Scheme aided in store's rescue
Tax credit plan is little-known
When Pollock's Hardware was threatened with closing a couple of years ago, supportive area residents and patrons pulled off an amazing bit of community organizing to keep the place open.
Part of the process was to turn the business into a co-operative and sell memberships. It's at 1,400 members and counting.
Those members were also given the opportunity to buy shares in the business, a special feature made possible through a little-used provincial program called the Community Enterprise Development Tax Credit.
Mike Wolchock, longtime owner of the Neon Factory and now also manager of Pollock's, said the process of selling membership and raising equity -- most of it at about $100 at a time -- meant that they were able to come up with two-thirds of the capital needed to renovate and reopen the store, making securing a loan for the rest much more doable.
Wolchock has an almost missionary zeal when talking about community revitalization in the North End. He loves to talk about the benefits of local purchasing and keeping money in the community.
He said that his mandate at Pollock's is not necessarily to make loads of money but to provide a service. At the same time, he said, he can't not make a profit.
"There is no bailout money out there," he said.
So far, so good in that regard. He said the business is generating revenue at a pace of about 25 per cent ahead of projections for the year.
His investors might also be more interested in the rewards of owning a piece of a solid business that benefits the community than the expectations of massive returns.
Up until this week the most a company could raise and still be eligible under the CEDTC program was $500,000.
That low total might partially explain the program's fairly modest takeup -- about 10 companies have used the program since 2003, raising about $1.8 million.
Pollock's raised about $55,000 through the CEDTC program.
This week the province doubled the amount approved enterprises can raise up to $1 million. (Individuals can invest a maximum of $30,000 and receive a provincial tax credit equal to 30 per cent of their investment.)
Officials say the increase came about because of demand from companies looking to raise larger amounts.
But with access to capital so hard to come by regardless of the amount, it is surprising that there has not been greater takeup so far. There might be a couple of reasons for that.
For one thing, the CEDTC is administered by the Rural Economic Development Initiative, but urban enterprises are also eligible.
Each company needs to be approved for eligibility and Agriculture, Food and Rural Initiative Minister Rosann Wowchuk said innovation, skills development and job creation are important considerations, but specific targets do not have to be met.
"We're hoping by increasing the maximums that it will stimulate more demand," she said.
The other problem with the program is that it is most likely confused with the more recent Community Enterprise Investment Tax Credit, a similar program designed for sophisticated investors with a minimum investment of $20,000 which also comes with a 30 per cent provincial tax credit.
Each program also has limits on the size of the company eligible -- $15 million in assets and no more than 200 employees for the CEDTC and $25 million in capital, no more than 50 employees or gross revenue of less than $15 million for the CEITC.
In its 2009 budget the province also doubled the size of the CEITC program so that up to $17 million can be raised under that tax credit scheme.
Whereas the latter program was fully subscribed during its first two years of availability, information is not yet available on how it's tracking this year.
Savvy promoters are quick to get their names in the queue, but the soft marketing of both programs probably keeps them off the radar screens of many businesses that might be worthy of a little investor interest.
The expanded programs are not likely to change the economic dynamics of the province, but they might provide some underpinning for more widespread growth -- if only more businesses knew about them.
Republished from the Winnipeg Free Press print edition September 3, 2009 B5