Province should head off industrial property tax battle

OK, this is about industrial property tax battles.
But it's important. Depending on what happens, homeowners could face 70-per-cent property tax increases. Arenas and community infrastructure could be lost.
And thousands of jobs are at risk.
Catalyst Paper lost the first round in its fight to avoid paying property tax bills in the four communities where it operates - Campbell River, Port Alberni, North Cowichan and Powell River.
The battle isn't over. And Catalyst is just the vanguard.
Across B.C., the big employers in towns are fighting to pay lower property taxes. In Castelgar and Kitimat they've also launched legal actions. Some are threatening to close mills or other operations.
The companies have a case. For the most part, the municipalities concede that.
In the case of Catalyst, the four municipalities have been slowly trimming their industrial tax rates, and the company's burden, over the last several years. This year, the combined tax bill is down about 11 per cent.
But the companies say they're still being gouged. Given the recession, the rising dollar and collapsing markets, they can't afford to pay, they say. Competitors in the rest of North America face much lower local tax bills, they maintain.
Catalyst proposes to pay one-quarter of its tax bill. It calculates that reflects the value of the municipal services it consumes. The argument was part of its presentation in B.C. Supreme Court.
The challenge against North Cowichan taxes was the first of the four cases to be heard. Catalyst argued the taxes were so unreasonable and unfair as to be illegal.
Justice Peter Voith didn't buy it. The corporation made a good case that the taxes were too high, he found.
But the elected municipal council had set them legally, he ruled. "These matters are properly addressed by different levels of government and not the courts," Voith wrote in his judgment.
The tax rates are a legacy of a different time. Forest companies, mines and smelters were all highly profitable and often operated in one-industry towns.
They needed a stable workforce. Rather than building an old-style company town, they opted to pay high taxes to fund the services and infrastructure that allowed them to attract workers and their families.
Now they're less profitable. The towns are more diversified and a lot of people with no connection to the company are being subsidized.
In North Cowichan, residential property taxes are among the lowest in the province because Catalyst pays so much tax.
But fixing the imbalance isn't easy. If big industry pays less, than everyone else has to pay more or the municipality has to slash services.
In North Cowichan, residential taxpayers would have faced an immediate 70-per-cent tax increase to maintain services if Catalyst had won in court.
The provincial government should have taken the lead on the issue long ago. More than three years ago, the B.C. Competition Council, chaired by former NDP premier Dan Miller, recommended a 50-per-cent cut in industrial property taxes.
The B.C. Progress Board, which advises the premier, has also identified the problem.
The government has the power to cap industrial tax rates. But that would be intrusive and politically risky.
And the government could be accused of paying the company's tax bills, subsidizing them at the expense of their competitors.
Still, a combination of the threat, along with the carrot of some transitional funding to allow municipalities to plan for higher residential and small business taxes or budget cuts, could help resolve the problem.
That's what both Catalyst and the municipalities hoped would happen.
The government has opted to stay on the sidelines.
It could let the industries and the municipalities continue the battle. But there are significant risks to jobs and investment and public services in this dispute.
The provincial government has the best chance of brokering an agreement without a long and destructive series of skirmishes between big industries and municipalities.
Footnote: The issue raises the broader question of municipalities' reliance on property taxes. It's an odd way to assess taxes. A big family with a huge income and heavy demand for services pays the same as the neighbouring couple just scraping by.