Forest firms grateful for tax relief

Another showdown with municipality over cuts is unlikely

Robert Barron, Daily News
Published: Wednesday, May 20, 2009

The main players in Nanaimo's forest industry share concerns about excessive taxation with Catalyst Paper, a company involved in escalating disputes in four coastal towns.

But spokesmen for Western Forest Products and the Harmac pulp mill said they "appreciate" the city's ongoing efforts to lower its heavy industrial tax rates and don't foresee similar confrontations here.

Brian Clemens, Nanaimo's finance director, said the city decided to freeze its industrial tax rates in 2008 (and drop them 12% in the recently approved budget for 2009) and plans are to continue to decrease them for the next three years to help alleviate the financial pressure on its forest companies and to attract new investment to the community.

"When you add in the province's decision to cut its school taxes on heavy industry in B.C., Nanaimo's heavy industries will have a 20% cut in their taxes in 2009, and that's quite a reduction from previous years," Clemens said. "Like many municipalities, our industrial tax rates evolved over time when the forest industry was much stronger, but we recognize that things have changed and we're working toward reducing those rates."

The municipalities of North Cowichan, Port Alberni, Campbell River and Powell River are joining forces in a showdown with Catalyst, the province's largest paper maker, over the company's refusal to pay its assessed taxes this year.

While Catalyst owes the cities a total of $22.3 million for 2009, Catalyst says it's only going to pay $6 million and if the cities don't comply, the company will likely shut a mill down in one of the four communities.

All four municipalities have been gradually adjusting their industrial tax rates downward to accommodate Catalyst, but they have also passed

budgets for 2009 that include substantially higher payments from Catalyst than the $6 million the company intends to submit.

"I expect people to pay their taxes," North Cowichan Mayor Tom Walker said in an interview. "Our council has rejected Catalyst's model."

Harmac, which is still operating despite the harsh economic climate, paid $3.6 million in taxes to the city in 2008. Western Forest Products, which has two sawmills and a reman plant in Nanaimo idle until markets improve, paid about $1 million in municipal taxes in 2008.

Duncan Kerr, WFP's chief operations manager, said while the company believes the taxes it pays in the Island communities where it owns property (including Nanaimo, Ladysmith and Port Alberni) are still too high, WFP "appreciates" the municipalities' efforts to bring them down.

He also pointed out that, unlike many of Catalyst's pulp and paper mills that are almost self-sufficient with services such as their own fire departments and water infrastructure, WFP's mills tend to rely more on municipal services.

Levi Sampson, president of Harmac, said while the company likes the direction Nanaimo is taking with its industrial tax rates, Harmac is still appealing the taxes it is expected to pay in 2009, despite a 20% reduction.

He said Harmac is "working diligently" with the city to find fair solutions that are acceptable for everyone concerned, and the "lines of communication are always open."

"The tax structure is still incredibly high here compared to other jurisdictions in the U.S. and around the world that pay about one-10th of the taxes we do," Sampson said.