New Brunswick

Saint John requests repeal of Canaport LNG tax deal

Saint John council voted unanimously on Monday to move ahead with the repeal of the 11-year-old Canaport LNG tax deal.

City requests additional funds be held by the provincial government in trust until assessment appeals over

Councillors were warned an appeal of the assessment on the Canaport LNG property could take years

Saint John council voted unanimously on Monday night to move ahead with the repeal of the 11-year-old Canaport LNG tax deal but it could be years before any additional revenue arrives in municipal coffers.

The request is subject to the willingness of the provincial governmenet to agree to an arrangement that will see additional tax money placed in a trust account until any assessment appeals on the Irving Oil Ltd. property have been completed.

Jeff Trail, the city manager, advised councillors on Monday that should Irving Oil appeal the assessment,the process will be complicated and could take years. 

"This is a distinct possibility given the uniqueness and the complexity of the property in question," said Trail. 

If that proves the case, warned Trail, the city could potentially lose millions by having to pay back the provincial government tax money forwarded earlier.

"The liabilities could accumulate into a large amount owing to the province by way of repayment [it] represents a large financial exposure risk for the city," he said.

We have to be very cautious of how we handle this- Shirley McAlary, Saint John councillor

The Canaport LNG property is assessed at $299 million, but under terms of the 2005 deal requested by Saint John's then council, and agreed to by the provincial government, Irving Oil's property taxes are fixed at $500,000 annually until 2031.

The taxes on a $299 million property would — under normal circumstances — generate $8.02 million annually for the municipality.

Deal offers security

City's councillors believe their motion offers the security they need should a messy assessment process unfold.

Coun. Shirley McAlary said the motion approved by council on Monday protects the city from financial loss.
"It is protecting the City of Saint John in every way so that it eliminates any risk that the City of Saint John will have in repealing this tax," said Coun. Shirley McAlary, who authored the initial motion last year setting the ball rolling to repeal the provincial act that freezes the terminal's tax bill.

"We don't want to collect taxation without knowing for sure that it's going to be for our use. So for the next few years we have to be very cautious of how we handle this."

The two-page motion asks the province to "develop and implement" a mechanism to protect stakeholders. 

Under its terms the city would continue to collect the current $500,000 in tax revenue from Irving Oil, it would also continue to receive its annual provincial equalization grant under the existing formula.

In the meantime added tax revenue from the terminal property would be placed by the province in an interest bearing trust account. 

Once the tax appeal process is completed funds are to be taken from the trust and distributed to communities across the province who lost money because Saint John continued to get higher equalization payments during the appeal process.

The remaining tax revenue in the trust would be turned over to the city.

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