TimberWest tax challenge rejected by court

Judge concludes that the city does have 'clear statutory authority to set different tax rates for designated lands'

Kristen Douglas

Campbell River Mirror

 

The City of Campbell River has won a Supreme Court of B.C. tax challenge levied against the organization by TimberWest.

TimberWest, the city’s largest private timber and land management company, filed the tax challenge last Feb. 27 after council increased taxes on managed forest lands from $2.29 per thousand dollars of assessed value to the provincial average of $13.98. The increase, to be phased in over three years, was set to bring rates in line with other B.C. municipalities.

That increase, approved by council in January, 2014, affects all Class 7 (managed forest land) properties in the city except for land held by Merrill and Ring, which is charged a rural rate according to a provincial order set when those properties were brought into the city.

TimberWest argued during a hearing held Sept. 15-17 in Vancouver that the new tax bylaw would increase its taxes in 2014 by more than two and a half times the rate for 2013 and that once additional increases are phased in over three years, TimberWest will be taxed at a rate that is more than five times what Merrill and Ring will pay.

That comes out to $61,375 in property taxes in 2014 for TimberWest, $94,428 in 2015 and $127,480 in 2016.

Terry Francis, operations manager with TimberWest, asked council at last year’s budget deliberations to reconsider.

“The proposed tax burden will likely discourage forestry and remove the financial incentive to carry out forest management activities,” he said at the time. “If implemented, a prudent timberland owner might be forced to harvest the operable timber without replanting.”

TimberWest’s main argument before Justice Lauri Ann Fenlon was whether “the city has the authority under statute to discriminate, in the municipal law sense, by drawing a distinction between the Merrill and Ring lands and other Class 7 lands within municipal boundaries.”

In her judgement handed down on Jan. 23, Fenlon concluded that the city does have “clear statutory authority to set different tax rates for designated lands.

“I conclude that the city has the authority to set a higher tax rate for Class 7 lands falling outside the designated area encompassing the Merrill and Ring lands,” Fenlon continued in her written judgement. “The petition is dismissed.”

Mayor Andy Adams said the city’s goal in increasing the tax rate was to keep pace with other communities, not discriminate against TimberWest.

“The goal of that policy was to set a taxation rate comparable to rates in other communities, and we look forward to establishing an equitable tax rate for managed forest lands,” Adams said in a news release. “We are pleased that the Supreme Court supports the policy set by council during last year’s financial planning meetings.”

In reviewing the circumstances surrounding the city’s intent to set tax rates, and the precise wording of the statues and legislation, the Supreme Court found that the lower tax rate applied by the province is only applicable to newly incorporated lands, such as Merrill and Ring, and not on property already within a municipal boundary at the time of the extension.

Ron Bowles, the city’s chief financial officer and general manager of corporate services, said the court challenge and subsequent verdict could have been precedent setting.

“The ruling in this case is of interest to local governments throughout the province as there are examples of many other municipalities that have similarly set differential tax rates through a municipal boundary extension that would also be in jeopardy if the City of Campbell River’s tax rates bylaw was not upheld,” Bowles said.

The city will now take steps to recover the roughly $55,000 in disputed taxation that TimberWest placed in trust with the court and court costs as awarded. TimberWest still has 30 days to file an appeal of the decision.

This most recent tax challenge is the second time in six years that TimberWest has taken the city to court.

In 2009, Justice Laura Gerow ruled that a tax increase to $1.21 million was unlawfully levied by the city on TimberWest.

In that case, however, the court ruled that the city was improperly using tax rates to bring about a change in land use.