City to grant $350,000 to offset Kruger transfer duties

The City of Sherbrooke is providing $350,000 in financial assistance to the Kruger plant in Brompton, to offset transfer duties (often referred to as the "welcome tax") that the company will have to pay as a result of changes in its Brompton plant.

Last month, municipal council agreed to this exceptional measure that was requested by the company, to maintain its 248 jobs by focusing on the production of specialized paper products that will require an estimated $55 million investment in new equipment.

The new production activities, in both Sherbrooke and Trois-rivières plants, led to the creation of a new legal entity regrouping the assets of the two plants. This shift in the organizational structure results in the imposition of transfer taxes in the range of $325,000 to $360,000.

The new company, Kruger Specialty Papers Holding L.P. therefore submitted to the City an application for financial assistance of the same order as the transfer tax, arguing that these fees could have a negative impact on the feasibility of the project. A special power under the Municipal Powers Act allows the City to provide assistance to a private sector firm that doesn’t exceed $250,000 per year.

According to the city's decision-making summary, Sherbrooke has never used this power as it already subsidizes businesses within its territory through various programs, including the tax credit program. However, this route can’t be used with Kruger as the company’s needs do not fit in with any other program. The City will therefore grant the company $250,000 in 2017 and $100,000 in 2018.