Catalyst Paper has petitioned the B.C. Supreme Court to reduce its property taxes in North Cowichan, Port Alberni, Campbell River, and Powell River.

At the same time TimberWest is dragging Campbell River to the same court because after the log exporters put some of their massive private forest land holdings on the real estate market the municipality increased the property tax rate.

Catalyst is controlled by a New York hedge fund named Third Avenue Management (TAM) and, wouldn’t you know it, TAM has significant investment in TimberWest.

To their credit the mayors and councils of these communities are not folding in the face of this Wall Street spin that the property taxes have put them in a perilous financial position.

Catalyst’s tax bill in North Cowichan is approximately $6 million per year. When TAM took over Catalyst it paid more than that to get rid of the CEO and CFO. After installing four new board members and its own CEO and CFO, TAM oversaw Catalyst’s purchase of the Snowflake recycle newsprint mill in Arizona from Abitibi-Bowater for $161 million cash. Surprise, surprise, TAM owns a controlling interest in Abitibi-Bowater.

Catalyst already owns a recycling facility in B.C. and all the Arizona purchase did was to increase Catalyst’s half-billion dollar debt and increase TAM’s worth, enough to more than repay what it paid to control Catalyst. Never forget TAM is not here to run pulp and paper mills, it is here to increase its bottom line, and that is all.

Even these self-proclaimed financial geniuses sometimes drop the ball. When TAM completed its hostile take-over three years ago, at a brief peak in the pulp market, it paid $3.30 per Catalyst share. Today the shares sell for $0.16, with little hope for improvement soon.

The crash in the share price is a disaster for TAM, not for Catalyst Paper which still has all its buildings, equipment, and highly skilled workforce. The Arizona recycle mill is headed for the ditch because the huge U.S. government subsidy paid for burning black liquor in power boilers does not apply to recycle mills. Snowflake is a financial albatross around Catalyst’s neck.

Pulp prices are hitting bottom and the newsprint market is shrinking every day. TAM is desperate to lay hands on every dollar it can. So it came up with this preposterous scheme where accountants will decide what municipal services it uses and base its taxes on that. Using that kind of calculation many people in rural areas could significantly reduce their property taxes. But the New York hedgehogs would scream “anarchy” at that and demand the rule of law.

The fact to remember is that TAM may or may not shut down the Crofton mill, but the decision will not be based on Catalyst’s property taxes.

Got a tip or a comment? E-mail me at dmaroc@shaw.ca

Response from the right

It doesn’t matter if Catalyst at Crofton has the buildings, equipment and a skilled workforce; if the operation loses money on every tonne of pulp and/or paper it produces, sooner or later somebody says: “Enough, we won’t lose any more money.” It’s ugly but a fact of life.

— Patrick Hrushowy. Read Hrushowy’s From the right Saturdays in the News Leader Pictorial.