Even vacant and unfinished, the facility built by Aurora Cannabis should provide net gain for the city by 2025.--NEWS PHOTO COLLIN GALLANT
cgallant@medicinehatnews.com@CollinGallant
The near $6-million deal struck on development fees to lure Aurora Cannabis to Medicine Hat in 2018 will be a net benefit to the city in 2025, even though the building is vacant and unfinished, according to a new report issued by Invest Medicine Hat.
The huge facility in northwest Medicine Hat that was supposed to bring 400 jobs to the Hat when proposed, currently sits for sale of lease. On Thursday, crews were loading the final pieces of construction equipment for transport off the site.
Last week the mid-year report by Invest Medicine Hat defended a raft of incentives offered for economic development, while administrators and many councillors argued they should be seen as “investments” to grow the tax base rather than subsidies.
“This is the sort of analysis that we hope to bring forward in the future,” Eric Van Enk, Invest’s director of strategic planning, told council Aug. 18.
Along with an overview of a new industrial study focusing on hydrogen development, Invest’s report also delved into more common development subsidies now offered by the economic development office.
In the case of Aurora, the city waived development fees totalling just over $6 million on the $120-million plant site. That cash, which would typically be paid by the developer, was paid to the city by itself out of reserves to cover road and sewer debt.
However, stressed Van Enk, the tax bill on the land has risen by $940,000 per year compared to bareland since construction began and land was reassessed with the improvements.
“That’s a payback period of about five years and there’s a lot of upside,” said Van Enk, stressing if the site is commercialized the tax bill could double.
Mayor Ted Clugston didn’t comment at the meeting, but since has told the News the analysis favours the decision, and additional power sales could still develop if Aurora and a new buyer come to agreement.
A separate utilities agreement is “take or pay” with the company, meaning the city earns a fee even if power isn’t purchased.
“That’s the deal we signed,” he said.
New tax revenue wasn’t a driving behind the original decision however, and there is still a question of future revenue.
If the plant is commercialized the bill could likely rise to $3.3 million per year.
But that is only if the use is anything other than traditional vegetable growing. Manufacturing and even cryptocurrency are potential uses according to real estate listing.
At the time the Aurora-city agreement, municipal taxes on all urban greenhouses, including cannabis was set to be phased out completely. Cannabis production was made fully taxable in 2019, but the exemption for food producers is still in place.
Council members generally welcomed the report, stating “investments” like the one with Aurora seem to pay dividends.
Coun. Kris Samraj said the report was interesting but in general, he feels such subsidies are troublesome.
“The question is how a deal is done and whether these projects would go ahead without the subsidy,” he told council.
Since the Aurora deal, the city has since used new taxation powers to reduce taxes for a set period to help clean up contaminated sites, such as the Medicine Hat Arena. This year it also set aside millions for Invest to distribute to new housing projects in the city centre and other private-sector projects as part of the “Waterfront District” development.
The Aurora subsidy was comprised of additional rate of “city assist” in off-site levy development fees to the site. It eventually totalled $5.7 million, while the city also forgave $300,000 in lieu of requirement on all new developers for environmental reserve, which is typically set aside for parks, school sites and public lands.
Aurora Cannabis also paid a $1.2-million share of a nearby $15-million power sub-station that was required to handle increased power load to the entire area.
