Saint John Must Consider Long-Term Impacts Of Taxing Refinery
David Campbell is a Moncton-based economic development consultant and co-host of the Huddle podcast, Insights. The following piece was originally published on his blog, It’s the Economy, Stupid!, on Substack.
I have been following the efforts to increase property taxes on the Irving refinery in Saint John. I don’t know enough about the specifics to comment on comparisons or analyses that have been done. I know, in general, jurisdictions in Canada (not just Saint John) tend to tax industry less than in the U.S.
As an illustration of this, KPMG ranks Moncton and Fredericton 10th and 11th lowest for overall corporate tax burden compared to 60 global cities (Saint John was not in the analysis). New Orleans, which is known for its low-tax environment in the U.S., was tied with Fredericton at 11th.
But my bigger concern is that Saint John officials need to be thinking 10, 15, and even 20 years out. I haven’t talked with anyone at Irving Oil about this but, eventually, the company will need to transition to new opportunities (see my note on this below). Those new opportunities will likely cost hundreds of millions or maybe billions of dollars in new, intergenerational investment.
It is distinctly possible they will decide to migrate that investment elsewhere. It is also possible they will sell lock, stock, and barrel to one of the large players and that company will play out the string and then shut down Saint John altogether.
I’m sure many of you will respond with “who cares? Tax ‘em while we got ‘em. They aren’t going to move the refinery.” True enough.
But there are 1,800 people directly working in the petroleum refining and wholesaling sectors in the Saint John CMA (2021) Census Metropolitan Area, and several thousand more jobs are tied to the sector through the supply chain and induced impacts.
In fact, Saint John is more reliant on this sector than any other urban centre in Canada.
I could be wrong. Many people I talk to with some knowledge of this will say they expect there to be demand for refined oil products until later in the century. The demand will diminish over time but – who knows – maybe Irving Oil is planning to be the last refinery standing in Canada.
The city’s Number 1 priority should be working with the company to help facilitate what’s next and to ensure Irving is investing in Saint John for subsequent generations. That could be green hydrogen, other forms of bioenergy, or even in other sectors.
The bottom line is that the company has billions of dollars invested in Saint John and is creating high-paying jobs, tens of millions in tax dollars, and work for hundreds of suppliers. We should be focused on ensuring that impact lasts into the future.
As any salesperson will tell you, it is easier to keep existing clients than attract new ones. But if you raise prices on existing clients…
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