Auditor General Kim MacPherson delivered her latest report on Tuesday. (Michel Corriveau/Radio-Canada)

A $22.8-million bailout package by the Brian Gallant government for the City of Saint John represented "excessive risk" to provincial taxpayers and did not go through the normal approval process, according to New Brunswick's auditor general.

Kim MacPherson says the bailout agreement did not include targets and, as of this April, had "failed to effectively address the city's challenge" or reduce the financial risk to the province.

And by tying the funding to the city's deficit, the Gallant Liberals actually created "an inappropriate incentive" for the city to run larger deficits so it could collect the maximum amount of $22.8 million from the province, she says.


Her audit, released Tuesday morning at the legislature, also says the government may have committed obstruction, a violation of the Auditor General Act, by not providing all the documents her office asked for.

It's not clear whether that alleged obstruction took place under the previous Liberal government that signed the Saint John deal or the current Progressive Conservative government.

3-year package announced in 2017

Then-premier Brian Gallant committed to a three-year assistance package in September 2017, following pleas by Saint John Mayor Don Darling for a "new deal" to address what he called a municipal budget crisis. The city was forecasting a $6-million deficit at the time.

That commitment came the same month Gallant appointed himself as his government's regional minister for the Saint John area, despite representing the southeastern riding of Shediac Bay-Dieppe.

The Liberals were targeting the region in the 2018 provincial election, hoping to pick up seats in and around the city. Darling publicly mused about running for the party before deciding to remain as mayor.

MacPherson says the city was conscious of the timing of the provincial election and "leveraged" that timeline to push the province for the bailout.

While the Regional Development Corp. was given responsibility to negotiate the agreement, the audit says top staffers in Gallant's office "were intricately involved" in the work.

In December 2017, Gallant sent Darling a letter offering him "my guarantee" that the province would provide a financial bailout and promised to "begin making investments today" to ease the pressure on the city's 2018 budget.

MacPherson says there was "no evidence of documented approval by cabinet" for Gallant's promise until two months later. There was also no sign that the Department of Environment and Local Government — responsible for municipal funding — was consulted.

When documentation finally appeared in February 2018, it was "difficult to follow, lacked clarity and in our opinion did not include adequate analysis" to support cabinet approval for the funding.

Less stringent accounting standards

The city also pushed for — and Gallant agreed to — less stringent accounting standards for measuring Saint John's deficit, and for the removal of a clause requiring the legislature's approval for the payments.

MacPherson's audit also says there were repeated references to legal advice from the Office of the Attorney General on the bailout agreement, but when her staff asked for it, they were refused.

And it faults the premier's office for not making sure records were maintained during the transition from the Liberal to PC government for her review.

"We realize this was during a period of government transition but our expectation was that records would be retained to facilitate transparency, knowledge transfer and effective review of significant, ongoing files," MacPherson writes.

"We believe this is fundamental to effective governance."


Former premier Brian Gallant and Saint John Mayor Don Darling agreed to a bailout package for the city. (Rachel Cave/CBC)

Saint John council approved the agreement on Feb. 12, 2018, three days after the province announced it. The province paid out the first $1.2 million on Feb. 22, for a highway interchange project, despite Gallant not signing the agreement until March 15.

In comments incorporated into her report, the Higgs government says it will heed MacPherson's recommendations to ensure proper protocols are following in funding agreements and that they comply with provincial laws.

MacPherson's audit says tying provincial funding to the city's deficit encourages the city to continue running deficits and also creates a precedent for other municipalities looking for money.

"Providing funding to a municipality to address a projected, ongoing deficit could incite other communities to seek the same solution to financial issues," she writes.

"This precedent would represent additional increased risk for the province as it faces pressure to address municipal deficits with similar actions."

The funding also circumvents the Local Governance Act, which lays out how a municipality is supposed to deal with deficits, according to the auditor general.

Kiefer Sutherland, left, says he's offended by the Ontario Progressive Conservatives comparing their policies to those of former Saskatchewan NDP premier Tommy Douglas. (CBC/The Canadian Press)

Canadian actor Kiefer Sutherland, the grandson of renowned former Saskatchewan premier Tommy Douglas, is asking Ontario Premier Doug Ford and Ottawa MPP Lisa MacLeod to stop using his grandfather's name for their own political ends.

MacLeod invoked the premier's memory in a May 31 Financial Post editorial, arguing that Douglas would have approved of Ontario Progressive Conservatives' moves toward fiscal discipline.

Ford quoted from the editorial in a post on Twitter on June 2, and Sutherland responded to both Ford and MacLeod on Monday.


Sutherland's tweet reads:

Mr Ford,
Your tweet has recently come to my attention and I can only tell you that you are correct, my grandfather Tommy Douglas was fiscally responsible. In addition to balancing the budget of Saskatchewan, he also provided the province with paved roads, healthcare and electricity. He did it all within four years. Contrary to your argument, it was never at the expense of social and human services to those in need. I personally find your comparison of your policies to his offensive. So I can only ask, as the grandson of this man, for you to stop posting his picture and using his name as part of your political agenda. After all, I knew Tommy Douglas and you Sir, are no Tommy Douglas.
P.S. You're lucky my mum's not active on Twitter.
Sincerely, Kiefer Sutherland.

Sutherland's mother is Tommy Douglas's daughter, Shirley Douglas, also an actor.

MacLeod fired back on Twitter later Monday, posting a picture of a 2017 bus shelter advertisement for Designated Survivor, which stars Sutherland, and saying she "used to like" the TV show.

"Alas, it's more difficult to be a politician than pretend to be one on TV," she added.

In a statement to CBC, the premier's press secretary Ivana Yelich said the PCs are proud of their financial record.

"After 15 years of waste and mismanagement, Ontario was in precarious fiscal position," she said. "We're proud of our decision to balance the budget in a responsible manner, while showing compassion and protecting what matters most to real Ontarians."

Douglas, who also helped found the Co-operative Commonwealth Federation, which became the New Democratic Party, is recognized as the father of universal health care in Canada.