Considering the local news media hasn’t bothered to tell us how the cutback by more than half of the assessment for Essar Steel Algoma is going to affect residential taxpayers and those in the other tax classes, I thought I would take a run at it.
Turns out I am not going to be able to do that either.
It appears the city has the numbers but is going to let us know by a posting on its website later this month.
That is the word I got Thursday from Shelley Schell, the city’s chief financial officer and treasurer.
“The information you are requesting will be posted to our website now that our tax rates have been approved. My staff have indicated that the report should be available by the end of the month,” Schell said in an email.
Well, at least, I thought, that is something.
After all, there had been some back and forth between us over the past while that didn’t end well for me, Schell saying in a final email, “The matter is still being adjudicated in the CCAA (Companies Creditors Arrangement Act) process and with the Assessment Review Board and thus I am not prepared to comment further.”
She didn’t reply to a further appeal I made asking what firms other than Algoma were involved in the heavy industry class, but she did reply to my question about tax rates after I sent the following:
“I realize you said you were not prepared to comment further in regard to my questions about the change in reassessment accorded Algoma for the years 2017. But I feel I must press on.
“I still believe I should be able to obtain figures showing how the change in tax ratios will affect each class. I note you say in your report that the tax rate applied to residential will increase to 4.31 (I dropped some words here. It should have read “to 4.61 from 4.38.”) I would really like to know what the changes are to all the tax classes.
“I think this will give the taxpayers of this city a better idea of what the new tax picture is. As of now, I can tell you from talking with some of them that they really have no idea. Nor, actually, do I.
“I have spent considerable time poring over appendix F-1 in your report (to council) but I can’t understand from it that with the need to look elsewhere for revenue that the commercial broad class and pipelines also had decreases along with Algoma.
“So I appeal again for one more shot at explaining to me how the new assessment for Algoma will be distributed to other classes and give residential taxpayers a good idea of how it will affect them.”
Schell in a later email said the report to which she was referring sets out the amount of the levy by class.
That, of course, is what I was seeking, hoping the figures would be accompanied by an explanation of how this affects all those involved in the various classes.
I naturally, speaking as a journalist, would have preferred that the information would have been available to me now, rather than being scooped by the city itself.
But all in all I am just happy the information is coming.
Anyway, I gather revenue neutral ratios have been adopted for 2017 to mitigate the assessment related tax shifts between classes.
In her report recommending this, Schell said:
“The reasoning is as follows: The tax burden on a typical household is ranked as average and does not have significant room to increase the taxes over and above the levy increase. Starting ratios would reflect an increase of 8.27% on the median valued single family home, close to double the levy increase of 4.34%.
“Revenue neutral ratios would reflect an increase of 4.61% on the median valued single family home, close to the levy increase.
“The large industrial class where the assessment decrease occurred is ranked second lowest, on a cost per square foot, amongst our northern comparators as well as close to the survey ( BMA
Management Consulting Inc. prepares an annual survey of Ontario municipalities) average. Revenue neutral ratios will maintain relatively the same cost per square foot, thus remaining competitive in this class.”
I have been fiddling with this Algoma thing for some time. When people have asked why I haven’t had any comment on it, I simply have told them it is too deep for me.
But I got interested when word came out that the Municipal Property Assessment Corporation (MPAC) had dropped Algoma’s assessment from $82,999,000 to $39,773,000 for the years 2017 to 2020.
The new assessment is lower than the revised $42 million assessment total Algoma, which had enlisted the assistance of the Altus Group, a property tax consulting firm, was seeking.
Algoma, in protection proceedings under the CCAA, is appealing its tax assessments for the years 2014 to 2016.
The new assessment figures, I thought, were bad news for the city because they seemed to support Algoma’s claim that it has been over-assessed. It is hard not to see the company winning its appeal as Canadian Tire and Home Depot recently did, their combined settlements decreasing assessment by $9.7 million.
And beyond that possibility, the city has acknowledged that there are others before it in the line looking to collect on money owed them by Algoma. This came out when Eliot Kolers of Stikeman Elliott was cross-examining Nuala Kenny, city solicitor with the city, in regard to her affidavit.
Kolers: Now, in your affidavit elsewhere, you refer to Algoma’s DIP lenders both in this affidavit and the second affidavit. You are aware of the fact that the DIP lenders have that the DIP basically sits in priority to the city tax?
Kenny: I am so aware, yes.
(DIP, debtor in possession, refers to the Senior Secured, Priming and Superiority Debtor-In-Possession Revolving Credit Agreement that allowed Algoma to secure financing of US $200 million).
Kolers: And I take it you’re aware that the DIP amount is in excess of $150 million?
Kenny: Yes.
Kolers: And that that amount remains outstanding?
Kenny: Yes.
Kolers also made the point that when Kenny in her affidavit implied that Algoma’s unpaid taxes represented approximately 25% of the city’s annual tax levy in respect of all taxpayers, she was comparing apples to oranges as she was placing three years of Algoma’s taxes against the city’s annual levy..
The city is seeking more than $26 million in back taxes from Algoma, $13,998,028 prior to filing for protection under the CCAA and $10,815,665 after.
Being so far down the line when it comes to priority in collecting what it is owed and the state of Algoma’s finances, it doesn’t appear that the city will get its hands on anything in the way of payment soon.
Reading the affidavit of Rajat Marwah, Algoma’s chief financial officer, I was surprised that the city doesn’t appear to have raised an objection to his claim that, after Algoma ceased making regular property tax payments to the city on or about April 16, 2014, “The City consented to the cessation of the regular payments and entered into an agreement with Algoma whereby Algoma made reduced payments, which occurred until the CCAA filing.”
Neither side seems to have mentioned how many payments, if any, and how much money, if any, Algoma actually made under that agreement, if there actually was such an agreement.
The claim a while back that residential taxpayers could face a hit of 12-20% obviously was nothing more than a scare tactic that went nowhere. The 2017 tax rates are listed on the city’s website and show that residential moved up only to .01390541 from .01362266.
The landing will not be as easy for large industrial firms that are occupied, their rate jumping from .07446382 to .11666505.
That could have an unfortunate side effect.
Schell said in her report to council that our tax rate for “large industrial is second lowest amongst our Northern counterparts and close to the BMA Management survey average.”
The new rate undoubtedly will change that ranking and certainly won’t do anything to contribute to any efforts to attract large industries, who haven’t exactly been lining up to come to the Sault.
But it appears city staff have managed the issue and there is light in the doom and gloom that has pervaded the city because of the Algoma situation.
We are far from being out of the woods because Algoma isn’t, but I think we should all look at the jar as being half full rather than half empty and keep our fingers crossed that a hole is not poked in it.
Doug Millroy can be reached at dmillroy@gmail.com.
