Ron Lemieux, Manitoba's NDP minister of local government, has turned down a request by Mayor Tim Johnston to have Linda McFayden, the department's deputy minister, participate in discussions between Vale Canada and the City of Thompson, Local Government District of Mystery Lake (LGD) and the School District of Mystery Lake regarding the renewal of the letter of understanding that establishes existing arrangements for a voluntary grant-in-lieu of taxes to be paid by Vale Canada.

The current seven-year letter of understanding, which is supplementary to the Dec. 3, 1956 agreement creating Thompson, has been in effect since Jan. 1, 2005 and expires in about four months on Dec. 31. It says:

"In signing this letter of understanding, the parties acknowledge that the voluntary grant-in-lieu of taxes is a gratuitous non-contractual grant made by Inco," as the company was known in 2005.

The company, however, goes on to undertake that it will continue make the grant-in-lieu of taxes payments through Dec. 31, 2012 unless, among other eventualities, its Thompson operations shutdown permanently during the period or "there is a substantial reduction" beyond any planned in 2005 or contemplated in its current Mine Plan.

During the last bitter labour dispute at Vale's Manitoba Operations, when it was still Inco – an 11-week long lockout by the company of unionized employees between September and December 1999 – the company midway through the dispute threatened to reduce its annual grant-in-lieu by $1.5 million over the next three years.

Former mayor Bill Comaskey estimated a reduction of that magnitude of the grant-in-lieu would be equivalent to a 10 per cent municipal tax increase. Eliminating the grant altogether would have resulted in 2000 of a property tax increase of 144 per cent, Comaskey estimated at the time.

The City of Thompson, along with the province and USW, met with senior Vale Canada officials in Toronto June 25 to hold early discussions about the grant-in-lieu of taxes issue, along with other issues such as the Thompson Economic Diversification Working Group (TEDWG), launched on May 18, 2011 to help the city and region make its transition into the post-surface smelter and refinery operations era beginning in 2015. TEDWG, supported by Toronto-based consultants rePlan at a cost of well over $1 million to Vale, is winding down its work here to be replaced by some sort of regional roundtable, Johnston hopes.

Peter Poppinga and John Pollesel, the number one and two senior executive officers for Vale Canada respectively, were both here in Thompson June 28 – three days after the Toronto meeting – to continue informal talks with the city on the grant-in-lieu of taxes issue. Poppinga recently replaced Tito Martins in Toronto as chief executive officer of Vale Canada and executive director of base metals and marketing and information technology for Vale, while Pollesel is chief operating officer and director of base metals North Atlantic at Vale.

"In your letter," Lemieux wrote to Johnston July 16, "you request that my Deputy Minister, Linda McFadyen, participate in discussions to renew the letter of understanding.

"The Province of Manitoba was not signatory to the existing letter of understanding, therefore, current discussions to renew the letter of understanding can proceed without the province."

Lemieux does add the province would be "pleased to support the city's discussions" and would "appreciate if you could keep us informed about your progress.

"In closing, I know that all parties involved in your negotiations share a common interest in the economic health of the Thompson region and trust that your discussions will be successful."