NEWS PHOTO COLLIN GALLANT Members of Medicine Hat City Council met with representatives of Aurora Cannabis is a closed session before Monday's council meeting on Nov. 18, 2019. Last week the company announced it would open only one-sixth of its massive greenhouse facility next year, then more as market demand warrants.
cgallant@medicinehatnews.com@CollinGallant
Delays in bringing the entire Aurora Sun cannabis facility fully on line was discussed behind closed doors prior to Monday’s city council meeting, including the potential of extending property tax breaks to the company.
Mayor Ted Clugston spoke about the meeting between council members, top administrators and representatives of the Edmonton-based cannabis producer. He said it had been scheduled for “several months,” but took on greater significance last week when a slowdown on commissioning was announced by the company.
“I think we had a very, very productive meeting,” said Clugston. “I can say that the plant is progressing, but at a slower pace. That’s as simple as I can make it.”
“They’re scaling back… we’ll see more come on over time,”
Last week the company said that in an effort to rein in its capital spending it now planned to have only about 15 per cent of the 1.6 million square foot facility licensed and operating in 2020. Further growing rooms inside the mostly complete super structure would be commissioned as market demand warrants, potentially in 2021.
Clugston admitted that new schedule is a blow to some of the initial optimism about the announcement. The facility was to be one of the world’s largest – a new major local employer in an area hit hard by natural gas sector decline.
In terms of the impact on city hall finances, potential power sales may be lower than expected next year under a substantial supply contract with the city power plant, and tax revenue may be adjusted.
“There are more numbers to come, and we could use Bill 7 option… for new industry to help them get off the ground. perhaps, but that’s in the very early years and I’m not saying we’re doing that,” said Clugston.
This summer, the incoming United Conservative Party brought in Bill 7, which allows municipalities greater latitude to offer multi-year property tax breaks of up to 15 years, to lure companies.
Last year, cities gained the authority to offer breaks on redeveloping contaminated sites, though the site, in the Box Springs Business Park, might not qualify and the previous government specifically excluded the cannabis industry from earning such breaks.
Last week, company officials clarified it is going forward plan for the Sun facility.
“We remain committed to investment in the Medicine Hat community as planned,” read a statement from the company. “We want to make sure that all local and government partners continue to work with us to support our commitments to significant investment in Albertas economy.”
How cannabis facilities are taxed is complicated, and moreso after a flurry of changes this month.
Municipal Affairs told a rural municipalities conference last week that cannabis facilities would no longer be classed as “agriculture facilities” or farm buildings like typical greenhouses that enjoy complete local tax exemption in rural areas and in urban areas are having their payments phased out.
Next year, farm buildings in urban areas would only pay taxes on 30 per cent of their assessed value – a figure that would drop to zero in 2023.
In Aurora Sun’s case, the building would be fully taxable in 2020, but it won’t be fully complete, another factor that affects assessment value.
Clugston said the province’s announcement and the tax change is likely coincidental, happening just one day apart.
“First of all, we weren’t expected any taxes, then we find out they are fully taxable, and then 24 hours later we get the other news,” said Clugston. “It was a very hectic 48 hours. We’re okay because we’re got 2020 budgetted for.”
