McMasterville and Saint-Basile-le-Grand have agreed with Northvolt on the amount of municipal taxes that the battery cell manufacturer undertakes to pay each year. A private bill will formalize the terms of the agreement.
This is an unusual process that allows the cities concerned to collect more taxes from the multinational while benefiting from more flexibility, McMasterville maintains.
In return, the Swedish company gains predictability over time by knowing how much it will pay each year, regardless of the future variation in the municipal value of its complex or the variations in the tax rate applicable to the industrial sector of the two cities concerned.
The agreement thus provides for setting around the current level of $2.25 per $100 of valuation the tax rate to which the Northvolt factory will be subject, the long-term value of which is established around 1 billion (distributed at 80% to Saint-Basile and 20% in McMasterville). In addition, the rate will be indexed to the consumer price index.
“The taxes paid should be in line with the Municipal Taxation Act in the interest of fairness with Quebec businesses,” write the cities in a press release.
Northvolt will also have no advantage in contesting the value entered on the municipal roll for the duration of the agreement. Such a contest from large taxpayers costs the City dearly in legal fees and creates uncertainty over McMasterville’s finances, its general director, Sébastien Gagnon, noted in an interview.
It’s a win-win agreement, according to him. “McMasterville will receive more taxes from Northvolt than under current law, and Northvolt gains predictability,” he summarizes.
McMasterville has an annual budget of $10 million. Once the factory was in operation, Northvolt would have theoretically paid a maximum of 4.5 million taxes per year to the City based on the usual rules and current tax rates.
The bill aims to remove the company’s property account from the application of the Municipal Taxation Act. This law creates links between residential and non-residential tax rates and between tax rates for the commercial and industrial sectors.
Under the current regime, the commercial sector tax rate cannot exceed the residential rate by more than 4.4 times. And the industrial rate is limited to 1.33 times the commercial rate. Under the guidelines currently in force, a reduction in the tax rate for residential owners therefore automatically results in a reduction in Northvolt’s tax rate.
McMasterville assures that such a private bill relating to the property tax bill of an industrial taxpayer is not a precedent. The Rabaska industrial-port project, which ultimately did not see the light of day, was the subject of a similar bill.
“What is important for us, in a project financing context, is to have good visibility on the tax amounts to be paid,” says Northvolt, in a statement. This amount will be determined based on the value of the buildings that will be constructed on the site, as already provided for in the municipal taxation law. »
Northvolt did not give an idea of the amounts that will be paid. The company says its project has “peculiarities” since it straddles two municipalities and that “no industrial property on a single site is expected to have a municipal assessment as significant as that anticipated” for its mega-factory.
There is no factory worth 1 billion in Quebec. The one worth the most today is Rio Tinto’s Vaudreuil complex in Saguenay, with a value of less than 500 million.
