Canada: Northern Breweries to justify operations

In a closely contested decision, Sault Ste. Marie, Ontario City Council voted 6-5 to have Northern Breweries Chief Executive Officer Bill Sharpe come to the next Council meeting to provide specific information pertaining to its operations, local media provided May 31.

Of specific concern is what Northern Breweries has done in terms of job security and expansion in exchange for clearing $CA430,000 in tax arrears. The Economic Development Corporation provided that money to Northern Breweries to pay the arrears. Ultimately, it was directly paid by the broader tax base, including 3,000 businesses who do not receive similar short or long term benefits.

Northern Breweries’ 2005 taxes remain unpaid. Moreover, there appears to be no clarity and specificity over the projected job growth Sharpe promised in exchange for relief of tax arrears when the company was purchased.

In providing Sharpe with no outstanding debt, Council shifted the burden of risk to taxpayers. Council approved the sale of the Breweries by accepting all of Sharpe’s conditions.

What Council did not do was correlate tax relief to realized job growth in the original deal. From a legal standpoint, Council has relied on good faith and does not appear to have leverage to hold Sharpe to such promises.

Proponents of the model used for Northern Breweries argued that there were short and long term benefits including stability of the operation, and a specific promise of 40 jobs by year 4.

Critics of the model argued that there appears to be some inconsistency within Council pertaining to taxation. Some businesses such as Northern Breweries have received creative tax relief packages, while most others do not. Many small businesses which encompass the majority of the local economic infrastructure are burdened with some of the highest commercial taxation rates in Northern Ontario. Many continue to be at odds with MPAC over their assessment, which plays a significant factor in their tax rates.

Money used for the relief of Northern Breweries’ $CA430,000 tab was essentially paid for by businesses and taxpayers. There is concern within these factions that the model used to benefit Northern Breweries was both flawed and unfair. This perception draws the current Council in the direct line of fire of accountability.

In the immediacy it appears that Sharpe will appear before Council for accountability. Sharpe can alleviate himself from such supposed accountability since there appears to be no contractual liability to the original deal. If Sharpe takes such a position, Council will be faced with further internal discourse as to what options they have.

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