New Brunswick

It's a new no-no, but the City of Saint John wants to make money

The City of Saint John has set up its own company, hoping to cash in on energy projects — despite a provincial ban against municipal adventures in commerce.

City creates a for-profit corporation to benefit from Saint John Energy projects

City council is looking for ways to direct dividends from Saint Energy into municipal coffers

The City of Saint John has set up its own company, hoping to cash in on energy projects — despite a provincial ban against municipal adventures in commerce.

The city set up the numbered company last year as a potential home for energy projects to be operated by Saint John Energy, the city-owned utility. 

Saint John cannot just survive on its taxation as we receive it today. So in order to be self-sufficient we still have to think of new ways to raise revenue.- Shirley McAlary, deputy mayor

Saint John Energy is responsible for selling electricity to customers inside city limits but has hopes of expanding into generating projects such as hydro and wind power.

The city's goal is to see profits from those projects funnelled to city coffers as dividends, but it is by no means certain it will be allowed by the province.

Saint John Deputy Mayor Shirley McAlary said the city is hoping that by incorporating the company in December the municipality has skirted an explicit ban against for-profit companies included in provincial legislation that went into effect Jan. 1.

"It reads that no municipality in the province of New Brunswick is able to have a for-profit organization or company. ... So the city thought, well, we should create a corporation before Jan. 1," said McAlary.

Deputy Mayor Shirley McAlary says Saint John incorporated a for-profit company just before the new year to try to get ahead of a new provincial act expressly forbidding municipalities from doing so. (CBC)

"The fact still remains that Saint John cannot just survive on its taxation as we receive it today. So in order to be self-sufficient we still have to think of new ways to raise revenue and new ideas to get there."

The company, 699783 NB LTD, was created with the least fuss possible in the final weeks of 2017.

It required approval in open session of city council, but that step was added to the agenda at the last minute at the start of the Nov. 27 meeting. In such situations the background documents are rarely provided.

Council's real discussion had taken place earlier that evening in private.

For the purposes of the vote, the matter was described only as a "recommendation from committee of the whole with respect to the establishment of a corporation."

Last fall, Saint John Energy and two other New Brunswick municipalities, Edmundston and Perth-Andover, jointly applied under NB Power's Renewable Energy Small Scale program to build a pair of wind farms that they said would be worth an estimated $120 million.

Saint John Energy confirmed Thursday the proposal was not one of those short-listed by NB Power to potentially move ahead.

No reasons were given for the rejection.

But the municipality is not giving up. A report to Saint John councillors at the Feb.12 meeting refers to plans to "maximize the value and potential of Saint John Energy."

The utility has long operated at arm's length from council, with its own board of directors, headquartered on the west side and taking little direction from city hall.

But a legal opinion obtained by Saint John Energy about six years ago determined the utility and its assets are entirely owned by the municipality.

Preparing for future

When asked about the matter of the new corporation, Saint John Energy spokesperson Jessica DeLong issued a statement saying the company was created "in order for the City and Saint John Energy to keep its options open as we position for the future. We are working through many issues."

The issue of whether New Brunswick cities and towns even have the right to create such corporations has been debated in the past and was not directly addressed in the former municipalities act.

That legislation was replaced Jan. 1 by the Local Governance Act which, in section 8 (2), expressly forbids any kind of commercial enterprise: "A local government shall not establish a corporation that operates for the purpose of making a profit or acquire or hold securities of a corporation that operates for that purpose."

Preventing competition

The new act allows municipalities to set up corporations, but they can't be for profit. The restriction was adopted to protect taxpayers from risky ventures, the Local Government Department said.

The aim was also to prevent competition with the private sector, said spokesperson Sheila Lagacé.

The communities of Perth-Andover and Edmundston did not take the same step of incorporating for-profit companies before the legislation went into effect.

Marc Michaud, Edmundston's chief administrative officer, said in an interview that there were varying opinions in the past about whether municipalities were allowed to own for-profit corporations.

"And now it's quite clear that we can't do that," he said.