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Celgar/city in $3.6-million conflict

The City of Castlegar is on the horns of $3.6 million dilemma, as Zellstoff Celgar has refused to pay municipal taxes for 2009, as well as taxes for other levels of government that are invoiced on the city bill, all of which were due at the close of business July 2. (City taxes are $2.785 mil and other jurisdictions are $863,000).

City representatives explained in a press release that, “the City of Castlegar has been served by a petition for a judicial review of 'unreasonable tax rate' or 'illegal' tax bylaw to the B.C. Supreme Court by Zellstoff Celgar.”

Mayor Lawrence Chernoff said the city is not prepared to just accept Celgar's position.

“I'm as shocked as anybody by this. While the city has not had an opportunity to review the petition in detail, our understanding is that Celgar is challenging the city's tax bylaw in an attempt not to pay its 2009 taxes as duly passed by (city council),” Chernoff said. “The city ... plans to defend it bylaws and expects Celgar to pay its property tax bill like any other responsible taxpayer. However, the city recognizes the difficulties in the pulp industry and is prepared to work constructively with Celgar in determining its future tax structure.”

Chernoff also pointed out that Celgar is not challenging the property assessment, but rather the tax rate, “which is the lowest when compared to 14 other forestry-based municipalities within the province,” including Prince George, Williams Lake, Dawson Creek and Grand Forks.

He said there is a similar case before the courts right now, in which Catalyst Paper is challenging the tax bylaws of four Vancouver Island municipalities, but unlike the Catalyst situation, he said, Celgar is refusing to pay any tax whatsoever for this taxation year. A hearing on the Catalyst matter is slated for early August of this year, the outcome of which may foreshadow the Celgar/Castlegar case, as the two claims are so similar.

The Celgar municipal tax bill for 2009 is roughly $2.8 million, comprising 45.76 per cent of the city's entire tax base – a fiscal blow to city coffers that CAO John Malcolm said will require some creative problem-solving on the part of city staff and council.

“City council is exploring different options,” he said, “one of which is internal borrowing against our reserves to cover this year's expenditures.”

Chernoff added the city reserves are, in this situation, something of a life-preserver – and this proves, if nothing else, the merit of having money in the bank for rainy days like today.

“Without all those reserves, we'd be in big trouble here,” Chernoff said. “We will get through this ... we will find the solutions. We have been in contact with the provincial Minister of Community Development, and we're working on figuring out our best options to move forward.

“What I'm really worried about here is, does this open the floodgates to all major industry, like Teck Cominco, following suit?”

He said there was no discussion between Celgar and the city, prior to the taxation due date, of the possibility that the bill simply would not be paid.

“They (Celgar) had questioned the tax rate and said it was too high, but there was no indication that they were preparing to refuse to pay,” he said. “We were trying to reduce their taxes by eight per cent over five years, but I guess that's not acceptable to them. There was a lack of communications ... why, I have no idea.”

Adding to the angst surrounding the taxation issue is that taxes on the still-closed Interfor facility have also not been paid, despite several days passing since the deadline, and Malcolm said there has been no communication from Interfor on the matter. He added, though, that Interfor's bill is significantly less than Celgar's – less than $1 million.

Both agreed that the key information for residents right now is that, due to city reserves, this is not a panic situation, although there's no way of guessing when the matter will be finally resolved.

Zellstoff Celgar general manager Al Hitzroth was not available for comment at this press time.