Fogo Island Inn, town bring in government mediator to settle $57K tax dispute

The government of Newfoundland and Labrador has been brought in to mediate a tax dispute between a high-end hotel and the Town of Fogo Island.

Shorefast, the operator of the Fogo Island Inn and a major employer on the island, refuses to pay a portion of its municipal tax bill from the first 16 months of the pandemic.

"The portion of our bill that we are disputing is the $57,000 in business taxes (2020 through June 2021) when the inn was forcibly closed due to the government-imposed travel ban that cuts us off from our guests, 96 per cent of which come from outside Atlantic Canada," reads a letter sent to Fogo Island residents this week. 

"During our 16 months of closure, however, the inn and Shorefast took on millions of dollars in debt so that we could emerge from the pandemic in good standing, bring our whole team back to work, and resume operations."

The letter from Shorefast states that in December 2020, the Town of Fogo Island offered to waive business taxes for businesses that remained closed the entire year due to the pandemic. 

"Shorefast applied, on the grounds that the inn was open a mere 38 days at the beginning of 2020 during the lowest part of our season and ended the year in a position of significant financial loss, but the request was denied," it states.

Fogo Island Mayor Andrew Shea told CBC/Radio-Canada the town considered shutting off the hotel's water supply because of the outstanding tax bill, but eventually decided against it.

"It was in the process, but we didn't do it," said Shea on Friday, before declining any further comment.

Radio-Canada obtained a copy of the Shorefast letter Friday. The town's chief administrative officer, Pauline Payne, declined an interview but confirmed that the Department of Municipal Affairs is mediating the dispute. 

Shorefast and the town previously agreed to a 15-month payment plan for around $200,000 in "undisputed" property taxes and water and sewer fees due since the beginning of the pandemic, according to the company's letter. 

The two-page document, sent to residents to "demonstrate the impact of our work," says the money the hotel makes after paying its operating costs is reinvested in the community through its charity and economic development work.

Shorefast says it has paid the town $700,000 in taxes since 2011. The company also says it directly employed 255 residents in 2019, the last year before the pandemic. That year, it paid out $5.8 million in salaries.

About 2,300 people live on Fogo Island.

The Fogo Island Inn, built by billionaire Zita Cobb, has played host to the rich and famous — including movie stars like Gwyneth Paltrow — since opening in 2013 with a mandate of revitalizing the local economy.