Industrial tax revolt against towns could end up in province's lap

By Gordon Hamilton, Vancouver SunSeptember 29, 2009

Municipalities facing a property tax revolt by industry can't count on the B.C. Supreme Court to settle the issue for them, the Union of B.C. Municipalities was told Tuesday.Six B.C. municipalities are being sued by four forest companies over the tax rate they have been levied, but no matter what the courts decide, the standoff between industry and local government is already past the boiling point, said Gerry Armstrong, a former deputy minister of finance.Court challenges have been launched in the municipalities of North Cowichan, Port Alberni, Campbell River, Powell River, Kitimat and Castlegar by Catalyst Paper, West Fraser Timber, Celgar and TimberWest Forest. The companies say they are being charged too high a rate that, in the case of Catalyst, accounts for 30 per cent of the property tax revenue collected by the municipalities where it operates.The court challenges are taking place against a backdrop of "simmering discontent" that Armstrong believes is now reaching the boiling point in municipalities across the province. Catalyst Paper is the lead company in the industrial tax rate challenge and a decision is expected in October

Taxation is a heated issue at this year's UBCM convention. The City of Burnaby, concerned that Catalyst's court challenge could set a precedent if it is successful, is proposing a resolution that the UBCM support the municipalities being sued, condemn Catalyst Paper's actions and lobby the province to support the municipalities. Discontent over property taxes has led to government intervention twice in the last 25 years, Armstrong said.He expects that to happen this time regardless of the outcome of the court cases. "The outcome is less important than the fact that these challenges have been launched," said Armstrong, who is now a consultant to the UBCM.

The companies are singling out municipalities through the court challenges but their target is provincial policies. They will continue to fight for change if they lose, Armstrong said. If they win, municipalities will be after government to bail them out, he said."Whatever the courts decide, this issue will likely end up in the government's lap."

The issue before the courts is the rate of taxation municipalities are charging their major industries compared to the rate charged on residential property. Taxation bylaws set rates for industry. The companies are arguing in court that those rates are unreasonable, unsustainable and illegal. Catalyst Paper, which has mills in four coastal towns, argues that it pays 30 per cent of the tax bill but uses only 10 per cent of the services. However, Armstrong said the companies are using data in a very narrow context. He cited other data, in an equally narrow context, that could be used to argue against lower industrial taxes. A 50-per-cent reduction in taxes would shave only half of one per cent off the cost of production of a tonne of pulp, while increasing the tax rate for residential taxpayers by 250 per cent, he said. He also noted that the entire major industrial tax bill levied by all B.C. municipalities was $160 million this year. By way of comparison, the forest industry expects to reap a $140 million benefit from the Harmonized Sales Tax, almost offsetting their municipal tax bills.

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Don Quixote Note:

As examples of what would happen to these Town's taxes if the Heavy Industry Taxes were cut in 1/2 and this tax shortfall had to come from the residential taxpayers see tables below. These are for 2008 as I can't seem to download the 2009 tax files yet.B.C. Stats Tax burden at http://www.cd.gov.bc.ca/lgd/infra/tax_rates/tax_rates2008.htm

Also note that Kitimate doesn't appear to assess residential taxes and therefore the % increase involves division by zero (o) which is undefined. (Impossible). (I'm Checking on why?)(Might be a BC STATS ERROR on website)

I have also included Burnaby which is leading the legal battle at UBCM to see what effect a 50% heavy Tax reduction would mean to their residential tax payers.

I also have done the calculations for this scenario for VERNON (no effect because it has no major Industries) and Coldstream and Spall.