Close to a year of productive negotiations culminated on the afternoon of Thursday, May 9, when officials from the Town of Snow Lake and Hudbay Minerals sat down in the former’s council chambers and signed a grant-in-lieu (GIL) agreement. The five-year pact will see a sizable increase in funding going to the community’s operating budget, as well as a new component that will contribute towards Snow Lake’s capital requirements.
The current agreement between the two parties provides the town a flat $1,144,000 per year, plus another $126,000 per year in taxes for the Hudbay-owned New Britannia property. The agreement reached last week will see the flat rate increased to $1,338,610 for 2019 and a further two per cent increase each year thereafter, until 2023, when the agreement will pay the town $1,448,950. In addition to this amount, Hudbay will pay the town $750,000 in each of the five years to be used within their capital budget. In return, the New Britannia Mine will now be included within GIL funding; however, other properties inside town boundaries, including the Lalor Camp, will remain on the tax roll.
“We are pleased to have signed a five-year agreement to provide a grant in lieu of taxes to the Town of Snow Lake, as well as a capital contribution for their necessary capital projects,” said Robert Assabgui Manitoba Business Unit vice-president for Hudbay Minerals. “We are very happy to be a partner with the community and helping with their infrastructure projects.”
A grant in lieu of taxes is a payment in place of taxes to recognize the services a company receives from the municipality and thereby encompasses that company’s share – or a portion of their share – of the costs of running the municipality.
Snow Lake’s mining grant-in-lieu agreement has been a part of the community’s funding formula for 60 years. In December 1959, a key agreement between the Local Government District (LGD) of Snow Lake and HBMS (Hudbay) amended the letters signed in 1947, which created the district and the townsite. The 1959 agreement was special because of the capital investment that HBMS provided to the LGD. Schedule A of that agreement showed the sewer and water lines, fire truck and equipment, curling rink, and community hall and their respective values at the time, which were transferred (from HBMS to the LGD). Although not specifically a grant-in-lieu agreement, it does show an early idea of the relationship between HBMS and the LGD.
In 1976, Snow Lake incorporated as a town and during that period a new agreement was negotiated moving more responsibility for items that the company traditionally looked after from HBMS to the Town of Snow Lake. Also around the time of this transfer, a formula was arrived at to help defer the costs of operating the town, as well as help with the capital purchases the community would have to make from time to time. This was known as the grant in lieu.
In 1981, the grant-in-lieu payment encompassed 55 per cent of allowable expenditures and 66.25 per cent of approved capital expenses. This percentage based agreement carried on until 1994/95, when Hudbay closed the majority of their mines and put the Stall Concentrator on care and maintenance. With the downsizing of their Snow Lake operations, the agreement was renegotiated, taking on its current form, which is a bargained lump sum payment. The new agreement brings back a capital component.
After affixing his signature to the agreement documents, Snow Lake Mayor Peter Roberts stated, “It’s been a long time coming. We haven’t had this type of Hudbay representation sit at the council table for as long as I can remember. The capital money is something that is going to be there every year of our five-year agreement and nothing but good things are going to happen as a result.” Roberts says that with the capital funds the town now has at its disposal, it will be easier to leverage more money for further infrastructure projects through agreements with the provincial and federal Governments. He also noted that the capital money was for the town’s use only; Frontier School Division would not be a party to this portion of the agreement.
Richard Trudeau, Hudbay’s director of health, safety, Aboriginal and external affairs, added, “We have a five-year agreement, but that doesn’t stop the relationship. We are going to continue the good relationship that we have with the Town of Snow Lake; we’ll continue meeting with the council and discussing updates and anything we can assist with.”
Of note, there has been a move of late to change how grants in lieu of taxes are referred to. These changes were originally suggested by the Federation of Canadian Municipalities (FCM), whose members believed that using the term “grant” for the payments made in lieu of property taxes did not reflect the value of the services provided by its member towns and cities. Using the term “payment” rather than “grant” puts the emphasis on the payer’s responsibility as a property owner to share in defraying the cost of local government, rather than its generosity in making a payment, which the word “grant” implies it is not legally obliged to make.