3 questions Saint John seeks to answer about Canaport LNG tax deal
City investigating details surrounding 2005 property tax concession agreement with Irving Oil
Saint John city managers will be looking to answer three key questions as they investigate why the city approved a multimillion-dollar property tax concession for Irving Oil in 2005 and whether that approval should now be withdrawn.
City council voted 9-0 on Monday night to have city staff piece together a report on all of the known circumstances that led to Irving Oil winning the tax reduction on land it was planning to use for the city's LNG development.
The company convinced both Saint John and the provincial government the project would not proceed unless property taxes at the site could be frozen at $500,000 per year for 25 years. That's about $7.5 million per year below current rates.
But recent revelations from Repsol — Irving's partner in the LNG development — have raised questions about whether key financial information about it was shared with the two levels of government before the tax concession was granted.
Saint John is now attempting to answer three questions around that issue:
1. Did Irving Oil have a deal to lease the LNG properties for $12.25 million US at the same time it was pressing city and provincial governments on the need for tax concessions on those properties?
CBC News has reported that a lease agreement signed between Irving Oil and Repsol on June 6, 2005 shows the companies agreed that Irving Oil would receive $1.25 million US per year in rent on its Canaport properties between June 2005 and June 2007, $2.5 million US per year between 2007 and 2009, and $12.25 million US per year from 2009 onward.
City council has asked staff to confirm that report.
"With the reports that have come out recently through the media we're not sure whether the Irving Oil interests knew and had an arrangement with Repsol prior to asking for a tax concession," said Coun. Shirley McAlary.
One unknown about the lease payments to Irving Oil is whether they had been worked out before the company approached city council.
The lease agreement was signed after the city had endorsed the idea of the tax concession, although it was before before the concession had gone to the provincial government for approval.
But Irving Oil acknowledged in 2005 it had a memorandum of understanding with Repsol, outlining much of the arrangements between the two, before it approached the city.
2. Were financial details of the development shared with either level of government?
If Saint John city staff confirms Irving Oil does collect substantial lease payments on the properties that have been tax-reduced, councillors want to know if any government officials knew that was Irving's plan before the tax concession was granted back in 2005.
"It looks like we're now looking to see who knew what, where, when and how," said Coun. Bill Farren, who is the only municipal politician left from the council that originally endorsed the tax deal.
Farren voted in favour of the concession in 2005, but said the approval came on one hour's notice and in a near complete absence of information, other than Irving Oil's claim the tax break was needed.
"I don't think there's too much information to go around, at least from my point of view, because I didn't know anything," Farren told the current council on Monday night.
Several former Liberal MLAs who were in the legislature when the tax concession was debated say no information about lease payments Irving Oil would be getting from the properties was shared with them either, but Progressive Conservative cabinet ministers have so far declined to answer that question.
Saint John councillors believe Irving Oil kept details of how much it planned to make off of the properties to itself, but want to know for sure.
"I think it is pertinent to everyone whether they did know they were going to have an arrangement — one that was very productive for them financially and also we would like to know if the province knew," said McAlary.
3. Would the tax concession have been granted if financial details about the project had been disclosed?
Some city councillors have expressed concern about breaking a deal a previous council made with Irving Oil, but if city staff find that key information about the Canaport development was available in 2005 and not shared with the city, there will an attempt to re-evaluate the deal with that information.
"Full disclosure did not take place in 2005, but it must take place now in 2015," said Coun. Gerry Lowe, who has promised a motion to undo the tax deal if it turns out important information about the LNG development was not shared with either the city or the province in 2005.
"Once we get that information, we'll see what happens," said McAlary
Coun. Ray Strowbridge agreed.
"They did what was best for their business back in 2005 and now council is going to do what's best for the citizens here in 2015," he said.