Municipalities loan $1.6M to operators of Truro's Rath centre in dispute with CRA

Two Nova Scotia municipalities are providing more than $1.6 million to the society that runs the Rath Eastlink Community Centre in Truro, N.S., resulting from the Canada Revenue Agency's clawback of a COVID-19 pandemic relief program.

The Central Nova Scotia Civic Centre Society is fighting the CRA's decision. It lost its first appeal and is awaiting a date for a second appeal.

In the meantime, the society will receive a repayable grant from both the Town of Truro and Municipality of the County of Colchester. 

Matt Moore, executive director of the society, said the organization received almost $1.3 million through the Canada Emergency Wage Subsidy. After an audit, the CRA asked for it back, saying the group didn't qualify.

As a result, the CRA is also holding back $186,000 in HST returns, according to Moore. He said the amount being clawed back has accumulated over $300,000 in interest. 

'It could be devastating'

Moore said there are also legal fees and additional auditor fees "that we are now facing to try and resolve this."

"It could be devastating for our organization if we didn't stand up and go against the grain on this," he said. 

A spokesperson for CRA said they could not comment on the specifics of any taxpayer's situation. 

As of September 2024, the CRA had audited $17 billion in emergency wage subsidy claims. Of that, $893 million was denied or partially reduced. 

"This includes cases where claim amounts were adjusted due to simple calculation errors," said spokesperson Jeff Lansing in a statement to CBC News on Wednesday.

"The CRA is committed to being transparent regarding our activities and results, and regularly updates a compliance snapshot on the CEWS post-payment compliance program," he added. 

Moore said that while the municipalities own the building the society operates and have representation on its board, it is independent and the majority of voting members are local residents. 

"We're all very optimistic that we'll overcome this very short-sighted ruling and we'll get back to normal business," he said. "But really our only option was to request a loan with interest from both municipalities."

The grant from the municipalities has a 1.5 per cent interest rate. Colchester municipal staff said the money will allow the society to pay back the CRA and halt that accumulation of interest.

"This was the way we felt that we could deal with it and save money, pay it off, get it done," said Colchester Mayor Christine Blair, adding she hopes the appeal will ultimately be successful.

At Monday's Truro council meeting, staff said the society's bill to the CRA could have reached $2 million before the  next hearing date.

"So, if we didn't do something now, it was just going to continue to snowball," said Truro Mayor Cathy Hinton. 

"We just want to try to get through this part right now and hopefully we'll be successful in getting the [money] back," she said. 

Blair and Hinton said the municipalities could consider taking over operations of the facility if the second appeal is denied. 

Other issues 

This is the second time in recent months that a financial issue with the society has come before local councils. Late last year, both municipalities approved an advance on a quarterly payment. 

Another financial request is on the horizon as the heating and cooling system in the building needs repairs or replacement, according to Moore.

Moore said the facility is worth the cost because of the value it brings to the community every day but also during times of crises, for example acting as an emergency centre in the aftermath of post-tropical storm Fiona.

He said the CRA issue has caused financial hardship for the organization that was just looking to support over 100 staff through the pandemic and help the community recover.