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Essar insolvency: mayor says nothing else really matters

Forget all that other stuff the media is talking about. Mayor Christian Provenzano says the problems at Essar Steel Algoma are pretty much the only thing occupying his time right now.
Mayor Christian Provenzano says he's minimizing his involvement in pretty much every issue except Essar Steel Algoma's fiscal fitness. Donna Hopper/SooToday

The current difficulties at Essar Steel Algoma are so important that Mayor Christian Provenzano is hardly spending time on any other issue.

"To be quite frank with you, I have minimized the amount of time I'm spending doing other things," the mayor told a City Council meeting last night.

The local steelmaker's insolvency is really "the only issue right now, from my perspective, that requires our 100 percent attention."

"A lot of the other issues that are in the media, that are being talked about, are not even secondary compared to this. They're tertiary. They're three or four or five levels down the rung."

City Council approved the following resolution tonight:

‚ÄčEssar Steel Algoma

Mover Councillor P. Christian
Seconder Councillor S. Butland

Whereas Essar Steel Algoma Inc. (ESAI), the City of Sault Ste. Marie’s largest private-sector employer, is currently under Company Creditors Arrangement Act (CCAA) court protection, and its capacity to exist as an integrated steel manufacturer is uncertain due to a number of key operational, financial, economic, and market factors; and

Whereas Statistics Canada 2015 Census data indicates, Sault Ste. Marie had the lowest labour force and employment levels as well as the lowest employment participation rates in 20 years; and

Whereas the weak national and global economy, the low value of the Canadian dollar, significant Tenaris–Algoma Tubes layoffs (approximately 500 out of 700) and significant impacts to affected local ESAI unsecured creditor companies are all exacerbating an already difficult economic situation for the community; and

Whereas the impacts of this situation are only now starting to be realized; 

Now therefore be it resolved that council direct the Sault Ste. Marie Economic Development Corporation and Chief Administrave Office Al Horsman to report back to council no later than February 22, 2016 with a suggested course of action and recommendations for its consideration and support.

‚Äč“Our employment figures are as bad as they’ve been 1996,” said Tom Dodds, chief executive officer at the Sault Ste. Marie Economic Development Corporation.

That, combined with the city’s major employer under court protection from its creditors, the uncertain situation at Tenaris Algoma Tubes, and changes at Ontario Lottery and Gaming Corporation, collectively represents “a significant issue,” Dodds said.

An ad hoc group with representation from municipal, provincial and federal levels has met three times since Essar Steel Algoma obtained protection under the Companies' Creditors Arrangement Act, Dodds told city councillors.

A response is being developed to cover three areas:

  • all local employees affected by recent layoffs and difficulties    
  • affected businesses, especially unsecured creditors
  • impact on the community, in the context of the troubled national and international steel industries

“In  a nutshell, what we’ve been working on is how we get ourselves organized,” Dodds said. 

Chief Administrative Officer Horsman said City Hall has reached out to other municipalities like Hamilton and Regina that might have similar concerns about the steel sector.

“As a municipality, there’s only certain things we can do,” Horsman said.

The CCAA process is independent and opportunities for the municipality to get involved are limited, he added.

The city is able to raise concerns from its own financial viewpoint. 

Horsman disclosed that the city has just retained a law firm to represent it at Essar Steel Algoma’s restructuring proceedings in Toronto.

“We have tax issues and we have some tax interest issues that need to be protected and we have the interests of Sault Ste. Marie to be protected.”

The city is also talking to local unsecured creditors, “to get a sense of what the municipality can do to assist there.”

City officials are also looking at the possibility of what Horsman termed a “mini infrastructure stimulus fund” to help local industries.

Mayor Provenzano has asked the city to review its asset management plan, to see whether any initiatives could be leveraged to help businesses hurt by the problems at Essar.

The mayor said that the solutions to much of Essar Steel Algoma’s dilemma lie at the federal level.

“The recent Canadian International Trade Tribunal decision was a really unfortunate decision,” Provenzano said.

According to the mayor, when a city lobbies the federal government, it must have:

  • some critical mass
  • identification of the problem
  • suggestions on how the problem should be addressed

“We’re currently developing that lobbying platform. There’s been outreach to other municipalities. There’s also been outreach to union leadership.”

Provenzano said anything he does will be in conjunction with Sault Member of Parliament Terry Sheehan.

Ward 1 Councillor Paul Christian, the mover of last night’s resolution, said that Sault Ste. Marie’s economy still very much relies on Essar Steel Algoma.

“As Essar goes, we go as a community,” Christian said.

“My intention in bringing forward the resolution is to pull the community together. I think council needs to take a leadership role to respond to this unprecedented situation.”

“We need all the stakeholders in the community involved,” Christian said.

“I think there are forces at work within the government and international organisations that are making it hard for Essar to succeed.”