Essar-Algoma Tax Loss Exposed and Explained

LETTER TO THE EDITOR
August 8, 2018

RORY RING, Candidate For Mayor
1958 Queen Street East
Ontario, Sault Ste. Marie
P6A 2H2

RE: ESSAR-ALGOMA TAX LOSS EXPOSED AND EXPLAINED

I am writing in response to the media coverage of the August 20th release from my campaign office, “The Mayor Cooks the Books on Failed Essar-Algoma Tax Deal: Time for Mayor to Come Clean on Real Numbers”

The subject of the story is of deep importance to the voters of Sault Ste. Marie and as such the facts must be made clear.

The Mayor’s position is flawed, while ignoring the evidence of the true loss suffered by city taxpayers. The core questions are, how much did the city lose and where did the calculation come from? 

The Mayor claims he negotiated a great deal to get 92% of the Essar-Algoma taxes and he ignored the facts and the evidence. Recall that council, on Monday, August 20, was told the Essar-Algoma taxes were $23.8 Million and that the City will collect $21.8 Million. The real numbers are in fact that Essar-Algoma taxes were really $36 Million, so the city only recovered 58%. A loss of $15 Million dollars.

The truth is in the evidence given under oath by the former city solicitor Nuala Kenny on April 18, 2017. She provided sworn testimony as follows:

4. The City has filed a proof of claim in these CCAA Proceedings for, amongst other things,

a secured claim of $13,998,028.13 in respect of realty tax obligations owing to the City at the time of the commencement of these CCAA Proceedings (the “Pre-Filing Tax Obligations”).

5. The Debtor is also indebted to the City for realty tax obligations that have arisen subsequent

to the commencement of these CCAA Proceedings, which, as of April 5, 2017, amount to

$10,815,665.32 plus interest thereon and which realty tax obligations continue to accrue in the

ordinary course (collectively, the “Post-Filing Tax Obligations”).

It is clear from this sworn evidence that city was owed $24.8 Million up to April 5, 2017.  The question is why did the Mayor come to council more than a year later and tell the community that the amount owing was only $23.8 Million?  

In her sworn testimony on May 3, 2017, retired city solicitor, Nuala Kenny swore under oath that from April 5, 2017 onward, the city taxes owed by Essar-Algoma accumulated at the rate of between $650,000 and $700,000 per month.  At page 15 Ms. Kenny testified as follows:

Question: So, would you agree with me that Algoma’s property tax obligation is in the range of about $650,000 to $700,000 a month on average is how it works out?

Answer:  I think that’s correct.

Essar-Algoma taxes were in the range of $650,000 per month.  So, for the 17 months from April 2017 to August 2018, the bill would have grown by an additional $11.05 Million.  The sum of these numbers, $13.998, $10.815 and $11.05 is $35.86 Million.  This does not include all the interest and penalties. 

Additionally, at a meeting of council on September 11, 2017, a report of the Mayor and CAO was accepted by council and the debt was $32 million.  The Mayor and CAO reported:

“As of the last report to Council dated July 17, 2017, pre- and post-filing obligations for property tax, including interest and education share, were almost $32 Million…”(see Page 32 of the agenda package)

It has also been implied the payments Essar-Algoma made to the City from 2017 onward are in addition to the $21.8 million.  However, those payments are already included in Mayor’s total of $21.8 million. This information is contained in the agenda package from the meeting on August 20, 2018 on page four paragraph B.

The Mayor claims the City didn’t sue Essar Algoma for the unpaid taxes. However, once the City decided to seek an order from the court for payment of taxes, it in effect sued Essar-Algoma.  It was the City who brought the request for relief to the court in the form of a motion.  There was testimony, cross examination, arguments and an order and the city lost.  The judge ruled as follows:

The City has a lien.…..The City has filed no evidence that its lien is not protection for it.

The Mayor spent over $500,000 fighting a case where the city had the protection of a lien to secure its payment and got nothing. 

In the meantime, Essar-Algoma filed an appeal for a lower assessment at the Assessment Review Board. The Mayor chose to refuse to negotiate a tax settlement before the assessment case went to a hearing. The city lost badly. And the Essar-Algoma tax bill was practically cut in half as a result.  It wasn’t until after the city was hit with that decision, that the Mayor came to the table to make a deal.  

Now that I have pointed to the sworn testimony and the calculations, our community should understand that we lost $16 Million and not $2 million. To the best of my knowledge in all the history of the steel mill restructurings over the last 50 years, never has the city taken such a huge loss.  Let’s come clean on the real numbers.

Yours truly,

Rory Ring, Candidate For Mayor