One way that it attempted to cut costs was by carefully managing
and reducing its property taxes. In 2009 it commenced judicial
review against four British Columbia towns (Powell River, Campbell
River, Port Alberni and North Cowichan) in an attempt to have its
property tax rates in those towns reduced. Ultimately it reached
settlements in several municipalities, and closed its mill in
Catalyst Paper's dispute with North Cowichan, however, made
its way to the Supreme Court of Canada, which last week ruled in favour of North Cowichan and upheld
the district's method of setting property tax rates.
Catalyst Paper had sought judicial review of North
Cowichan's property tax rates for major industry (Class 4)
primarily on the ground that the rate was unreasonable. The
property tax rate for Class 4 property in North Cowichan was set by
the municipal council at $43.3499 per $1000 of assessed value,
approximately 20.3 times the rate for residential property. This
was in spite of the fact that Catalyst Paper received little or
nothing in the way of municipal services - the mill did not receive
water or sewer service from the district.
The Supreme Court examined at some length the discretion given
to municipalities to set tax rates, and the principles that guide
court reviews of municipal taxation.
The Court noted that (in order to properly pass a bylaw) a
muncipality must comply with mandatory procedural requirements,
such as notice and voting requirements. While Catalyst Paper had
alleged that proper procedures were not followed (as North Cowichan
had failed to provide reasons and a rational basis for passing the
taxation bylaw), the Court held that procedural fairness does not
require the provision of either.
The Court went on to find that once a taxation bylaw is found to
be procedurally proper, the scope for review of the substance of
the bylaw is very limited. The essential question on judicial
review is whether the taxation bylaw falls within the range of
reasonable outcomes. That reasonableness must be assessed in the
context of all relevant factors , including the scope of
decision-making power given to council by the relevant legislation.
In the case of municipal councils, which are "democratic
institutions" that have traditionally been granted broad
discretion in legislative matters, the scope for substantive review
by the courts will be very limited.
In the case of property tax, the Court found that the B.C. Community
Charter gives muncipalities a "broad and unfettered
legislative discretion to establish property tax rates in respect
of each of the property classes in the municipality, unless limited
The Court rejected the argument that the level of a tax be
related to the services consumed. Catalyst Paper had presented a
"Consumption of Services Model" of municipal taxation,
which the Court rejected.
The Court was not unsympathetic to Catlyst Paper. While the
Court did mention that the Class 4 property taxes were harsh, and
that the ratio of industrial to residential rates were among the
highest in the British Columbia, it found that rates set by the
muncipal council was within the range of reasonable outcomes, and
accordingly declined to interfere with the bylaw.
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