Pulp friction: Property taxes on large mills under review

New Brunswick municipal politicians are hoping a property assessment review underway of the province's six pulp and paper mills will restore some of the $5.9 million in property tax reductions won by the facilities five years ago that caused financial problems in several communities.

"As you can imagine, it was significant," said Edmundston Mayor Cyrille Simard in an email to CBC News about the effect the 2014 tax changes had in his community.  

Edmundston lost just over $700,000 in annual tax revenue when the province slashed the assessed value of the Twin Rivers pulp mill by 58 per cent late in 2013 for the 2014 budget year.  

Twin Rivers was one of six New Brunswick pulp and/or paper mills that received significant property assessment reductions from the province during what were acknowledged to be difficult economic times in the industry.

But international markets have generally improved since then, and during legislature committee hearings into industrial property taxes earlier this month Service New Brunswick officials acknowledged they are re-looking at the value of the pulp and paper mills and will make changes in the assessments next year if warranted. 

"We are doing a reinspection of all these pulp mills again," said Stephen Ward, the executive director of property inspection services for Service New Brunswick.

"They are complex properties. It takes us two to three years to actually do a full complete reinspection. We do plan to have them fully valued for 2020 taxation year, but I can't speculate as to what is going to happen to the values of these properties at this point in time."

Millions in revenue lost

The pulp and paper mills, three owned by J.D. Irving Ltd., two by the AV Group and one by Twin Rivers were assessed to be worth $248.6 million as a group in 2012, according to information compiled by the website propertize.ca, and taxed by the province and their host municipalities on that amount.   

The following year, Service New Brunswick cut their assessed value to just $117.9 million. That drove annual property taxes they had to pay from $11.2 million down to $5.3 million.

Much of the reduction was in property taxes paid to the province, but local communities were also affected. Two of the mills are in Saint John and one each in Lake Utopia, Nackawic, Edmunston and Atholville.

Nackawic, which lost $450,000 in revenue, raised property tax rates four per cent to deal with the shortfall. In Atholville, the village budget lost $360,000 and council increased property taxes 10 per cent in response.

Saint John lost $1.5 million in tax revenue from the changes and city councillor David Merrithew, who chairs the city finance committee, wants it back.

"I would hope the increase is meaningful. If [we] can get to [past] levels today, I'd probably be happy. I don't know if that's going to happen," said Merrithew, who has been critical of Service New Brunswick for implementing the original change and questions whether it is independent enough to undo them.

"I mean, my hopes aren't that high."

Mill exports have increased

Service New Brunswick has defended its assessment cuts on pulp mills as necessary given serious competitive and financial pressures the industry was under back in 2013 and insists there will have to be evidence that has improved for it to raise values from current levels.

"Until we see those other indications, then the property assessment values will be will remain as is,"  Ward told MLAs during the hearings. 

Earlier this year, Statistics Canada reported exports of "paper manufacturing" from New Brunswick, which includes exports from the pulp and paper mills, have increased every year since 2012.  

It reported total exports from New Brunswick in 2018 were $1.28 billion, $307.8 million (31.5 per cent) more than in 2012.   

Whether that meets Service New Brunswick requirements for a healthier industry is not known, but Simard said if pulp and paper mills are doing better, he would like to see it reflected in their property tax assessments.

"If there is evidence that the markets have improved since 2013, it should normally have an impact on the assessment of these properties," he wrote.  

JDI, which owns three of the mills being reassessed, has been vocal through the summer that it pays enough property tax at current levels.

"New Brunswick pulp and paper mills pay more per unit of output than all other jurisdictions in eastern Canada, with the exception of Ontario," vice-president Mark Mosher wrote in an opinion piece in the Telegraph Journal in July about the company's property tax bills.

"New Brunswick, and Saint John in particular are not low cost property jurisdictions."

Mosher made a similar argument to MLAs at committee hearings two weeks ago.