Fredericton supports Saint John's LNG tax repeal request

Fredericton council will not oppose theCity of Saint John's request that the provincial governmentrepeal the Canaport LNG tax break, according to Coun. Eric Megarity.

"I think they dosupport it," he told CBC Newsafter Tuesday night's council meeting.

Megarityexpects council will send a formal letter to the Cities of New Brunswick Association indicating its support.

• Saint John's LNG tax repeal unlikely to face opposition by municipalities
• Government silence on LNG tax break repeal ends

Saint John city councilvoted last Decemberto ask the province to repeal legislation that freezes municipal property taxes on theLNGpropertyat $500,000 per year until 2031, well below the $8.02 million it would owe otherwise.

The province is currently consulting with cities, town and villages across the province.Environment and Local Government Minister SergeRousselleasked the Cities of New Brunswick Association to consult with its members, saidMegarity, who serves as the group's president.

"We're just doing our due diligence," saidMegarity.

If it's in the lean years, our lean years down the road, we might see the results of that. Right now, I just don't see it's a big thing for us.- Eric Megarity, Fredericton councillor

No opposition is expected.If the change goes through, anyincrease in Saint John's tax revenues caused by killing the LNG dealup to $4 million would beclawed back by the province and distributed to other communities under NewBrunswick's municipal equalizationformula.

Megaritysaid it's difficult to predict whetherFredericton would benefit from any of that extra money because theformula used to calculate theunconditional grantsis complex and based on each municipality's unique situation.

"It depends [on]our financial situation, our tax base," he said. "If it's in the lean years, our lean years down the road, we might see the results of that. Right now, I just don't see it's a big thing for us."

Other communities, however, could see more money, Megarity said. "They certainly won't lose [any]."

Trust fund proposed

In April, the Gallant government said it would agree to the request on the condition Saint John absorb any financial loss suffered by the province after the repeal takes effect.

The province's worry is that its own assessment on theLNGproperty, which it values at $299.5 million, might be grossly overvalued.

That could result in the assessment being significantly cut in the face of an aggressive appeal by Irving Oil after the tax deal is dissolved and the province wants Saint John to pay for refunds Irving Oil might win.

As a solution, in May Saint John proposedthe province kill the tax deal but hold all new revenue in a trust fund and wait on equalization changes until all Irving Oil appeals are settled.

The province hassaid it would adopt Saint John's proposal, but only after seeing if other municipalities agreed, since their new equalization money would also go into the trust fund and be held back until any property tax appeal launched by Irving Oil is resolved.

Saint John moved to end the tax deal following a series of reports by CBC News last year showing Irving Oil has beencollecting$12.25 million USper year in rent on the property theLNGdevelopment sits on.The deal took effect in 2006 and was supposed to last until 2031.

Any jump in property taxes at the Canaport LNG propertyis likely to hit Irving Oil alone.Repsol, the Spanish energy company which owns 75 per centof the Canaport LNG development to Irving Oil's 25 per cent, has said it has no ownership interest in the property the development sits on and is not affected by the property's tax bill.

The Cities of New Brunswick Association represents Bathurst, Campbellton, Dieppe, Edmundston, Fredericton, Miramichi, Moncton and Saint John.