Catalyst Paper (TSX:CTL) is fighting back against what it considers unfair property taxes being charged by four B.C. municipalities where its paper mills are located.
The Richmond-based paper and newsprint producer is petitioning the B.C. Supreme Court to conduct a judicial review of recently set property taxes by the communities of North Cowichan, Port Alberni, Campbell River and Powell River.
Catalyst CEO Richard Garneau said, "Excessive property taxes are diverting scarce capital that's needed to support the long-term viability of our operations as we face one of the most difficult markets in decades."
The company is seeking declarations under Section 262 of the Local Government Act that the tax rates being levied are unreasonable and therefore beyond the municipalities' jurisdiction.
The four communities have collectively charged Catalyst $19.3 million in taxes, excluding school, district and other provincial levies. Catalyst's 2009 taxes are about 10% lower than the $21.7 million it paid in 2008, but the total remains far higher than the $4 million to $6 million worth of municipal services the company said it consumed.
Catalyst said the major industry tax rates set are about 20 times the residential rate in North Cowichan and about 10 times the residential rate in the other three municipalities. By comparison, major industry rates in Alberta are typically capped at four times the residential rate.
Catalyst said its property tax payments, net of the cost of municipal services it consumes, accounted for half of the company's earning losses in the last five years and increased borrowing requirements by about $100 million.
Said Garneau: "Legal action was not our first choice, but the current bylaws suggest that our appeals for tax equity have not been heard and continuing to pay excessive tax bills with borrowed money is just not sustainable or prudent, especially with current credit markets."
Catalyst's share price range during the past week: between $0.11 and $0.18; 52-week high: $1.42; 52-week low: $0.08.