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Million Dollar Tax Battle: Port Alberni


September 1, 2009
By Pulp & Paper Canada

In principle, Port Alberni Mayor Ken McRae has no quibble with Catalyst Paper’s claims that industrial property taxes in his municipality are far too high.

In principle, Port Alberni Mayor Ken McRae has no quibble with Catalyst Paper’s claims that industrial property taxes in his municipality are far too high.

But he also knows there’s no way the small Vancouver Island forestry town can afford to lose $3.3 million in taxes from its largest employer all at once.

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“We know it’s a serious issue and we’ve been looking seriously at reducing industrial taxes for several years,” McRae says. “It’s all in how fast we go about it and how much we can afford.”

After years of lobbying for lower property taxes, with limited success, Catalyst announced earlier this year it would be withholding more than $17 million from four B.C. towns that depend on its mills for tax revenue and employment -North Cowichan, Campbell River, Powell River and Port Alberni.

Rather than pay $4 million to $6 million in property taxes to each community, Catalyst decreed it would pay a flat rate of $1.5 million, the company’s estimate of the value of municipal services it consumes.

Catalyst has since filed petition in B.C. Supreme Court to have the tax rates overturned and incurred an automatic 10% penalty under B.C. law by refusing to pay up by the July 1 deadline.

In court dates scheduled for September, the municipalities will argue that, by not paying its taxes, Catalyst is breaking the law.

Campbell River Mayor Charlie Cornfield refused to be interviewed for this story, but is on the record saying he “expects Catalyst to pay their taxes just like any other taxpayer.”

Towns have made concessions

Powell River Mayor Stewart Alsgard says it’s unfortunate Catalyst has chosen to pursue the matter in court and says the municipality is more than willing to negotiate substantial reductions over time.

“We’re aware of the problem and we’ve been making some adjustments,” Alsgard said. “We understand their position but we also want them to understand ours.”

All four municipalities have made efforts to appease Catalyst in recent years. Powell River began reducing the company’s taxes by $200,000 a year in 2004 and has since pledged to shave an additional $250,000 in each of the next four years.

Port Alberni is in the midst of a six-year plan to slash Catalyst’s taxes by $400,000 a year through 2012 and Campbell River and North Cowichan have knocked just under one million dollars each off the company’s levy in the last five years.

North Cowichan Mayor Tom Walker said the town now takes in just 44% of its revenue from industry, down from 62% a few years ago.

Catalyst spokesperson Lyn Brown called the reductions “too little, too late.”

Alsgard is hoping for quick resolution in court this fall before the tax dollars Powell River did receive this year are all used up. But just in case, council has prepared a contingency plan that identifies reserve fund transfers, gas tax funds, and possibly borrowing to make up the shortfall. Cuts to road maintenance and other services are also possibilities.

North Cowichan is also considering cutbacks and borrowing schemes to bridge the gap, while Port Alberni has reduced hours for city staff and may have to cut back municipal services.

Castlegar unexpectedly joined the ranks of tax-starved B.C. mill towns when Zellstoff-Celgar Ltd. suddenly announced June 30 it would withhold $2.7 million in property taxes -representing about 47% of the town’s revenue.

The resulting shortfall forced council to scrap $3 million worth of capital projects planned for this year, including all road paving, sidewalk maintenance, and a major sewer and water project.

“We put almost our entire capital program on hold,” says Castlegar councillor Kevin Chernoff. “We cut everything we could without affecting…the city’s basic ability to function.”

While Catalyst paid a lump sum for municipal services, Celgar withheld the entire amount, including school and hospital levies.

Celgar manager Al Hitzroth claims the mill doesn’t use any municipal services and therefore should not have to pay, an argument that town officials reject.

A recent finance department report noted that Castlegar’s industrial tax rate of 29.4 cents per $1,000 of assessed value is between 10 and 50 cents lower than most other mill towns in the province, Chernoff says.

In late August, six months after Catalyst laid off two-thirds of the 750 workers at its Crofton plant, the company recalled 104 those workers and restarted one of its production lines in response to improving pulp prices.

But the company’s CEO, Richard Garneau, says it will take more than an economic upturn to make the tax issue go away.

“It’s not a question of the market, it’s a question of fairness,” he says.

PPC


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