The city wants TimberWest to drop its tax challenge and reconsider taking the city to court for the second time in five years.
Last month, TimberWest, the city’s largest private timber and land management company, filed a petition in B.C. Supreme Court to fight the city’s tax increase for its forest lands.
City Manager Andy Laidlaw said it will be Campbell River taxpayers who will be punished if TimberWest takes the city to court.
“It is unfortunate that TimberWest, as a corporate taxpayer, has taken this action against council policy, which aims to set an equitable tax rate for managed forest lands, phased in over three years,” Laidlaw said in a news release.
“If they pursue this in the courts, the city will end up paying legal fees, funded by taxpayers, just to set a taxation rate that is in line with other B.C. communities. We hope that TimberWest, as a good corporate citizen, will do the right thing and withdraw their petition to the court.”
In January, council increased taxes from $2.29 per thousand dollars of assessed value to the provincial average of $13.98.
Terry Francis, operations manager with TimberWest, told council in January the rate hike could prompt forestry companies to re-think their operations in Campbell River.
“The proposed increased tax burden will likely discourage forestry and remove the financial incentive to carry out forest management activities,” Francis said. “If implemented, a prudent timberland owner might be forced to harvest the operable timber without replanting.”
Francis believes the city is legally restricted from setting the tax rate for managed forest lands higher than the rate Merrill & Ring Managed Forest land is taxed, which the city believes is the basis for TimberWest’s tax challenge.
“Our understanding is that TimberWest is trying to use what they believe to be a loophole to delay fair payment of taxes,” Laidlaw said. “The petition suggests that...council does not have the authority to set a tax rate for Class 7 Managed Forest lands that differs from the rural rate charged to Merrill & Ring properties as established by provincial order in council. The city’s legal opinion says legislation does not support their position, and it’s up to the courts to determine the correct interpretation.”
Al Kenning, a financial consultant working for the city, said the rate for Merrill & Ring land is set by provincial order that specifically only applies to that company and does not apply to TimberWest.
Francis also referenced a 2009 decision handed down when TimberWest last took the city to court. Madam Justice Gerow ruled that $1.21 million was unlawfully levied by the city on TimberWest.
But Kenning said that situation was different.
“Our view is that when this matter was considered...the court ruled that it was improper for the city to use tax rates to bring about a change in land use,” Kenning said. “This is not what the city is proposing. The court did not actually rule on whether any tax increase contravenes the Private Managed Forest Land Act, in our opinion.”
Despite TimberWest’s objections, the city is moving forward with the tax hike.
The increase will affect all managed forest land (class 7) properties except for Merrill & Ring lands, which are charged a rural rate according to a provincial order set when the property became a part of the city.
Kenning said the tax increase will bring TimberWest back up to the rate it was paying in 2008 and the increase will be phased in over three years.
“Residential property owners in Campbell River have borne the brunt of the recent shifting of the tax burden from the shrinking industrial class,” Kenning said. “While it is reasonable for residential, business and industry properties to pay their fair share, there needs to be equity and fairness between the classes.
“We’re seeing a situation where Cumberland is charging $11 per $1,000 of assessed value on managed forest land, and Campbell River has been charging $2.50. Clearly, that’s a big difference.”
TimberWest did not respond to a request for comment.