Grant-in-Lieu Payments

Res #: 39-01M
Number: 39
Year: 2001
Midterm: Yes
Expired: Yes
Responses Received: No
Departments: SaskPower

Resolution No. 39-01M

WHEREAS, SaskPower is paying grants-in-lieu of taxes to the twelve cities in the province based on the electrical consumption in those cities (this is in addition to the Municipal Surcharge); and

WHEREAS, there is no reason why SaskPower should treat the various types of municipalities differently;

THEREFORE BE IT RESOLVED, that SARM lobby SaskPower to make the grant-in-lieu payment available to all forms of municipalities, and further, that the Province be lobbied to amend The Power Corporation Act in such a manner so as to accommodate these payments.

Response from Maynard Sonntag, Minister of Crown Investments Corporation:

This resolution specifically raised the issue of payments by SaskPower of a grant-in-lieu of taxes to the twelve cities in the province based on electrical consumption. The resolution suggests that there is no reason why the grant-in-lieu of taxes should not apply to all municipalities and that SARM lobby the SaskPower for an amendment to The Power Corporation Act to allow for such payments.

I would like to begin my response by drawing a distinction between the municipal surcharge and the grant-in-lieu of tax payment. Section 36 of The Power Corporation Act provides for the ability of a village, town or city to levy a municipal surcharge on customers within their borders. This is essentially a flow through surcharge wherein the customer makes additional payment within their bill and this payment is then remitted to the village, town or city levying that charge. The grant-in-lieu of taxes, on the other hand, is a compensation payment made by SaskPower originating from contractual arrangements arrived at between SaskPower and the larger urban municipalities wherein they sold their electrical franchises to SaskPower and its predecessor, the Saskatchewan Power Commission.

I would like to expand briefly on this latter point. In the early days of the 1900's, only larger canters were able to afford to develop electrical generation and distribution systems. The provincial government, in 1929, created the Saskatchewan Power Commission and mandated it to start the development of a provincial grid system. This development was expanded and accelerated after creation of the Saskatchewan Power Corporation in 1949.

In order to develop one provincial system and extend electricity across the province, contractual agreements were arrived at with each of the larger centers whereby they agreed to transfer their generation and electrical distribution systems for a set capital price. In addition, they negotiated for ongoing payment which came to be called grants-in-lieu of taxes. These payments were negotiated as recognition for the stream of ongoing revenues which the larger municipalities were foregoing as a result of transferring their infrastructure.

It is critical to point out that rural areas did not give up a revenue stream in order to join the Saskatchewan Power grid system. Quite the contrary was the case. Many rural areas were only able to get electrical distribution in the 1940's and 1950's because the creation of a large infrastructure which was centrally financed.

In conclusion, there was a clear historical reason why larger centers received grant-in-lieu payments and others did not.