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Catalyst seeks tax relief
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| Catalyst Paper Corporation has told the provincial government the amount of municipal taxes it pays is unfair. The company wants to move to a consumption tax model and pay only for the services it uses, estimated to be about $1.5 million in each of the communities where it operates. |
Company officials propose to pay for services only in the four communities where it operates
By Laura Walz | editor@prpeak.com
BREAKING NEWS Catalyst Paper Corporation has told the provincial government the amount of municipal taxes it pays is unfair. The company wants to move to a consumption tax model and pay only for the services it uses, estimated to be about $1.5 million in each of the communities where it operates.
The company has asked the government to bridge the difference to mitigate the impact to municipalities.
City of Powell River council brought the issue forward at a budget committee-of-the-whole meeting on Friday, January 9.
Councillor Chris McNaughton, who holds the finance portfolio, reported that city representatives met with Richard Garneau, Catalyst president and CEO, the day before to discuss the issue. "Council is taking a proactive approach, as opposed to a reactive approach," he said. "We are faced with some very real challenges, but the important thing is we're going to face these challenges head on."
McNaughton said that Powell River had taken a leadership role in the past in reducing Catalyst's tax burden from $5 million annually to $4 million. The reduction was done over five years and was achieved through operational efficiencies and shifting taxation levels.
Councillor Dave Formosa pointed out the city invited Catalyst management to the meeting. He also said union representatives are in "deep negotiations" with Catalyst.
"Catalyst said they left here [Powell River] happy with the meetings with the unions and with the city," Formosa said. "People have done everything they can to come up with some solutions."
The global economic downturn has affected the company, Formosa said, and Catalyst is losing orders "quite rapidly. They have been told by their board of directors to close down one facility. It's something that is real. It's something that we've known for awhile. They are going to need cooperation. And we're going to make sure that Powell River is not the one."
Management is working towards operating two paper machines in each of its four facilities and reducing its costs to $80 a tonne, McNaughton said.
Catalyst is not looking for a bailout, McNaughton added, but it is looking for a partnership with the city, the unions and the provincial government. "They would like to have the last four mills operating in BC," he said. "It will be much better for the community to address the tax issue than to loose 500 jobs and the compounding effect."
That compounding effect would be a minimum of 900 jobs lost in the region, McNaughton explained. "What we need to do is support the families that are working in the mill and the businesses that are here as a consequence of the mill being in our community."
If the mill remains operating, it gives the city time to diversify the tax base and attract investment, he added.
The city has come up with a four-point plan, McNaughton explained. The plan involves considering:
• Continuing the $1 million major industry tax reduction.
• Initiating discussions for additional reductions to major industry.
• Refunding $700,000 the city recouped from Catalyst after the company won an appeal of its assessment.
• Discussing additional cooperative ventures such as joint sewer treatment to achieve beneficial synergies.
In addition to the initiatives taken locally, McNaughton said, "We are going to arrange meetings with cabinet ministers to discuss this issue further."
Mayor Stewart Alsgard has written to Blair Lekstrom, minister of community development, twice in support of Cataylst's proposal of provincial assistance.
Garneau has also written to Lekstrom, outlining the company's proposal.
Lekstrom met with company officials and municipal representatives from three of the four Catalyst-hosting communities, including Powell River, on December 18 to discuss both Catalyst's planned reductions in its municipal property taxes and the proposal to have the province help the municipalities to adjust to those reductions.
"Catalyst is not in a position to borrow the money, about $23 million, to pay municipal property taxes at traditional levels which are far higher than can be competitively supported," Garneau wrote.
Using the amount of taxes it pays in North Cowichan as an example, Garneau explained the company pays a tax rate that is more than 26 times the residential rate, yet it uses few community services.
"Thus, on July 1, 2009, Catalyst intends to pay only for the cost of municipal services it consumes," Garneau wrote. "This is estimated, for municipal planning purposes, to be about $1.5 million per community, representing a rate of $11/$1,000 in North Cowichan, still far more than the residential rates."
The municipalities may see Catalyst's position as a negotiation, Garneau continued. "It is not. With a debt load of $800 million, the company is not in a position to borrow to pay for unfair property taxes. Shareholders in Catalyst have lost 90 per cent of their investment over the past few years; in contrast, the municipalities and the province have done very well by way of Catalyst operations."
Should the municipalities and the province ignore the harsh world economy that Catalyst finds itself in, "this would leave the company with one alternative and that is the likely permanent closure of an entire facility with associated permanent job losses," Garneau wrote.
A provincial bridging fund to help the municipalities adjust would ease the impact on residential taxpayers, Garneau also wrote. "In our view, such a fund is a precondition for the municipalities to voluntarily make the adjustments in their tax rates. Without those adjustments, Catalyst will have no choice but to take extraordinary steps that will be painful for all parties as production shutdowns take place, unemployment increases and the annual $130 million in provincial revenues from Catalyst drop significantly."
The company has asked the government to bridge the difference to mitigate the impact to municipalities.
City of Powell River council brought the issue forward at a budget committee-of-the-whole meeting on Friday, January 9.
Councillor Chris McNaughton, who holds the finance portfolio, reported that city representatives met with Richard Garneau, Catalyst president and CEO, the day before to discuss the issue. "Council is taking a proactive approach, as opposed to a reactive approach," he said. "We are faced with some very real challenges, but the important thing is we're going to face these challenges head on."
McNaughton said that Powell River had taken a leadership role in the past in reducing Catalyst's tax burden from $5 million annually to $4 million. The reduction was done over five years and was achieved through operational efficiencies and shifting taxation levels.
Councillor Dave Formosa pointed out the city invited Catalyst management to the meeting. He also said union representatives are in "deep negotiations" with Catalyst.
"Catalyst said they left here [Powell River] happy with the meetings with the unions and with the city," Formosa said. "People have done everything they can to come up with some solutions."
The global economic downturn has affected the company, Formosa said, and Catalyst is losing orders "quite rapidly. They have been told by their board of directors to close down one facility. It's something that is real. It's something that we've known for awhile. They are going to need cooperation. And we're going to make sure that Powell River is not the one."
Management is working towards operating two paper machines in each of its four facilities and reducing its costs to $80 a tonne, McNaughton said.
Catalyst is not looking for a bailout, McNaughton added, but it is looking for a partnership with the city, the unions and the provincial government. "They would like to have the last four mills operating in BC," he said. "It will be much better for the community to address the tax issue than to loose 500 jobs and the compounding effect."
That compounding effect would be a minimum of 900 jobs lost in the region, McNaughton explained. "What we need to do is support the families that are working in the mill and the businesses that are here as a consequence of the mill being in our community."
If the mill remains operating, it gives the city time to diversify the tax base and attract investment, he added.
The city has come up with a four-point plan, McNaughton explained. The plan involves considering:
• Continuing the $1 million major industry tax reduction.
• Initiating discussions for additional reductions to major industry.
• Refunding $700,000 the city recouped from Catalyst after the company won an appeal of its assessment.
• Discussing additional cooperative ventures such as joint sewer treatment to achieve beneficial synergies.
In addition to the initiatives taken locally, McNaughton said, "We are going to arrange meetings with cabinet ministers to discuss this issue further."
Mayor Stewart Alsgard has written to Blair Lekstrom, minister of community development, twice in support of Cataylst's proposal of provincial assistance.
Garneau has also written to Lekstrom, outlining the company's proposal.
Lekstrom met with company officials and municipal representatives from three of the four Catalyst-hosting communities, including Powell River, on December 18 to discuss both Catalyst's planned reductions in its municipal property taxes and the proposal to have the province help the municipalities to adjust to those reductions.
"Catalyst is not in a position to borrow the money, about $23 million, to pay municipal property taxes at traditional levels which are far higher than can be competitively supported," Garneau wrote.
Using the amount of taxes it pays in North Cowichan as an example, Garneau explained the company pays a tax rate that is more than 26 times the residential rate, yet it uses few community services.
"Thus, on July 1, 2009, Catalyst intends to pay only for the cost of municipal services it consumes," Garneau wrote. "This is estimated, for municipal planning purposes, to be about $1.5 million per community, representing a rate of $11/$1,000 in North Cowichan, still far more than the residential rates."
The municipalities may see Catalyst's position as a negotiation, Garneau continued. "It is not. With a debt load of $800 million, the company is not in a position to borrow to pay for unfair property taxes. Shareholders in Catalyst have lost 90 per cent of their investment over the past few years; in contrast, the municipalities and the province have done very well by way of Catalyst operations."
Should the municipalities and the province ignore the harsh world economy that Catalyst finds itself in, "this would leave the company with one alternative and that is the likely permanent closure of an entire facility with associated permanent job losses," Garneau wrote.
A provincial bridging fund to help the municipalities adjust would ease the impact on residential taxpayers, Garneau also wrote. "In our view, such a fund is a precondition for the municipalities to voluntarily make the adjustments in their tax rates. Without those adjustments, Catalyst will have no choice but to take extraordinary steps that will be painful for all parties as production shutdowns take place, unemployment increases and the annual $130 million in provincial revenues from Catalyst drop significantly."
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The following are comments from online readers. In no way do they represent the views of Peak Publishing Ltd. To suggest removal of comments that violate the terms of use, please e-mail webmaster@prpeak.com.
rcmr wrote on Jan 14, 2009 5:16 PM:
" Perhaps it's time the city allowed Catalyst to pay what they're intending and to make up the difference by having Catalyst turn over ownership of unused mill-site land back over to PR for the development of an industrial/commercial waterfront area. This could then be the seed for a partnership with developers to initiate a true Gateway to Desolation Sound tourist/boating based economy. "
Parent wrote on Jan 16, 2009 6:53 AM:
" Should this all play out the way Catalyst hopes, will Catalyst guarantee to keep the Powell River mill running for the next five years? "
1234 wrote on Feb 19, 2009 5:33 PM:
" Well this is a great precedent for all property owners. I don't have children so do not want to pay for any education. The city has to get real. If I don't pay my taxes the city can take my property. Is caughtatlast going to give up their unused but still valuable properti es. Yippee tax sale time. I will be bidding on the old golf course. "
Opaque wrote on Jan 10, 2009 4:08 PM: