AG stands by her report on controversial Saint John bailout

New Brunswick's auditor general says nothing she heard during a two-day hearing by the legislature's public accounts committee has changed her opinion about the former Gallant government's controversial $22.8 million bailout package for the city of Saint John.

Kim MacPherson, who was the final person to appear before the committee Wednesday, said she stands by the conclusion of her June report: that the agreement was rushed, did not go through the normal approval process and constitutes "excessive risk" to provincial taxpayers.

After listening to the testimony of the 16 other witnesses, MacPherson said during her opening remarks to the standing committee of MLAs that she's still "100 per cent confident" with her findings.

"The agreement did not include specific outcomes to be achieved, as of the date of writing the report, which was April 2019. And has failed to effectively address the city's challenges or mitigate inherent risk to the province," she said.

"Should the city and the province fail to address the current deficit situation within the agreement's three-year time frame, the province will again be faced with a serious financial problem in its second largest city."

Former premier Brian Gallant committed to the three-year financial package for Saint John in September 2017 after the city appealed for help dealing with a budget crisis.

The Liberals targeted the region in the 2018 provincial election, hoping to pick up some seats. MacPherson suggested the city was conscious of the timing of the election and "leveraged" that timeline to push the province for the bailout.

Most of those who fielded questions from the committee Wednesday were senior civil servants who sat on a joint city-provincial working group charged with coming up with long-term solutions to Saint John's financial problems.

They appeared to agree it was an unusual case and there was a rush to put the package together. But that stemmed from the city's legal obligation to approve its 2018 budget, and the only alternative for the city was drastic cuts to services or much higher taxes, said Jordan O'Brien, former chief of staff to the Office of the Premier.

'Sound public policy' decision

There was a real concern the city could default on its debt and a lot of pressure to help the city, he said.

But O'Brien said the motivation behind the agreement was financial, not political.

He argued it was a "sound public policy" decision. The cuts being proposed by the city would have "set in motion irreversible damage," and would have made Saint John's default "inevitable," he said.

O'Brien testified no laws were broken and suggested MacPherson might have reached different conclusions if she had interviewed more people and accepted additional records offered to her in April by the former premier's office. 

MacPherson said she used professional judgment in deciding who to interview and made numerous requests for information from five departments and the premier's office prior to April.

At the end of the hearing Wednesday, the committee decided to request copies from the Executive Council Office of all the relevant documents between June 1, 2017 and June 31, 2019.

Recalls things differently 

Earlier in the day, the working group's co-chair Joel Dickinson contradicted a key claim made Tuesday by Gallant.

The former premier told MLAs a draft report on municipal reforms proposed for the city was ready prior to the September 2018 provincial election.

No party won a majority of seats in that election, and Gallant, after trying and failing to win the confidence of the legislature, was succeeded by Progressive Conservative Blaine Higgs.

"The evolution of the working group's report is crucial evidence in this matter," Gallant told the committee in demanding the new government release the earlier document about Saint John.

"It was beyond partisan politics for the Higgs government to criticize the new deal without releasing the original draft report of the working group, which represents the most important piece of the new deal." 

But Dickinson testified the first draft of the report was written in December, after the election.

"There was no report," he responded when asked about an earlier draft.

Insists there were proposals

Speaking afterward, Jack Keir, an employee of the premier's office when Gallant was in power, told CBC News a list of "opportunities, solutions, and recommendations" had been forwarded in some form to the premier's office prior to the election.

He said many of those recommendations are not reflected in the new report released by the Higgs government.

Earlier, the city's finance commissioner, Kevin Fudge, told MLAs the municipality faces significant service reductions and property tax increases by 2022 if its problems cannot be resolved.

The city is seeking property tax reform, including changes to how taxes on heavy industry are dispersed.

It is also seeking the ability to generate revenue on its own, along with changes to the binding arbitration process used to reach collective agreements with unions representing police and firefighters who are not able to go on strike.