W~R/P~ Telephone 604 485-6291 • Fax 604 485-2913 the Pearl on the Sunshine Coast

City of Powell River City Hall- MacGregor Building 6910 Duncan Street, Powell River BC V8A 1V4 ~w~R/p~ Telephone 604 485-6291 • Fax 604 485-2913 The Pearl on the Sunshine Coast www.powellriver.ca

OFFICE OF THE MAYOR

File 220-20-16 29 June 2009

The Honourable Gordon Campbell, Premier Province of British Columbia PO Box 9041 STN PROV GOVT Victoria, BC V8W 9E1

Dear Premier Campbell:

Re: Catalyst Paper Corporation Taxation

As you are undoubtedly aware, Catalyst Paper Corporation announced they will pay only a minor portion of their 2009 property taxes. Further, Catalyst has petitioned the Supreme Court of British Columbia for an order to set aside 2009 City of Powell River Tax Rate Bylaws. This has created an untenable situation for our community with an expected tax shortfall of $2,200,000. The matter is referred to as a crisis situation by an editorialist for the Victoria Times Colonist (article attached).

The City of Powell River has reduced its dependence on Major Industrial Taxation by greater than $1,300,000 over the last six years. This has reduced much needed revenues to our community by a cumulative total of $4,300,000. Our property taxation has been reduced by greater than 20%. This has been achieved by efficiencies, reduction of services and shifting of taxation to residential and business classes.

I write to you today to urge involvement from your office. I recognize that Major Industrial Taxation may have to be reduced in order for our industries to remain competitive in today's global economic markets. I also recognize that our rates must be competitive to attract and retain industry. Powell River has a solution towards resolving this discrepancy but requires your assistance in the form of transitional funding to achieve our goal of fair and sustainable taxation. At risk are the greater than $154,000,000 Provincial Tax Revenues generated by Catalyst annually along with the beneficial impacts to the four Catalyst communities.

The fundamental Powell River way has always been our willingness to work with Catalyst and the Province. We are committed to a cooperative and innovative approach to fixing this situation and we have the resolve to follow it through to completion. The Honourable Gordon Campbell, Premier 29 June 2009 -2-

What we propose is a five-year temporary bridge to allow us to adjust community service levels and taxation. We remain supporters of free enterprise and are industry stalwarts. Since 2004 we have reduced the Catalyst tax position from $5,000,000 to $3,650,000, with a further commitment to reduce this amount to $3,000,000 by 2012. With provincial support we can achieve $2,000,000 by 2014.

I look forward to a meeting with you and your government as soon as possible on this critical issue. Only by working together can we achieve the solution that will benefit all British Columbians.

Yours truly, CITY OF POWELL RIVER Akt2'tttj?- 11 ~ Stewart B. Alsgard ~ Mayor

SBA:cmg Attch. cc: Mayor Ken McRae, City of Port Albemi Mayor Tom Walker, District of North Cowichan Mayor Charlie Comfield, City of Campbell River The Honourable Pat Bell, Minister of Forests and Range The Honourable Bill Bennett, Minister of Community and Rural Development The Honourable Colin Hansen, Minister of Finance and Minister Responsible for the Olympics The Honourable lain Black, Minister of Small Business, Technology and Economic Development Richard Garneau, CEO, Catalyst Paper Corporation Catalyst crisis calls for action Page 1 of2

Catalyst crisis calls for action

TIMES COLONIST JUNE 13, 2009

It's negligent of the provincial government to stand by as Catalyst Paper Corp. and four municipalities head toward a destructive showdown.

Catalyst argues property taxes are too high on its mills in Port Alberni, Campbell River, North Cowichan and Powell River. It says it will pay about one-quarter of the assessed tax. If the municipalities push for full payment, the corporation says it will close one of the mills.

Catalyst has backed up the threats with a legal petition asking B.C. Supreme Court to declare the tax rates "unreasonable" and thus illegal.

The municipalities argue that they have already cut Catalyst's tax bills and are prepared to do more. But if the company doesn't pay, they will face financial disaster. Services and staff will have to be slashed and taxes for homeowners will soar.

Both sides have reasonable concerns. Catalyst's taxes are a legacy of a different time. Forestry operations and major mines were highly profitable. The communities in which they operated were effectively company towns. Companies recognized that supporting municipal services made it easier to attract and keep employees.

Now the companies are not so profitable. Catalyst recorded a loss last year and a small profit for its most recent fiscal quarter; it maintains taxes are much lower in other jurisdictions, placing its four mills here at a competitive disadvantage.

And the municipalities cannot really be considered company towns.

The company's concerns are legitimate. The Premier's Progress Board has called for lower property taxes on business and the B.C. Competition Council, chaired by former NDP premier Dan Miller, suggested resource communities cut taxes on pulp and paper mills and forestry operations in half. It found B.C. pulp mills pay at least twice as much per tonne in property taxes as their competitors in the U.S. and central Canada.

The communities' concerns are legitimate, too. All four have cut property taxes for Catalyst over the past several years, including an combined 11-per-cent cut this year. The corporation, naturally, is impatient.

Deeper cuts for Catalyst leave the municipalities with two options -- slash services of all kinds, or raise property taxes for everyone else. In North Cowichan, the most extreme case, maintaining the current

http://www.timescolonist.com/story_print.html?id= 1693077 &sponsor= 6/26/2009 Catalyst crisis calls for action Page 2 of2

level of municipal services based on Catalyst's proposed payment would require an immediate 70-per cent property tax increase for residents and small businesses.

This is a crisis. Municipalities are more than two months into their fiscal year with no certainty about their revenue. They face legal costs, interest on borrowed money and more uncertainty. The B.C. Supreme Court will likely order Catalyst to pay its taxes while petitioning for relief, as required by the Local Government Act, but the municipalities still face serious uncertainty.

There is a third option. Catalyst has urged provincial government involvement, including transitional funding for the four municipalities to allow immediate cuts for the company now while protecting jobs and services and tax rates for residents. The municipalities have also sought provincial help, both financial and in resolving the dispute.

So far, the government has ignored its responsibility to these four communities.

New Community Services Minister Bill Bennett, not one to shy away from controversy, should make this a priority. A deal needs to be brokered, outside of court.

The municipalities will need help over the next five to seven years to adjust to the new reality. The provincial government needs to lead the way in resolving this deadlock.

http://www.timescolonist.com/story_print.html?id=1693077 &sponsor= 6/26/2009 City of Powell River City Hall- MacGregor Building 6910 Duncan Street, Powell River BC V8A lV4 Telephone 604 485-6291 • Fax 604 485-2913 The Pearl on the Sunsh,ne Coast www_powellriver.ca

File 1470-01 CITY OF POWELL RIVER

PRESS RELEASE

15 June 2009

Catalyst Paper Corporation has indicated it will pay $1.5 million in taxes to the City of Powell River in 2009. This would create a $2.2 million shortfall for the City.

City Council has put a contingency plan in place to address the anticipated shortfall. Operational adjustments and reductions have been implemented. In accordance with the Community Charter, Council is considering revenue anticipation borrowing. At this time, there are no reductions in labour or service levels. There will be delays in some projects, such as pavement management.

"We expect Catalyst to pay their taxes in full," stated Mayor Stewart Alsgard, "In the interim, it is incumbent upon Council to implement a strategy to address the immediate shortfall and mitigate the City's risk. For the past 5 years the City has made an annual tax shift from Class 4 Major Industry to other classes and implemented operational reductions. Council has approved an additional reduction to Class 4 Major Industry Tax for the next 4 years."

Catalyst has served the City with a petition to the Supreme Court of BC to determine the legality of the City's Class 4 Major Industry Property Tax Rate.

Mayor and Council are facilitating discussions at the provincial and federal levels in an attempt to arrive at an acceptable solution to this issue.

The City is continuing with an organizational efficiency review with input from labour and management. 2010 budget discussions begin shortly and will include public consultation to determine the priorities and service levels for the City of Powell River.

For further information: Marie Claxton, City Clerk (604) 485-6291 [email protected] -30-