Municipalities may benefit from Saint John ending Canaport LNG tax break

A CBC News review of New Brunswick's municipal funding formula shows more than 70 communities have a significant financial stake in Saint John's tax treatment of Irving Oil's LNG property and could share millions in extra funding if the deal is undone by the Gallant government later this year.

• Saint John will ask province to repeal Canaport LNG's tax deal 
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• Saint John councillors who want tax deal repealed hopeful after minister's comments

Saint John will receive a $7.52-million increase in revenue if the LNG development is subject to full property tax but could lose up to $4 million in provincial "equalization" payments that will go to other communities under the province's municipal funding rules. 

Dalhousie Mayor Clem Tremblay, whose community could gain up to $150,000 from the tax change, said he had no idea his town might have a financial interest in the LNG tax issue.

"If the government decides to take some of that money and spread it among the other municipalities where it is much needed such as ours, I'm all for it," Tremblay said.

Last December, Saint John city council voted to repeal a multi-million dollar property tax concession at the Canaport LNG development but it still needs the Gallant government to approve the request.  

The concession freezes property taxes at the LNG site at $500,000 per year until 2030.  Taxes to the city will jump to $8.02 million per year if the concession is revoked.  

Other cities could cash in

An increase in revenue of that size to Saint John will instantly shrink the city's claim on a $53.3-million pool of municipal "equalization" grants from the province. 

That will leave more money in the fund for at least 72 other communities that are also financed from it.

"Exactly, exactly," said long-serving Campbellton Mayor Bruce MacIntosh about the money that would flow to communities from a decision to undo the LNG tax break.

"It will reduce the fiscal transfer to Saint John. That money would then go into the pool and other municipalities would receive more dollars from that pool of money."

Campbellton receives just over $2 million from the equalization pool. That's 5.6 per cent of the money flowing to communities other than Saint John. 

Based on that percentage Campbellton would be in line for an extra $200,000 or more if the tax deal is killed and Saint John's share of equalization is lowered by $4 million as expected.

"Well that would be super and I would suggest to Saint John I hope they're successful. If we can get more dollars here in northern New Brunswick and help us that would be great," said MacIntosh.

Saint John gets $17.5M in equalization

Saint John is by far the largest recipient of equalization funding from the province, receiving $17.5 million this year. 

That's more than triple the amount going to the next largest user, Miramichi, and nearly eight times more than Moncton receives. Fredericton is one of 24 communities that receives no equalization funding 

Saint John's equalization payments are so high they are enormously sensitive to changes in its tax revenue. 

This year when assessment increases in the city pushed property tax revenues up by $1.8 million, the province's funding formula offset that by cutting equalization to the city by $1 million which was then redistributed to other communities. 

Coun. David Merrithew, who is in charge of Saint John's finance committee, said he has not seen a detailed analysis of what would happen if the city begins collecting $8 million in taxes from the LNG property next year.

"What I expect to see is that we'll net half of this figure. We'll net $4 million of this.  That's what I expect to see," said Merrithew.  

"It [the rest] will go into a pot and someone else will get it."

Merrithew voted in favour of revoking the LNG tax deal and said he still strongly backs the decision even if the city only gets to keep half of the increase it generates and the rest ends up with other communities.

Equalization funds holding steady

In February, Finance Minister Roger Melanson told the legislature the overall pool of money available to municipalities from the province would not be cut for the rest of the Gallant government's term.

That is virtually assuring that any reductions in equalization funding to Saint John next year will generate equal increases to others.

Although nine New Brunswick municipalities could gain $100,000 or more from the LNG tax change if the effect on Saint John's equalization grant is as large as Merrithew expects, at least 72 communities would be in line for at least some new money.  

The big winner would be Miramichi, which could gain close to $600,000 based on this year's equalization formula.