Province to examine request to cancel Irving's LNG tax break carefully

The Gallant government says it has not yet heard from Saint John about cancelling a 10-year-old municipal tax break for Irving Oil at the city's LNG development, but will look at it carefully.

Saint John city councillors voted 7-2 Monday night to ask the province to terminate the tax deal, 15 years ahead of schedule.

"We haven't received a formal request from the City to revisit the legislation yet but if we do we will consider it," said local government minister Brian Kenny in a statement released Tuesday afternoon.

"I think the province should act," said councillor Shirley McAlary. "We're the elected body here in the city."

McAlary made a surprise motion at Monday night's council meeting to ask the province to repeal the tax break which the city asked for, and the province granted, in 2005. 

It eventually lowered municipal property taxes on the LNG site by more than 90% to $500,000 per year.

McAlary said she decided to take action after she and other councillors mulled the issue over on the weekend in light of the city's significant money problems.

Lawsuit not an option

On Friday, Saint John city solicitor John Nugent distributed a report to councillors about the tax deal. 

He concluded it was likely Irving Oil did not reveal financial benefits it would receive from the LNG development when it asked for the tax break, including US$12 million (CDN $16 million) in yearly rent it has been collecting on the tax reduced property. 

But Nugent said the city could not sue for misrepresentation because the two parties never signed a contract with each other.

McAlary said council had little choice other than to drop the issue, or use the lack of a written contract to its own advantage and seek to end the tax concession early.

"We thought about it over the weekend and I would have to honestly say we didn't know if we would go as far as we did," said McAlary. "The longer we talked about it we thought, well everybody has to pay their fair share of taxation."

Gerry Lowe, who seconded McAlary's motion, said he sees no reason for the province not to honour to the city's current request.

"In 2005 Liberals were against the agreement and now Liberals are in power," said Lowe.  "I don't know what reason they'd have to think its not a good idea."

Irving Oil asked for tax break

Former Irving Oil President Kenneth Irving asked the city for the tax break in March 2005, telling then-mayor Norm McFarlane in private meetings it was necessary for the LNG project to be viable. 

However, no proof of that claim was provided and Irving declined an invitation to speak to city councillors directly about it.   

Municipalities are not permitted to provide tax cuts in New Brunswick so Saint John asked the province to pass legislation allowing the tax break. 

Then-Premier Bernard Lord agreed, citing the duty of the province to listen to the city.

"I don't see any reason why we would not accept the recommendation of the city of Saint John," Lord said at the time.

"When local governments give us advice like that, we take it into account very seriously."

The Lord government even awkwardly titled the tax break, "An Act to Comply with the Request of The City of Saint John on Taxation of the LNG Terminal," to emphasize whose idea it was.

But Tuesday, Progressive Conservative MLAs from Saint John were not sure they would listen to the city this time around.

"This is sending a signal to people that Saint John is closed for business," said Portland-Simonds MLA Trevor Holder, who was part of the Lord government that originally approved the tax deal.

"It made sense for us to do it then and we believe it makes sense now and we don't understand why you would even poke this bear and renegotiate everything at this point."

Irving Oil not happy

Irving Oil also reacted negatively, saying in a statement the vote was "extremely disappointing," and would "deter long-term investment and prosperity for our city."

However, Green Party leader David Coon said from Paris he will do what he can to support the city's request, even present a bill to repeal the tax deal himself if the Liberal government will not.

"The symmetry is perfect here," said Coon.  

"The provincial government of the day defended their decision to bring in the legislation as simply responding to a request from common council, so if common council is making a request to reverse that, this government should follow suit."