In dismissing Catalyst Paper Corporation’s appeal of the taxes it pays in North Cowichan, the Supreme Court of Canada confirmed municipalities have broad powers in setting tax rates. Chief Justice Beverly McLachlin wrote in the decision that municipal councils have extensive latitude in what factors they may consider in passing a bylaw. They may consider objective factors, such as the services a business uses, but they may also consider broader social, economic and political factors that are relevant to the electorate.
McLachlin also pointed out that the impact of North Cowichan’s tax bylaw on Catalyst was “harsh.” The ratio between major industrial rates and residential rates there is among the highest in BC and only two municipalities exceed it. “In Catalyst’s present economic situation, the consequences are serious—indeed, Catalyst suggests that the industrial rate threatens the continued operation of its mill in the District [of North Cowichan],” McLachlin wrote.
Kevin Clarke, Catalyst’s president and CEO, said the same thing, using different words, in an interview with the Peak last week. He pointed out that in some towns, Catalyst pays 30 per cent of the tax revenue and if people think that is appropriate, “they might be killing the golden goose.”
City of Powell River officials began a tax shift away from major industrial to residential and small business in 2004, when it began reducing major industrial taxes by $200,000 a year for five years. However, it began reducing major industry taxation in 1999, when major industry contributed 54.90 per cent of the tax base, compared to 33.72 per cent from the residential sector and 10.49 per cent from small business. By 2010, the residential sector was contributing 61.42 per cent, small business 19.60 per cent and major industry 17.9 per cent.
Since the major industrial tax reduction began, Powell River’s elected officials have defended it by emphasizing the central position of the mill in the city. Their position has been to cooperate with the company that owns the mill and reduce taxes to keep the operation competitive and to maintain jobs.
While Catalyst has lost the battle in North Cowichan, it’s not giving up the war, according to Clarke. It plans to concentrate on changing BC legislation, as the province has the authority to set tax ratios between residential and major industrial sectors.
Meanwhile, municipalities continue to struggle with the impact of dramatically lower tax revenues from major industries. In Powell River, residential property owners have shouldered the burden, but the question of how much more they will be able to pay remains.
