The Sprung Greenhouse
In 1987, the provincial government partnered with Calgary businessman Philip Sprung to build a multimillion-dollar greenhouse complex near the St. John's-Mount Pearl boundary. Sprung claimed that his unique greenhouse covering and high-tech hydroponics process could grow more plants faster than conventional methods. Premier A. Brian Peckford announced the facility would create jobs, tap into a profitable export market, and supply local consumers with fresh and affordable vegetables year-round.
Instead, the operation could not meet production quotas, find a suitable market, or turn a profit. It cost taxpayers $22 million and the Progressive Conservative Party its credibility. Peckford withdrew from politics in March 1989 and an April election returned a Liberal majority. The Sprung project went into receivership the same year. The greenhouses were sold to a Montreal company two years later and shipped off the island. This was one of the most infamous projects in the province's economic history.
Need for Economic Diversification
By the late 1980s, the provincial economy was struggling. Unemployment was high, provincial revenues low, and the cod stocks on the brink of collapse. Efforts at rural development largely consisted of short-term government make-work projects aimed at qualifying people for unemployment insurance. Peckford recognized an urgent need to diversify the economy. This was supported by a 1986 Royal Commission on Employment and Unemployment, which was chaired by sociology professor Douglas House and recommended the province "focus on small-scale resource development aimed partly at local markets. Agriculture is a prime example." (449)
That same year, a local company, Charmar Holdings Ltd., asked the government to support financially the building and operation of a series of innovative greenhouses based on those developed by the Calgary-based Sprung Group. Sprung president Philip Sprung claimed his greenhouses significantly accelerated plant growth by combining a specially designed 'biophotic' fabric covering, which supposedly enhanced sunlight, with a sophisticated hydroponics process. Hydroponics is a method of growing plants without soil by bathing the roots in a nutrient-rich solution. According to Sprung, the company had spent $35 million and 10 years developing the high-tech greenhouses. It now wanted to sell licensing rights to interested parties.
Peckford visited the Calgary facility in late 1986, and was followed by a team of senior civil servants, including an agricultural advisor, Ross Traverse, in early 1987. Sprung predicted the Newfoundland facility could grow 6.7 million pounds of cucumbers and tomatoes in its first year, and increase production to 9 million pounds by its fifth year. However, he offered no concrete or independently verified evidence that these numbers could be achieved. A test facility had been operating since 1985, but the only production yields Sprung provided were for cucumbers during the April-to-August period; no figures were available for tomatoes.
Traverse voiced skepticism and warned that Newfoundland's cold climate and reduced sunlight from October to March would limit the technology's effectiveness. Sprung suggested that an artificial lighting system would solve the problem and the province decided to pursue the venture, although Charmar Holdings dropped out of negotiations.
On 8 May 1987, Peckford announced an $18.4-million agreement between the province and Sprung Group of Companies to operate a greenhouse complex under the jointly owned Newfoundland Enviroponics Ltd. (NEL). The province provided $11.4 million and Sprung $4 million; high-powered grow lights were leased for an additional $3 million, to be paid for by NEL. Sprung was company CEO and managed the project with his daughter, Dawn.
The complex consisted of eight greenhouses stretching out from a central facility like spokes on a wheel. Each greenhouse was about 800 feet long and 38 feet high. The project employed 330 temporary workers during construction and 150 permanent staff once production began. Cucumbers were the major crop, although tomatoes were also grown.
Problems plagued the venture from the start. Construction took three months longer than expected, which inflated costs and delayed production. To cover expenses, the province gave NEL a $2-million line of credit in February 1988 and $78,000 in job creation funds the following month. The first cucumbers reached grocery store shelves in May 1988, a time of year when markets were flooded with hothouse produce from around the world and prices were at their lowest. A single Sprung cucumber cost $1.08 to produce, but sold for 63 cents in Atlantic Canada and just 25 cents (US) in Massachusetts.
In July, the province gave NEL another $2.6-million loan guarantee to stay afloat. The money was intended to last until January 1989, at which time production levels and market prices were expected to reach sufficiently high levels to make the venture financially independent. By November, however, the operation needed another $825,000, which the province provided, followed by another $1.335 million between December 1988 and January 1989.
Although prices improved in the fall and winter, averaging 90 cents in November and spiking at $1.50 in early 1989, production yields never reached forecast levels. The cucumbers also struggled to find a stable market. Statistics Canada reported in 1987 that the average Newfoundlander ate about half a cucumber a year and the average family spent only $1.56 per year on cucumbers. Larger markets existed in other provinces and the United States, but travel costs made exporting unprofitable. Controversy erupted in July 1988 when press reports revealed surplus cucumbers were being trucked to farms as cow feed or dumped at Robin Hood Bay; that same month, the government approved a $2.6-million loan guarantee.
Other problems undermined the project. Poorly controlled humidity and heat levels produced misshapen cucumbers and mottled tomato plants. Residents in surrounding areas complained grow lights were too bright during nighttime hours. Industrial pollution stained the greenhouses' 'biophotic' fabric brown, causing it to reduce sunlight transmission instead of enhance it.
In December 1988, the entire cucumber crop died on the vine. Sprung alleged someone introduced an herbicide into the plants' nutrient solution and offered a $10,000 reward for the "saboteur." Neither the National Research Council nor Memorial University could confirm his claim after testing leaf samples.
Financial and Political Disaster
The Sprung greenhouse quickly became a financial and political disaster for the Peckford administration. Negative press dogged the operation and the Liberal and New Democratic parties condemned it as a foolhardy waste of taxpayers' money. Peckford watched his once high popularity erode as voters grew tired of funding Sprung's greenhouse while hospitals and schools faced budget cuts.
Opposition emerged within Peckford's cabinet as well. On 9 January 1989, Charles Power resigned as agriculture minister, calling the project a "financial fiasco." He later told Atlantic Business Magazine "I am embarrassed by allowing myself as minister in 1988 to commit the same kind of process that Joey Smallwood's ministers must have committed in 1968, and it shows that Newfoundland is still susceptible to the quick-fix, fly-by-night boys coming in from outside."
On 3 March 1989, the government and Sprung allowed NEL to go into receivership - a form of corporate bankruptcy in which a third party (known as a receiver) is appointed to run the company. The accounting and consulting firm Clarkson Gordon became NEL receiver and ran the facility until May 1989, when it was sold to Cabot Produce Ltd., a consortium of Dutch, Canadian, and American interests.
Although Cabot was able to improve production yields and reduce costs, it found that the St. John's climate undermined the project's economic viability. It abandoned operations and sold the greenhouses to Montreal firm Acier Hurtsteel Canada Ltd. in 1991; the facility was subsequently dismantled and shipped out of province.
By then, a Liberal government was in office. Peckford had announced in January 1989 that he would withdraw from politics. A March leadership convention elected Tom Rideout, who called a general election the following month. The Conservative Party's popularity had been damaged by the Sprung affair, and the Liberals won the April election.
Royal Commission Appointed
In July 1990, the new government appointed a royal commission headed by Justice Seamus O'Regan to investigate the province's involvement with the Sprung project. The commission reported two years later that the Peckford administration entered into the costly venture without proper investigation of the technology or its economic viability. Once the government signed the contract, it failed to consult with experts on the operation's progress and unnecessarily sustained considerable loss of taxpayers' money.
The commission wrote that although the province and Sprung were joint partners, "the financial risk of the project was almost entirely with the government without justification." While Sprung invested $4 million in the project, it cost the province $22.2 million - considerably more than the agreed upon $11.4 million in the original contract. The commission found that the government acted in an "improper fashion" by failing to bring the various loan guarantees before the House of Assembly for debate. It recommended that independent experts should assess all future government ventures and that any financial commitments should be fully debated by the legislature.