July 7th, 2020

Plant taxes in Hat’s favour: mayor

By Collin Gallant on March 7, 2018.

Mayor Ted Clugston, seen here addressing a luncheon audience at the Medicine Hat Lodge in January, says Medicine Hat may have an ace up its sleeve when it comes to luring Methanex to expand here as opposed to Louisiana.


cgallant@medicinehatnews.com
@CollinGallant

Mayor Ted Clugston says Medicine Hat may have an ace up its sleeve when vying for industrial expansions against U.S. state governments that offer tens of millions of dollars in property tax breaks.

Namely, said Clugston on Monday, Medicine Hat already doesn’t charge the types of taxes that others are willing to forego to lure new investment.

The News was first to report locally that Methanex had presented figures on possible tax abatement to authorities in Louisiana, which along with Medicine Hat is one of two possible expansion sites.

The Louisiana Industrial Tax Exemption program would allow for up to five years of property tax cancellation on a proposed third plant there, and then a further three years paying only 20 per cent on assessed amounts.

Figures showed the break could total more than US$50 million, but then new tax revenue would add the same amount to coffers over the life of the plant.

It’s a large number, said Clugston, much larger than Medicine Hat’s potential tax gain because, he hypothesized, there’s no local machinery and equipment levy.

“Some of these are things out of our control; we’re a city competing against a state government,” Clugston said.

“We have spoken with the province about diversification programs. We don’t have the same levers to pull as a state government, but we don’t have a machinery and equipment tax like most other jurisdictions do.”

Clugston said myriad factors go into business case and costs of a major facility, but the largest considerations are likely labour, fuel and utility costs.

“Their property tax bill (here) is absolutely minimal,” he said.

Compared to Louisiana, that could be true.

A company presentation in the U.S. states the full education tax bill would be about US$6 million per year on a new plant that has a capital construction cost of US$1.6 billion.

That amount raised some eyebrows in Medicine Hat, where the entire non-residential, commercial and industrial sector pays about C$6 million in educational property taxes.

That assessment base includes existing methanol and fertilizer plants, plus more than C$1.3 billion in commercial properties.

The company has reserved statement only saying that both proposals are being evaluated.

“We are still in the early stages of project evaluation,” read a statement from the company. “A tentative Geismar (Louisiana plant) schedule was included in our ITEP related public discussions; however, it is not atypical for projects at this early stage to experience delays to schedule.”

The presentation to U.S. authorities also states natural gas in Alberta is half the price as on the U.S. Gulf Coast, and mention’s Alberta government plans to support investment in the petroleum processing sector diversification.

The Alberta Energy Diversification Advisory Committee released its report last week stating that construction costs in Alberta can be up to 15 per cent higher in Alberta. That should be offset by better co-ordination between the industry and provincial government and the development of regional petrochemical hubs, including Medicine Hat.

“We believe Medicine Hat has great potential for further downstream development and value-added processing jobs as one of four industrial clusters identified by the (committee),” said Energy Minister Margaret McCuaig-Boyd.

Her office states specific measures to support the initiatives could be announced “in the coming weeks.”

Clugston said the city has offered special utility rates to entice new or expanded industrial operations, but the province’s support is needed and welcome.

“We’ll be very interested to see what those might be,” said Clugston. “And we’ll be happy to lobby on anybody’s behalf if we’re asked.”

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