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Hudbay, local leaders reach five-year grant-in-lieu deal

The City of Flin Flon and Hudbay have reached terms on a deal that will see the company continue paying a grant-in-lieu to the City for another five years.
N37 Hudbay City Agreement
Hudbay director of human resources Richard Trudeau and Flin Flon Mayor Cal Huntley shake hands during an event confirming the two sides' deal at City Hall Sept. 7.

The City of Flin Flon and Hudbay have reached terms on a deal that will see the company continue paying a grant-in-lieu to the City for another five years.

Senior officials from both the City and company announced the deal Sept. 7 at City Hall, providing Flin Flon with funding - albeit, at lower levels than previous years - until 2028.

No firm numbers for what amount of money the company will contribute were released, but the ballpark amount will be at around 70 per cent of the level of the grant during Hudbay's peak years of paying the grant, including years such as 2006.

Each year, Hudbay pays a lump sum grant to the City of Flin Flon for the area covered by its local compound in lieu of paying property tax. Money from the grant-in-lieu is paid to the City, which then pays a portion of that funding to the Flin Flon School Division (FFSD). Grant-in-lieu funding makes up about a third of the City's annual budget, depending on the year.

Back in 2006, the grant-in-lieu received by the City was around $6.8 million, putting the approximate future amount at somewhere around the $4.7 million a year range in gross payment. In the City's 2022-23 fiscal year budget, Hudbay paid about $6.5 million total in grant-in-lieu funding as a gross payment. About $4.7 million of that was kept by the City, with the remainder going to the FFSD.

"The new agreement is built on the 95-year relationship between Flin Flon and Hudbay, which have been closely connected since the City’s inception," reads an announcement released by Hudbay on the agreement.

"The new financial terms reflect Hudbay’s reduced presence after the conclusion of mining activities in Flin Flon in June of this year, while still supporting the community where many of its employees live."

The deal also includes three sub-agreements. Those include covering maintenance of water levels at Cliff Lake, where Flin Flon gets its drinking water (Hudbay will cover that maintenance), connecting Hudbay to the City's water supply so levels at Hudbay's own reservoir can be maintained and the City providing fire protection services for the Hudbay compound. Hudbay previously operated its own fire department in-house, but has disbanded it following closures, staff moves, retirements and layoffs.

The new deal, which goes into effect Jan. 1, 2023, will be in effect until Jan. 1, 2028.

The reduction in grant funding is due to Hudbay's closure plan for most of its Flin Flon-area facilities. The company closed and shut down 777 mine earlier this year, closed down its mill earlier this summer and will auction off several items of crucial equipment later this month.

“The change in Hudbay’s operations in Flin Flon has been a source of concern for many in the City. However, this new agreement is providing contributions of more than 70% of the historical high payments from past agreements,” City of Flin Flon chief administrative officer Nicole Hartman is quoted as saying in a Hudbay statement.

“After carefully reviewing other models and benchmarks for municipalities in similar situations, we are very happy with this agreement. We think it is fair to both parties and allows us to continue to plan for the future of our community, even as Hudbay’s role in it changes.”

The payments, Hudbay representatives said, are still being made due to the company seeing Flin Flon as an important base for its Snow Lake operations - while few employees will still be working at the company's Flin Flon properties, Hudbay expects Flin Flon to support its Snow Lake-area employees, including being a place for some to live in and purchase housing in.

"Our footprint is a lot smaller in Flin Flon. When we look at that, we feel that this is a fair and beneficial agreement to the City of Flin Flon because this community supports our employees in Snow Lake," said Hudbay director of human resources Richard Trudeau, who represented Hudbay at the Sept. 7 announcement.

"When we talked about the percentage of the highest grant-in-lieu payment, that's equivalent to 2006, when we had a couple of mines running. We feel it's very fair for continued support in this community."

"When you look at historical highs, we've had a grant-in-lieu that's been over $6 million. So, with 70 to 75 per cent being the number that they're saying is equal to what we'll be looking at in the future, that's about $4.5 to 5 million," said City treasurer Lyn Brown.

Brown and other City leaders said the cut of the grant kept by the City and paid out to the FFSD would need further discussion between the two groups.

"When it comes to the school division, we need to have a conversation with the school division with regard to how the formula looks moving forward. Until we have that discussion and get to an agreement with the school division, I can't give you that number [of how much money the City will have], because I don't know what it is," said Brown.

"There will be a reduction for them [FFSD], as well as a reduction for us, but we need to talk to them about that. That wasn't an obligation under the grant-in-lieu agreement - that agreement is between the City of Flin Flon, the province of Manitoba and Hudbay," said Flin Flon Mayor Cal Huntley.

"We've been discussing this with the City of Flin Flon for going on two years now. We didn't take this lightly, we've negotiated and I think we've come up with a very good agreement for both parties," said Trudeau.