[POINT TUPPER, NS] — If the tax revenue Richmond County receives for being home to the NewPage Port Hawkesbury paper mill is significantly reduced it will place a heavy burden on other ratepayers and lead to greater decline, court documents say.
Pacific West Commercial Corp., the company working to buy the mill, is seeking to have the Supreme Court of Nova Scotia throw out the provincial legislation that sets the amount it pays in municipal taxes. Richmond County will fight the action during a hearing Thursday.
Pacific West has filed with the court an appraisal of the mill and site buildings that lists their value at $20.9 million. Pacific West is paying $33 million for the mill. If it was to pay municipal taxes based on the value in the assessment, its tax bill would be $420,090, not $2.652 million.
In an affidavit flied with the court, Richmond County CAO Warren Olsen said the tax deal allowed the municipality to approach its annual budget with a degree of certainty. The potential loss of revenue will result in a more tentative process, he said, noting they won’t know what the mill’s tax assessment will be in 2013 or 2014.
“We will lose much of our ability to make multiple-year commitments to any project or program, which in turn reduces the number and effectiveness of such projects or programs,” Olsen said.
Richmond County chief financial officer Stewart MacDonald stated in an affidavit that the potential loss of $2.23 million in tax revenue and resulting budget shortfall of about $1.86 million would require an increase in residential tax rates of 26.5 per cent, an increase in commercial rates of 25.7 per cent, or spending cuts of $1.86 million, or a combination of cuts and tax hikes.
The base residential tax rate currently stands at 75 cents per $100 of assessment, while the base commercial rate remains at $2.01 per $100 of assessment.
The municipality has a $13.5-million annual budget, $10.7 million of which is considered non-discretionary spending, mandated by legislation or municipal bylaws. Total property tax revenue in 2011-2012 fiscal year was almost $9.2 million. The potential loss of $2.23 million would represent a 24.3 per cent decline in the municipal tax base.
“On that basis, I do believe that an increase in tax rates in this order would likely force many residents and businesses to leave the municipality or close, further eroding the tax base and worsening the problems the municipality already faces: outmigration, population decline, youth exodus and an aging population,” MacDonald stated.
In an affidavit, Pacific West restructuring manager Marc Dube said that since 2008 the paper industry has suffered from challenges, which has affected the value of the mill. Since the legislation was enacted in 2006, NewPage sold lands for construction of a biomass plant, as well as its biomass boiler.
Dube said getting rid of the tax deal is an important element of the Pacific West’s efforts to reduce costs and restructure the business.
“In attempting to counter net losses in the magnitude of $19 to $46 million per year, an additional cost of more than $2 million per year beyond the anticipated and budgeted costs is substantial,” Dube said.
On Tuesday, the Strait area mayor and wardens sent out a news release indicating they support Richmond County in the tax dispute.