Over at the Castlegar Current, there is some venting over the unpaid property taxes owed the City by Mercer for the Celgar Pulp Mill site. Briefly, Celgar decided not to pay it’s property taxes and requisitions for other levels of government to the City of Castlegar by the deadline in August 2009. Now the battle is going to court, which follows on from the Catalyst Paper decision that confirmed that the municipal taxes levied by municipalities on heavy industry are not unreasonable, a decision which is being appealed.

This on top of the recessionary cycle we seem to be pulling out of is a tough pill to swallow. But even tougher is what may be ahead – research has shown that often it is municipalities that are one of the last organizations to recover from a depression or recession:

But, warned the NLC’s Christopher Hoene, past recessions show that “the low point for cities,” in terms of their revenue and expenditure numbers, “typically comes 18 months to 24 months after the low point of the recession” –a particularly disturbing fact because, economists tell us, the current recession’s “low point” has just been hit.

The delayed impact occurs because property tax collections, the revenue mainstay for most cities, don’t decline until after an entire cycle of reduced assessments to reflect declining house values.

Even before that, cities and towns are finding themselves engulfed in a daunting, widespread fiscal crisis. Deep workforce cuts, sharply reduced services and cancelled infrastructure projects are reported across the country. Each cut, as it occurs, reduces economic activity and intensifies the recession.

Source: Citywire – Cities’ Recession Deficits: Belated Blow to U.S. Economy?

Held Over a Barrel?

In some communities that were hit by resource industry closures and failure to pay taxes over the past decade, the trouble is already brewing, this from Prince Rupert, BC:[ad#468]

“In Prince Rupert, you have a one-in-seven greater chance of the infrastructure failing in your neighbourhood than you do in any other community in Canada,” said Mayor Jack Mussallem.

Prince Rupert recently took over a pulp mill after Sun Wave Forest Products, a subsidiary of the China Pulp and Paper Group, failed to come up with about $6.5 million in taxes.

The massive hole left in the municipal budget was compounded with costs of up to $100,000 a month to maintain the former Skeena Cellulose mill that shut down six years ago, forcing the municipality to do without basic services.

“We’ve had water lines fail in neighbourhoods, we’ve had valves burst apart and wash out roads and flood adjacent properties and we’ve had in other areas retaining walls for road networks fail,” Mussallem said.

The community has seen hundreds of jobs disappear over the last few years with the closure of fish processing facilities and pulp and saw mills, and is only managing to pay for services through grant money, not funds that it generates itself.

“We are $100 million behind in our infrastructure reinvestment,” Mussallem said.

“This is a situation, where a municipality, if it were allowed to, would go bankrupt. It’s beyond a desperate situation. It’s hand to mouth.”

Source: B.C. towns suffer as major pulp and paper companies refuse to pay taxes

On the Flip Side?

This is an ominous situation for all communities, but flipping the information presented above right around, would it fair to make a case that these major industrial players have been propping up municipal budgets for decades?

Would these communities have been able to provide the services that are now failing without the support, (through taxes directly or via other levels of government in the form of grants) of major tax payers such as heavy industry?

This is not intended to be an acquittal of the responsibilities of every organization to pay the taxes that are legally enacted by any level of government. Rather, for rural communities, the population density is rarely there to support the level of services that have developed.

Property taxes are not a clean mechanism for garnering funding from heavy industry for one could argue that the use of the land for heavy industrial should not increase the municipality’s cost of servicing, but rather decrease it compared to commercial or residential, where services such as snow plowing, street maintenance, interaction with the municipality should all be reduced. In the Catalyst case, the judge did not buy into this argument as a determination of unreasonable taxes – instead he deferred to the municipality’s right to set taxes and be accountable to all of its tax payers, as well as stating that other levels of government should, if required, step in to sort it out well before a court should be required to. The judge was clear in stating that the courts didn’t want to get involved.

There is no easy solution to this tax dilemma, we’ve become accustomed to relying on this source of revenue for our municipalities, yet the companies that are the lifeblood of these communities walk away from court decisions, like those above, with a bad taste in their mouth. It seems that something’s gotta give, whether it comes from upper levels of government, the municipality, or the industries themselves, unfortunately everyone seems to be sitting around waiting for the other participants to be the first to blink.

Published by 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.

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