FREDERICTON — New Brunswick’s NDP is proposing to raise as much as $1.1 billion to pay down the provincial debt by selling off a stake of the future earnings in NB Liquor.
Under the NDP plan, 49 per cent of the company’s profits would be dispersed through an income trust. Liquor corporation employees and New Brunswick residents would get preferential access to shares.
“Instead of selling off (NB Liquor) to corporate interests on Bay Street or in Hong Kong, or to friends of the government, the money will stay in New Brunswick for New Brunswickers,” said NDP Leader Dominic Cardy.
He said trust units would yield a guaranteed six per cent return.
The plan doesn’t amount to selling the company, as the shares wouldn’t be for the assets, but for the profits.
While the move would see the remittance of about $150 million the government gets every year, go down, that would be offset by the reduction of interest charges on $1 billion worth of debt.
“The income trust model is a chance for New Brunswickers to invest in New Brunswick,”
Economists Brian Steeves and Mike Wong first proposed creating an income trust for NB Liquor in a November 2012 opinion piece published in the Telegraph-Journal.
They said it would still be cheaper to borrow money on the open market, but said if selling assets to pay down debt is what government wants to do, monetizing the NBLC through an income trust approach may come closest to squaring the circle of reconciling competing interests.
They suggested 49 per cent of the NBLC franchise might be turned into an income trust, publicly owned by the people of New Brunswick and having a 10 year redemption term.
“The income trust approach is superior in many ways to traditional privatization. Trust control is maintained by the province,” they wrote.
They said a trust could yield upwards of $1.1 billion in upfront cash for debt reduction. They suggested the price would be $100 per unit.
“Union jobs could likely be maintained but the presence of outside investors would create a new discipline for the NBLC Board. Fees to the private sector would be saved and the province could gain upwards of a further $8 million in tax revenues.”