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'It can’t be that Essar just continues to not pay its taxes' — Provenzano

City staff revealed this week that massive tax hikes, municipal layoffs and cancelled capital projects are on the table unless it can convince the court to reverse its decision last June to allow Essar to suspend tax payments
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File photo. Kenneth Armstrong/SooToday

Sault Ste. Marie’s mayor says city staff are making their case as to why the municipal taxes owed by the steel plant should be paid before anyone else.

As reported by SooToday yesterday, the city’s solicitor has said in a sworn affidavit that drastic measures will have to be taken if Essar Steel Algoma doesn’t pay the almost $30 million owed to the city in taxes by this summer.

At present, Essar Steel Algoma is $26 million in arrears, including the $14 million that was owed prior to the Companies’ Creditors Arrangement Act proceedings, which began in November of 2015.

Christian Provenzano, mayor of Sault Ste. Marie, clarified today that the city can’t request the entire amount because $14 million of those overdue taxes were owed prior to the start of the CCAA process.

“We’re not asking for the $26 million, we’re saying to the court at one point in time you found it appropriate to suspend their tax payments. The court didn’t wipe those tax payments out — the court didn’t say those tax payments wouldn’t be owing at some time, they just stayed them. What we are saying is, you can’t stay them any longer,” said Provenzano by phone today.

Instead, the city is seeking the approximately $12 million in taxes owed by the company since entering into CCAA.

“That would fix our problem and provide a significant amount of relief and then we will be able to deal with the $14 million as a participant of the CCAA process,” said Provenzano.

If it is not paid, the affidavit says, the city will need to take action to mitigate the loss in revenue — which may include a drastic increase in residential property taxes, laying off of city staff and/or the borrowing of money.

The city had a reasonable expectation, said Provenzano, that it would receive its municipal taxes owed from the date of filing forward, but in June 2016, the monitor asked for the tax payments to the city be suspended.

Provenzano said the Debtor-in-Possession (DIP) financing received by Essar Steel Algoma should have guaranteed the city be paid the taxes owed from the date of filing forward.

“When the DIP loan was originally made in the beginning of the process . . . it was made on the understanding and explicit provision that municipal taxes would be paid as of the date of filing forward,” said Provenzano.

“At the time, the monitor didn’t think it was an appropriate payment to be made and asked to suspend the payment. The court accepted the monitor’s arguments. We don’t believe the arguments the monitor made, and the company made, in June 2016 are applicable in the circumstances of today,” said Provenzano.

He cites an increase in the price of steel and signs the company is now operating at a positive cash flow as some of the reasons the conditions should now be in favour of having the taxes paid.

The city solicitor was making the city’s case when she laid out the city’s options in a sworn affidavit — including the possibility of raising residential property taxes by as much as 23 per cent.

“The illustration the treasurer put together for the court was just outlining for the court where we’re at. The court is going to be asked to make a decision, and for the judge to make a proper decision, the judge needs to have all of the information in front of him to make that decision,” said Provenzano.

The courts may not have appreciated the process would still be continuing almost a year later, said Provenzano, when the decision was made to stay payments of the city taxes in June 2016.

“It’s not clear to us when the process is going to end. If this goes on for another six months or nine months or 12 months, it can’t be that Essar just continues to not pay its taxes,” he said.