Saint John politicians look to Alberta tax rules for industry

Saint John politicians, struggling with a slow growing tax base and looking for examples of other industrial communities that raise more revenue from their industries, are liking what they see in Alberta cities, such as Fort McMurray and Sherwood Park.

Coun. Donna Reardon, who visited Fort McMurray last year with Coun. John MacKenzie, said the experience opened her eyes to the fact that some Canadian cities tax their industries a lot more than is allowed in New Brunswick

"That's what the mayor out there told us. She [Melissa Blake] said industry here pays," said Reardon.  

"We were just blown away."

Saint John has been increasingly struggling with its finances  and a group of city councillors, including Reardon, have begun asking whether New Brunswick's property tax rules might be part of the city's problem.

When I look at it is so unfair, it is just so unfair.- Coun. Donna Reardon

Ten years ago Saint John had the largest tax base in the province, but has since slipped to third. 

According to New Brunswick's Department of Environment and Local Government,  Moncton now has $1.1 billion more taxable property than Saint John with Fredericton $203 million ahead.

Even Dieppe, which is still far behind in fourth place has been catching up, adding $193 million more to its tax base in the last four years than Saint John has been able to.

That has fuelled the debate about whether Saint John is being hampered by New Brunswick rules that shield machinery and equipment used in industrial operations from being assessed and taxed, something that is allowed in some other jurisdictions, including in Alberta industrial communities, such as Fort McMurray and Sherwood Park 

"We can barely provide services," said Reardon.

"When I look at it is so unfair, it is just so unfair."

Sherwood Park is an industrial city just outside of Edmonton.

It's at the centre of the regional municipality of Strathcona County and has a remarkably similar make up of commercial, residential and industrial properties to Saint John, including the significant presence of oil refining.  

But while Saint John has been forced by provincial assessment rules to rely mostly on residential property tax for money, Strathcona County, like Fort McMurray, has been free to tap into the wealth of Sherwood Park's industries to fund the region's municipal services and keep non industrial property taxes low.

Property tax review

A CBC News review of tax records of five sets of similar properties in Saint John and Sherwood Park, including two similar size homes, two Tim Horton's stores, two Costco stores, two shopping malls and three oil refineries show taxes are 30 per cent to 45 per cent lower in Strathcona Country on all properties except the refineries.

Taxes on those are a stunning 400 per cent or more higher than in Saint John, after adjusting for size differences in the three plants.

MacKenzie, who represents some of Saint John's poorest north-end neighbourhoods, said the differences between Sherwood Park and Saint John need to be looked at by the provincial government.

"If the numbers are correct, I would say it shows the provincial government needs to review the tax legislation to bring the municipalities' share of property tax to a more appropriate level," said MacKenzie

Sherwood Park's population, at 68,800 is virtually the same as Saint John, but it has two oil refineries, one owned by Imperial Oil and the other by Suncor Energy. 

Combined they have a production capacity of 327,000 barrels of oil per day and sit adjacent to one another on a total of 300 hectares of land. 

That is nearly identical to the singular size of Saint John's Irving Oil Ltd. refinery, which sits on 316 hectares and produces up 320,000 barrels of oil per day.   

Tax records from Strathcona County show in 2015 the two refineries paid a combined $26.4 million in property tax, with 96.7 per cent of that going to the municipality and the rest to the Alberta school system.  

By contrast, Saint John's refinery pays $4.8 million in property tax.  Saint John gets 55 per cent of that, or $2.6 million, with the provincial government taking the rest.

See-saw battle over taxes

Larry Hummel is the former head of property tax assessment in Ontario and now works with the International Property Tax Institute.

He said property tax in every community is a see-saw with each property owner on one side of the device or the other. 

Low tax rates for one group require high rates for another and every jurisdiction has to find its own balance.

"The one thing about property tax is the local community shares in that burden," said Hummel.

"So whoever you give that benefit to, the rest of the community is going to have to make up that gap." 

In Sherwood Park's case so much more property tax is generated from industry than Saint John, it generates much lower residential and commercial tax bills in that community than Saint John can afford.

For example, according to tax records, a 3,000-square-foot home on Sherwood Park's Estate Drive pays $2,800 less in property tax than a similar 3,000-square-foot home in Saint John's Cedar Point Anchorage Estates does.

Similarly the Tim Horton's on Sherwood Park's Main Boulevard pays $10,600 less than the Tim Horton's on Saint John's King Street West, while Sherwood Park's Costco pays nearly $207,000 less property tax than Saint John's Costco.

The difference is even greater for the Sherwood Park Mall, which pays nearly $1.7 million less tax than Saint John's McAllister Place Mall although both are a similar size.

Alberta's property tax laws differ

Much lower taxes on commercial and residential properties are only possible in Sherwood Park because Alberta's property tax system allows high property taxes on industry.

And that is only possible because the province allows equipment and machinery used at industrial properties to be assessed and taxed. 

In Sherwood Park's case, the two refineries' property is assessed at $268 million while the equipment inside the refineries is assessed at a further $2.6 billion.

In Saint John, the Irving Oil refinery property is assessed at $98.6 million while the equipment on site is by law exempt from assessment and so is tax free.

Terry Totten, a former Saint John city manager, said low assessment and taxes from industry have long been a problem for Saint John that Alberta-style rules would largely solve.

"It's the piece we're missing here in New Brunswick," he said.

But Hummel said taxing machinery and equipment is a tricky issue that jurisdictions handle in different ways around the world.  

In Alberta's case, oil industries, such as refineries, often have no choice but to set up near oil fields, which can lower the danger that high property taxes will scare manufacturers away. 

That is not necessarily the case in an industrial community like Saint John.

"This whole issue of taxation and level of taxation is a critical one and particularly where it begins to change people's decisions," said Hummell.

"It might be a situation that you'd say, 'Well I don't have to be in this jurisdiction, I can be in this other jurisdiction and still satisfy my customers."

Reardon said she doesn't see Saint John industry packing up and leaving the community as a practical concern.

She said she would like the provincial government to at least consider reviewing New Brunswick's Assessment Act, which is 50 years old this year, with an eye to adopting property tax rules similar to Alberta.

"It's fair taxation that we want. Nothing more," said Reardon.