McCain Foods takes full advantage of tax breaks on farmland

McCain Foods Ltd. is known worldwide as a multibillion-dollar food processing company, but inside New Brunswick it is also one of the province's largest farming operations.

Through its agricultural arms, McCain Produce Inc. and Valley Farms Ltd., the company owns more than 200 New Brunswick farm properties, which grow potatoes and other vegetables for its Florenceville plant.

As long as you keep the land for agricultural purposes, you don't have to pay the taxes on it.- Peter Hyslop, Hartland lawyer

That makes McCains one of the biggest users of a tax concession the province offers to owners of farmland to help them avoid most of their property taxes, a CBC News investigation into special tax breaks in New Brunswick shows.

Taxes deferred

Downriver from Florenceville, in Jacksonville, one of McCain's larger farms, a 150-hectare operation the company has owned since 1966, is assessed to be worth $176,200. On paper, the property tax on that is just below $2,800, but this year Valley Farms only had to pay $654 of that.

The rest, in all likelihood, will never be paid.

Peter Hyslop, a Hartland lawyer in the middle of New Brunswick potato country, has a number of clients who own agricultural property and benefit from its unique tax treatment.

"A big part of the taxes are deferred," Hyslop said.

"As long as you keep the land for agricultural purposes, you don't have to pay the taxes on it."

Since 1978, New Brunswick has allowed owners of agricultural land andbuildings on that land to defer, and ultimately not pay, provincial property tax.

Can be forgiven after 15 years

Deferred amounts are forgiven after the 15th year as long as the land is still in use for farming.

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Farmland owners still have to pay local property tax, but that is capped at a low rate as well. The program is advertised as a way to prevent the loss of farmland to commercial or residential development.

But it's been an expensive undertaking.

Government figures show that since its inception, the program has generated $129.9 million in uncollected property taxes, including $7 million deferred this year. And since more than $40 million of those unpaid taxes are older than 15 years, that portion has been written off.

"It's very widely used," said Hyslop. "Most farmers take advantage of it."

$134,000 put off this year

According to a CBC review of property records, McCain's has at least $11 million worth of farmland enrolled in the tax deferral program and was able to avoid paying about $134,000 in property tax because of it this year.

But that's assuming agricultural land is properly assessed for taxes in the first place.

In New Brunswick, property tax assessments by the province can be slow to recognize rising agricultural land prices, granting owners of farm properties deep discounts on their initial tax bills that are then accelerated by the tax deferral program.

Last year, Nova Scotia'sBraggGroup was looking to expand its New Brunswick blueberry properties and settled on the purchase of 189 hectares inPennfield.

The company, whose Oxford Frozen Foods boasts it is the world's largest supplier of frozen wild blueberries, paid slightly more than $1.5 million for the land.

But this year, the property tax bill for it looked like it might be a misprint: $1,004.

In nearby Blacks Harbour, people pay more than that on their $70,000 homes.

Much lower than commercial properties

Fifty kilometres away in Saint John, the owners of commercial properties worth $1.5 million pay 60 times more.

Still, it was no mistake.

Down the road from the Bragg blueberry properties P.E.I.'s Wyman company bought 229 hectares of its own in 2013. Wyman's paid nearly $1.6 million for its blueberry land , but its tax bill this year is equally low, at $1,012.

Both properties have agricultural tax deferrals from the province, but that's only part of what's driving their tax bills down.

Discounted assessments

More significantly the province does not yet recognize what the companies paid for the land to be true market values and assesses each of them at an 80 per cent discount $270,200 for the Bragg Group's property and $310,200 for Wyman's.

If we see blueberry land is selling for considerably higher than what we have it assessed at provincially at some point in time, yes,we would certainly go take a look at all blueberry land in the province.- Stephen Ward, provincial director of property valuation

Stephen Ward is the director of property valuation for New Brunswick and says unique properties like blueberry fields have to be considered in combination with all the other blueberry properties in the area and it takes time for individual land sales at high prices to move all those assessments.

"Just because somebody pays $7,000 or $8,000 per hectare for a piece of land one or two sales does not create a market," said Ward..

"We're looking for trends. If we see blueberry land is selling for considerably higher than what we have it assessed at provincially at some point in time, yes, we would certainly go take a look at all blueberry land in the province. We just haven't reached that point yet."

Hundreds of thousands reassessed

Ward says in the past it has taken the province up to 20 years to complete a comprehensive "re-inspection" of property groups including blueberry fields and other agricultural properties, a cycle it is trying to reduce to five years or less.

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"We will make adjustments on an annual basis to all 465,000 properties in the province but we really fine tune our property assessments when we go in to do a reinspection," said Ward.

That's been good news for the Bragg Group and Wyman's, who, with tax deferrals and low assessments on their new blueberry land, get to pay a fraction of the tax other landowners do.

Without a tax deferral, blueberry fields in Pennfield assessed at full sale price,$1.5 million,would be looking at property tax bills of about $26,000. Instead the two each pay 96 per centless than that more than the discount Irving Oil originally got from Saint John on its LNG properties.