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Paper company pays $15-million in back taxes to four mill towns

Stung by a series of legal setbacks in its fight against high industrial tax rates, Catalyst Paper has quietly paid more than $15-million in back taxes that the company withheld from four West Coast mill towns last year.

"We have paid all the taxes, penalties and interest owing to the four municipalities," Catalyst vice-president Lyn Brown said Wednesday.

"That was a total we had accrued for in the eventuality that our appeal to the B.C. Court of Appeal would not prevail, so the $15-million in outstanding taxes to the four communities has been paid."

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The decision to pay the money followed an April 22 Court of Appeal ruling rejecting the company's claim that tax rates on its Crofton mill in North Cowichan are "unreasonable and therefore illegal."

The company filed similar petitions in court last summer against three other towns where its mills are located – Port Alberni, Campbell River and Powell River.

B.C. Supreme Court Justice Peter Voith sided with the municipalities in each case, forcing Catalyst to pursue the matter in appeal court this spring.

Reached by phone Wednesday, Campbell River Mayor Charlie Cornfield was guarded in his praise for Catalyst.

"Yes it was good to get the cheque, but on the other hand, they just paid their taxes for the 2009 year like any other taxpayer," said Mr. Cornfield, whose municipality was owed close to $4-million.

Catalyst shut down its Elk Falls mill near Campbell River in February, 2009, during the height of the recession, eliminating 350 jobs, and has given no indication of if or when the operation will reopen.

Fed up with industrial tax rates that are "between 11 to 26 times higher" than residential rates in the four communities, Catalyst announced last spring it would pay each town a flat rate of $1.5-million in property taxes, an amount the company based on the consumption of municipal services.

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North Cowichan Mayor Tom Walker, whose municipality received a cheque for $5-million last week, stopped short of calling the payment a sign of economic recovery.

"I think it's good, but I'm still concerned about the downturn in the pulp industry and the forest industry," he said. "There's been an uptick in the price of pulp but demand for paper is still dropping, so we're not out of the woods yet."

About two-thirds of the 750 workers at Catalyst's Crofton plant were laid off in late February. However, the company has since restarted both of its idled production lines, citing stronger market conditions.

The City of Powell River cut a special deal with Catalyst, agreeing to reduce taxes from $3.25-million to $2.25-million over each of the next five years in return for the repayment of $2.5-million in 2009 back taxes.

"It gives us a clear road ahead as we move ahead with our financial strategy and trying to encourage other revenue sources," Powell River Mayor Stewart Alsford said.

Catalyst has also agreed to a $750,000-a-year agreement to help Powell River develop a new sewage system using the mill's wastewater treatment technology.

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Ms. Brown said the repayments do not mean Catalyst is abandoning its tax protest.

While Catalyst has withdrawn its legal action against Powell River, Campbell River and Port Alberni, the company is seeking to appeal of the North Cowichan case in the Supreme Court of Canada, she said.

"We've paid our outstanding bills, but that's doesn't erase the problem," Ms. Brown said. "The conditions that … prompted us to appeal to the courts in the first place have not changed."

Ms. Brown said it would be premature to comment on whether the company plans to pay its 2010 taxes by the July 1 deadline.

Special to The Globe and Mail

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