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Castlegar Caught in the Middle

To catch everyone up on the story, Celgar, a subsidiary of Mercer International, runs the pulp mill locoated way out on the north western extremity of the City’s boundary, alongside the now closed Interfor lumber mill on the banks of the Columbia River at Hugh Keenlyside Dam.


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Background

So Celgar decided that it was fed up with subsidizing everything in the City of Castlegar and firstly requested a 50% cut in taxes. When the City rolled over and gave them a 1% cut, Celgar decided to withhold payment and challenge the City’s right to levy a property tax on them that is greater than any other property class in the City. This battle seems to be headed for the courts in the first week of August (in Campbell River), and at this stage it seems that the City is going to let the courts decide rather than negotiate a deal.

Then the RDCK comes in and Area J Director Gord Zaikoff suggests that if full payment from the Cityof Castlegar to the RDCK is not made by the August 1st deadline, he will suggest that the RDCK opens discussions with Celgar to get them into the regional district, rather than the City – the assumption being that the tax rate might be lower, and then all of the regional areas, (including Castlegar, but to a lesser degree than they currently see), would enjoy the benefits of the tax base provided by the pulp mill.

The City’s Response

The stance taken by the City is surreal, some recent snippets from the Castlegar News and Castlegar Source…

Castlegar News – RDCK hauled into tax battle

As the city did not receive tax payment from Zellstoff Celgar, city council has resolved to delay payment of the non-paid taxes to other taxing jurisdictions, stated a letter sent to the RDCK.

According to Castlegar Mayor Lawrence Chernoff the City of Castlegar collects taxes for the RDCK. This year, they owe the regional district $2,058,953 and will only pay them $1,683,953 by the payment due date.

City/RDCK at odds over Celgar tax bill | The Castlegar Source

Hearne pointed out that, while Celgar’s refusal to pay its tax bill does represent a major hit to district coffers, of $375,000 to be exact, Castlegar is sustaining a $2.8 million shortfall without Celgar’s taxes and shouldn’t be forced to bear the burden of other jurisdictions’ delinquent invoices as well.

[ad#200-left]“I understand their frustration, I truly do,” he said. “However, we don’t feel the taxpayers of Castlegar should be on the hook for the RDCK’s invoices when they’re not paid. It’s their invoice … we’re just the collector. We collect the taxes, then remit to them (the RDCK). In this case, because Celgar didn’t pay, there’s nothing to remit.”

As to Zaitsoff’s clam the city is violating the Local Government Act by not paying the regional district their portion of Celgar’s tax bill, Hearne said that’s a matter of perspective.

“It’s all in how you interpret the act,” he said. “Our interpretation is that the money is owed them (the RDCK) by Celgar, not by Castlegar.”

It’s Fine to “Interpret” the Act – But What Does it Actually Say?

Councillor Hearn, it is a matter of perspective – but perspective is limited to the information you have. The section of the Local Government Act that deals with this matter seems clear [emphasis mine below]…

Local Government Act

Requisition of funds from municipalities

805 (1) On or before April 10 in each year, the designated regional district officer must send to each municipality a requisition in respect of each service stating the amount required from the municipality for the service during the year.

(2) An amount requisitioned under this section is a debt due by the municipality to the regional district, and the council must pay it to the board on or before August 1 of the current year.

Requisitions are a debt owed by the Municipality

It seems clear from the Act, (and from similar examples that I’ve heard), that Municipalities are liable to pay those amounts other levels of government requisition to them – this is particularly true when a major industry goes bankrupt – the Municipality is still liable to pay hospital and school taxes to the Provincial government, even if they are not collecting the taxes.

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So, this begs the question to be asked – what about the school and hospital taxes, which when added to the regional district shortfall equates to some $863,000 that the City is obliged to pay, whether it collects the taxes or not. Follow me on this one.

The City expected to receive approximately $2,785,000 in City taxes from Celgar to fund City capital and operations for 2009. Seeing this money has not been received, that amount should be cut from the budget, or drawn from reserves.

But the City is also liable to pay the $863,000 it owes other jurisdictions, so now the budget or reserves should be reduced by this amount to cover this expense. Then there are legal fees. Whether the City cuts it’s own budget or not, you can assume that this part of the requisition from other levels of government will remain, and somehow the City should plan on finding this money to give away – especially if Celgar goes under.

Time for a New Budget Please

A few weeks ago, a four point plan was unveiled by Council, and Councillor Hearn was quoted as follows…

Mayor unveils four-point plan for Celgar situation | The Castlegar Source

Councillor and committee member Russ Hearne agreed, adding the financial impact of the shortfall is complex and deserving of this level of specific attention.

“Yes, we do have healthy reserves,” he explained. “But we don’t know how long it will take to get this resolved – it could drag on for years – so we need to do what any household would do and cut some of our unnecessary expenses.”

This means a new budget, a new financial plan – and a public process to determine which parts of the budget are, in Councillor Hearn’s own words “unnecessary”.

I understand that the City doesn’t know the implications until the court case, but this is a situation that heavily impacts the citizens of Castlegar, either in increased tax burden, or in decreased services. We can ask the other jurisdictions to reduce the budget for their services, but it is unlikely we’ll see any results on that front from the Hospitals or Schools, so why would the RDCK be interested in helping out? I’m not here to second guess the outcome of the court case, but I’d rather see the City be proactive on this matter and move away from a heavy reliance on a flailing industry – it is likely that in the future there is going to be less, rather than more, cash floating around for municipalities to tax against for pet projects.

Mike Thomas

Mike Thomas P.Eng. ENV SP, is the author of UrbanWorkbench.com and Director of Engineering at the City of Revelstoke in the Interior of British Columbia, Canada. If I post something here that you find helpful as you navigate the world of engineering, planning and building communities, that’s wonderful. But when push comes to shove: This is my personal blog. The views expressed on these pages are mine alone and not those of my employer.