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Letter from Powell River, Catalyst Town

The mill got its tax cut. Now it wants more public funds to handle the town's sewage.

By Murray Dobbin 13 Jul 2011 |

Murray Dobbin files the occasional feature for The Tyee in addition to his 'State of the Nation' column that runs every second Monday here.

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Powell River with Catalyst paper mill in foreground.

It was interesting to receive my copy of Corporate Knights magazine in the mail recently. The magazine focuses on corporate social responsibility. It had its annual "50 Best Corporations" featured and number 13 on the list was Catalyst Paper. Where I live, in Powell River, people might be surprised to see this corporation (owned by a New York hedge fund) on the list.

Last year, as Tyee readers may remember, Catalyst approached the city councils of four communities in which it had mills and presented cheques for a fraction of their municipal tax bills. The message: take it or leave it, this is what we think the services we use are worth. The attached threat: if we don't get our way, we will simply close.

Catalyst then proceeded to take the mill communities to court, alleging their tax rates were so unfair to industry that they should be ruled illegal. Catalyst lost the case but has appealed to the Supreme Court of Canada. But even before the company launched its court case, the city council in Powell River panicked. They reduced Catalyst's taxes dramatically by 40 per cent from 2009 to 2010, to $2.25 million.

Now Powell River is proposing to pay Catalyst half a million dollars a year to treat the city's sewage as part of a plan "to reduce the property tax rate for major industry." Because Catalyst would have to spend next to nothing to treat the city's small volume of sewage, the end result is the equivalent of a $500,000 tax cut. You might wonder, though, whether it is a good idea to hand over an essential municipal service to a company that has a huge debt and has threatened to shut down.

City council apparently did not take the time to calculate just how much difference a tax cut would make to Catalyst's bottom line. Municipal taxes account for just 0.6 of one per cent of their mills' total costs, not enough to have any real impact on their viability.

Gambling on Catalyst's future

As part of the sewage privatization scheme, Powell River intends to get rid of the municipality's own treatment plants. But what exactly will the city do with its sewage if the mill closes? Hit by the closure of such a major industry, where it will find the money to build its own treatment plant? The former city engineer aptly called the sewage privatization plan a multi-million dollar gamble on the future of Catalyst.

When the proposal was announced -- by Catalyst, not the city -- it took everyone by surprise. City councilors moved quickly to sell the deal to residents on the basis that the provincial government said all of the capital costs could be covered by a provincial grant. Connecting Powell River's sewage system to the mill and other capital costs related to the privatization proposal were estimated to be over $7 million. Councilors claimed the grant was "the driver" of the privatization plan, and no money was available for a new public treatment plant.

With encouragement from the provincial government, the city applied to the Innovations Fund, a gas tax fund designed to reward environmentally innovative projects. The fund is administered by the Union of BC Municipalities. Judging by previous projects that got grants, municipalities have made genuine efforts to meet the "innovative" environmental criteria in the fund's application process.

Powell River -- population 14,000 -- is asking for a sizeable chunk of the $50 million total in the Innovations Fund. One hundred and fifty B.C. municipalities have applied for grants in this round of funding. Powell River's $7.3 million request represents nearly 15 per cent of the total monies available. How other municipalities would feel if Powell River received a large grant for what is, in effect, a corporate tax break, is unclear.

Sewage and standards

But Powell River councilors have repeatedly expressed confidence that they were going to get funding for the scheme, so maybe they know something the public doesn't. Is the pro-P3 provincial government pushing this deal behind the scenes? They already provided $150,000 to the city to "study" the joint treatment deal. Powell River's application has proceeded to the final stage of consideration, despite some fairly spectacular weaknesses.

The city's sewage advisory committee -- mandated by the ministry of environment -- voted ten to one against privatizing the city sewage system. (Catalyst's representative on the committee was the sole vote in favour.) The only study that has been done on combining the mill's effluent with Powell River sewage produced a result that would violate ministry of environment effluent requirements. The prospect of prolonged discharge of raw sewage into the ocean is very real and potential threats to the health of mill workers from exposure to city sewage have not been investigated.

Whether the city's existing treatment plant could actually have its problems resolved has not been studied. Powell River's main treatment plant does have overflow problems, but it treats sewage to a tertiary standard that would be the envy of most municipalities. The city's proposal would take Powell River backwards to a secondary standard.

The city was so determined to go ahead with the Catalyst privatization deal that it applied to the Innovations Fund before any of the above problems were addressed. They have still not been resolved. To make the application stronger, the city actually misled UBCM by claiming that the joint treatment deal had already been selected -- and that "extensive public consultations" had taken place. In fact, city councilors had not yet made any decision when city staff sent in the application and no public consultations had yet taken place.

Defining innovation

Councilors' most recent plan is to use the Innovations Fund to pay for the deal with the mill, and then 10 years down the road build a public sewage treatment plant when more funding from senior governments becomes available. Large components of the infrastructure that the Innovations Fund would pay for would simply be abandoned, essentially wasting up to $1.7 million in Innovations Fund money.  

Constructing and then abandoning infrastructure hardly qualifies as an environmental innovation.

But a permanent plant shutdown could happen even as the city sewer lines are being laid to the mill. The manager of the Powell River mill stated candidly at a recent stakeholders' meeting that in terms of the mill's viability, looking beyond the next four quarters is very difficult.

Another conflict between this privatization proposal and the environmental objectives of the Innovations Fund is that there are no reliable plans to deal with Powell River's sewage when the mill shuts down, either temporarily for maintenance or accidents, or permanently because of bankruptcy. The possibility that raw sewage may be dumped into the Malaspina Strait is still being considered. 

Powell River Councilors are promoting the deal with Catalyst by promising ratepayers they will get a cut in their sewer charges. But in reality, the City would have to quickly build up millions in a reserve fund in case the mill closed -- or else be left in a position where it had to dump raw sewage into the Strait.

'Trust has become a casualty'

It's not as though people in Powell River are not interested in the green alternatives the Innovations Fund was intended to promote. Public consultations were finally held in May and 150 people attended. Opposition to the Catalyst scheme was overwhelming and, to quote the independent facilitator's report, those attending expressed "…a strong desire that the City explore some of the more innovative solutions being used around the world to both reduce the footprint, impacts and costs of building this facility."

Yet when the city does build its public plant, there are no plans for resource recovery or other innovative approaches. It plans to use open ditches -- the most basic, old technology.

No amount of opposition to the privatization scheme seems to have any impact on city council's determination to provide Catalyst with another tax cut through this deal. The virtually unanimous vote against by the advisory committee, the overwhelming opposition in the public consultations and a 1,000 name petition, have all been ignored. The facilitator's report on the public consultations described the effect: "Trust has become a casualty of this process as it has unfolded. The perception of a ;done deal' has reinforced the feeling of a lack of honesty, transparency and accountability..."

The Catalyst deal will succeed or fail based on whether or not it gets the Innovations Fund grant. The decision is due sometime in September.  [Tyee]

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