Defunct mill equals $1.8m tax loss

A change in the property assessment value of the Catalyst Elk Falls pulp mill will mean a tax revenue loss to Campbell River

A change in the property assessment value of the defunct Catalyst Elk Falls pulp mill is going to result in a 2012 tax revenue loss to Campbell River in the range of $1.8 million, City Manager Andy Laidlaw said Tuesday.

If that loss was transferred directly to residential taxpayers, they would be required to pay 12 per cent more in property tax this year, Laidlaw estimates.

But Campbell River Mayor Walter Jakeway is determined there will be no property tax hikes for homeowners this year.

In an interview prior to the Catalyst notification from the BC Assessment Authority (BCAA) he said: “My personal intention is to have a zero per cent tax increase in 2012. That’s my personal goal and I’m sure I can bring a few other councillors along with me without having to cut services too badly.”

The BCAA announced Tuesday that the equipment removal at the former Catalyst Elk Falls pulp and paper mill means it no longer meets the legislative requirements for a major industrial property.

“This will result in a decrease of approximately $41 million dollars in the major industry classification,” says BCAA Vancouver Island Regional Assessor Bill MacGougan.

The city manager set the stage for the BCAA announcement in December with initial budget projections that included a zero per cent tax increase on the business sector and a 3.75 per cent increase in residential taxes.

That would have meant a $45 increase for the average homeowner.

That level of taxation would continue to support services the city currently provides. Laidlaw had framed his estimate around a projected deficit of $550,000.

Now, he says, that figure is no longer relevant.

Catalyst had been seeking a BCAA reclassification of its mill site property to business class. And Laidlaw had warned that any reduction in Catalyst’s assessment will directly affect the 2012 budget by the same amount.

Jakeway says budget shortfall estimates have been based on a 2011 budget model and that city council will “make that disappear.” And, he adds that city hall “doesn’t even know what budget trimming looks like.”

The mayor says when city council has balanced the budget he doesn’t think “people will even notice the difference.”

One of the service areas that will almost certainly get renewed scrutiny is waste removal.

Jakeway says “it’s kind of crazy” to have a (garbage) truck going by three times in one day to collect household refuse, then recycling and then yard waste.

Coun. Andy Adams, who has been given the city’s “finance portfolio,” says the Catalyst tax determination by the BCAA is “the elephant in the room.”

He says the city has done a good job over the past six years of reducing the city’s dependency on the major industrial tax base without having to resort to major residential tax increases.

A BCAA finding in favour of Catalyst means “a significant challenge hitting us in one year,” he says.

Adams says there is room for service cuts particularly in areas where services are duplicated by the private sector and council has to be better at examining service options.

There is one fiscal option he says should be avoided at all cost and that is using city reserve funds to offset operating costs. “It is fraught with peril.”

But, Coun. Mary Storry says: “Our goal is maintaining services that our community expects and defining what is essential is very difficult because we value all our services.

“There could be some options available in our reserves … as long as we maintain them at (required) levels … then maybe short term is not all that bad. You never want to use (them) for operational, but if it’s a toss up between maintaining services that the community feels it needs and short term utilization of some reserves that we don’t traditionally want to use then we have to think about that.”

Coun. Claire Moglove suggests homeowners may feel services have been cut enough in years past.

She says the city “is faced with a difficult balancing act” because municipalities are not permitted to run deficits. She says the “toughest” part of that balancing will come in 2012.

“We have reduced costs and reduced services during in the previous council term and further cuts or reductions of services are going to be very difficult.

“Many of the people I talk to understand the dilemma the city is facing, understand that maybe their taxes will have to go up. They do want city hall to be efficient and cut costs as necessary, but my sense is that the majority of people think our level of service is good and they do not want a significant reduction of service.

“If that means they may have to pay a little bit more for those services, I believe they will understand.”

Moglove estimates that it will take the city two or three years to make the fiscal transition from the negative impacts of the loss of Catalyst tax revenue to better times when the Catalyst site is “hopping with industry activity.”

Moglove says bridging to fiscal wellbeing will be helped greatly by BC Hydro’s Hart Dam refurbishing project and the construction of a new hospital. “The question becomes how do you bridge to that next part of Campbell River’s history. It’s very complicated and it will be an interesting discussion that we (the new mayor and council) have.”

Mayor Jakeway remains upbeat. There will be “a new style of behaviour” at city hall he promises. “The taxpayers will see it quickly, the investment community will also be watching.

“There will be a level of certainty, consistency, and a listening attitude that we all desire and need.”

UPDATE: An earlier version of this story quoted a figure of $45 million decrease in the major industry classification. The BCAA informed us that they had sent the wrong figure and that $41 million is the correction figure.