Bas-Caraquet shipyard deal sees PCs, Liberals blaming each other

There was more heat than light Wednesday as Liberals and PCs sparred over the controversial Bas-Caraquet shipyard buyout during a legislative committee session.

Opposition Progressive Conservative MLA Kirk MacDonald said the Liberals should have avoided the mess.

But cabinet minister Victor Boudreau said the fatal flaw in the shipyard's financing was in a memorandum of understanding signed in July 2014 by the previous PC government.

"The MOU that put this whole package together, the initial deal around the Centre Naval, was actually signed under the former government," Boudreau said.

"We're fixing a situation that the former government put these two municipalities in," he said, referring to the town of Caraquet and the village of Bas-Caraquet. "They were almost set up to fail from the get-go."

MacDonald did not directly challenge two key elements of Boudreau's argument: That the PC deal should not have required the two municipalities to borrow a total of $17 million, and that the Liberals were not told about that flaw when they took power in 2014 and went ahead with the project.

He instead claimed the PC agreement envisioned a private-sector investor and said the Liberals decided to "forego" that.

The Liberals cut off funding last August after having already paid out $1.5 million of the initial $4 million.

Boudreau said they froze the funding because it was becoming clear the naval centre was in trouble.

He said Ottawa cut off its funding around the same time.

The centre is a non-profit private corporation set up by the town of Caraquet and the village of Bas-Caraquet, home of the shipyard.

Phase one of the initiative, a $10 million infrastructure project, involved $4 million from the province, $4 million the naval centre would borrow, and $2 million from Ottawa.

A subsequent phase would see a $13 million drydock built at the site.

Boudreau says the PC-signed deal called for the centre to borrow that money from banks as well.

Deal never realistic, Liberals say

But that was never realistic, Boudreau said. Without funding, the centre was unable to pay suppliers, and the company building a drydock at the site, Quebec's Groupe Océan, stopped work.

Boudreau announced on the weekend the province will buy the shipyard for a dollar and finish the work.

MacDonald said the two municipalities behind the centre "could have decided to take on that additional debt load" or ask for a loan from the province's municipal capital borrowing board.

But Boudreau said municipalities aren't allowed to spend money on economic development incentives, and the amount is over the legal threshold they're allowed to borrow.

"By law they could not go to the municipal capital borrowing board to get this four million dollars," Boudreau said.

MacDonald conceded he wasn't aware what the two municipalities were allowed to borrow.

He relied mostly on partisan attacks to criticize the bailout, citing previous Liberal spending fiascos.

Boudreau returned the favour by pointing to PC boondoggles.

PC MLA Blaine Higgs said he remembers the previous Tory government committing only to the original $4 million in infrastructure funding when he was finance minister.

He said he did not remember the centre having to borrow an additional $13 million for the drydock.

But, he said, "I haven't read the original MOU. If it's available, I would like to read it."

Original deal can't be released

Boudreau said that $13 million requirement was explicitly spelled out in the PC-signed MOU but he said he's not able to release it because one of the parties to the agreement hasn't agreed to its release.

Caraquet Mayor Kevin Haché, who sits on the centre board, hesitated Wednesday when asked about the requirement the centre borrow $13 million.

"We were brought that information and we were working with that plan," he said, adding that the then-CEO of the Naval Centre, Michel Beaudry, handled most of the details.

Beaudry, a management consultant from Quebec, left after the problems surfaced last year.

"It's been a while and there's been a lot of water under the bridge," Haché said.

"That was the plan that we were supposed to do," Haché said.

But asked for more detail on what was spelled out in the agreement and why board members agreed to it, Haché said he was not comfortable discussing it.

"I don't really remember enough to be talking about it," he said. "It's been a while now."

He added: "There was a lot of people around the table at one point. So you could probably get that information from these people. The government was at the table, they gave us the money, so at some point somebody must have looked at something."

The mayor said the naval centre board felt it had assets at the shipyard that it could use as collateral to borrow the initial $4 million.

"We were under the impression that we had enough, but the banks wanted more coverage or more guarantees than what we had to offer," he said.

Likewise, the board assumed the lease with Groupe Océan that saw the company commit to use and pay for the finished drydock would be enough of a guarantee to get the $13 million loan. But it wasn't, he said.