City reveals details of tax agreement with Algoma

The City of Sault Ste. Marie has released its inked deal with Algoma that will see the steelmaker pay $21.8 million of property taxes once the purchase agreement is finalized. The agreement was reached after the parties established a new property assessment value that rids of a lengthy and costly assessment appeal review and offers the city stability for the property's assessment until 2020.

The City of Sault Ste. Marie has released an agreement it has reached with Algoma to settle its unpaid tax bills.

While the agreement will see the city receive 91 per cent of the owed taxes by the steelmaker, the amount paid will be based on a new negotiated property assessment agreement reached between the parties.

In total, the city will receive $21.8 million of the negotiated $23.8 million owed to satisfy its tax years 2014, 2015, 2016 and 2017.

Mayor Christian Provenzano said the lengthy negotiations, which concluded with an agreement in 2017, first needed the parties to agree upon the tax assessment for the west-end property.

In 2013 Algoma’s property was assessed at about $83 million, an amount they appealed for 2014 to 2016.

In 2017, the Municipal Property Assessment Corp. reassessed Algoma at $83 million, less than half its assessment from four years earlier.

“We needed to sort out the assessment value of the property before we could settle a tax amount,” Provenzano told The Sault Star.

After some negotiations, the parties agreed the party should be assessed at $60 million for 2014, 2015 and 2016 and property tax amounts should be based on that figure, he said.

The agreement was made outside an appeal hearing and no outside party ruled on the agreed to amount. Algoma originally wanted the property assessment to be set at 2017 rates of $39 million.

Based on a $60 million assessed value, tax bills for 2014 would be $6.4 million and for 2015 $6.1 million, resulting in a total pre-filing amount owed of $12.5 million. Algoma had already paid $1.4 million of its taxes, leaving a balance of $11.1 million.

Calculations for 2016 resulted in a $5.7 million tax bill and in 2017 a $5.5 million tax bill, totalling another 11.3 million.

Based on the $60 million assessment, Algoma owes $22.4 million for property taxes from 2014-2017.

In addition to the city receiving $1.4 million in 2014, the City will recover an additional $20.4 million for the tax bill, about 91 per cent of the $23.4 million owed for those for years.

The parties also agreed that for the years 2017 to 2020, the property value would stay at the existing $39 million, resulting in about $5.5 million of taxes to be paid to the city annually. Neither party will appeal the assessment for those years.

Provenzano said that while the tax rate is higher today than it was in 2008 when Essar first purchased the steel plant, the assessed value is less than half it had been and the tax bill payment much lower.

“In the end, they’re paying a much less dollar figure than what they were,” Provenzano said.

He added that the city is satisfied that the agreement reached won’t have a detrimental impact to residents or other tax classes.

“After some negotiation, we met in the middle and settled on the assessed value of $60 million for the past years and we looked at the money we had taken from our reserves, precedent set in the past and how not to hit our other residents, our other taxpayers,” Provenzano said.

The city also agreed to enter into a memorandum of understanding to continue to work on tax fairness and adjust tax ratios in a manner fair to all tax classes and the community at large,a process the city has been doing for some time.

In return, Algoma has agreed to help the city with its economic priorities and initiatives that include working with Noront Resources and the Port of Algoma.

Since the agreement was reached, Algoma had committed to pay $500,000 per moth in taxes since October 2017 and has been doing so since.

The agreement also includes the consent of all parties to the Assessment Review Board’s appeals.

Provenzano said he took a very active role in the negotiations of the tax agreement along with senior city staff including the CAO, treasurer, city solicitor and the assistant city solicitor.

“I think its a fair deal for the taxpayers and the agreement develops a constructive relationship with the new owners of Algoma,” Provenzano said. “We were trying to come out with a win-win to move forward and I think we’ve done that.”

Provenzano said the new owners are showing good will on the Noront Resources file and have participated by meeting the company executives in Toronto about a month ago.

“We hope to create more economy in this city for Sault Ste. Marie’s future,” he said.

The final agreements, now approved by city council and signed by the mayor, will be presented to a judge in Toronto Wednesday along with other agreements, including those with the unionized workers, that will move Algoma towards emerging from CCAA.

Federal and provincial government agreements will be the last to come to the table and Provenzano hopes that will be in the very near future.

Algoma is hoping to emerge from CCAA with a new owner, a British Columbia based numbered company, by Sept. 30.

Algoma has been in CCAA proceedings since November 2015.

Under the acquisition transaction agreement, certain matters needed to be successfully negotiated in order for the sale to go through. Those matters included agreements with the city, among others.

MORE TO COME LATER……..