Unpaid taxes means city can't afford Sault College request, say staff

With millions in property taxes owed by Essar Steel Algoma hanging over the city’s head, the city treasurer is recommending councillors turn down Sault College’s request for $1 million toward the college’s plans for a new building.

The college has asked that the city chip in for furniture, fixtures and equipment to outfit a brand new four-storey Institute of Environment, Education and Entrepreneurship that is expected to cost $18.6-million.

Ron Common, Sault College’s president, told SooToday the city stands to reap long-term economic benefits from the project, including direct job creation and increased enrolment.

But Shelley Schell, the city's commissioner of finance and treasurer, says in a report to council that the outlay would have a “significant impact on the city’s ability to respond to future contingencies or leverage other economic activities.”

Schell cites “cash flow concerns” brought about by a ”significant non-payment of property taxes.”

Last week, the city learned that it won’t be able to collect millions in unpaid property taxes owed by Essar Steel Algoma at least until it emerges from Companies Creditors Arrangement Action protection.

Schell notes in her report that unpaid property taxes are likely to top $20 million by the end of the year and that the city may have to borrow money itself in the near future.

Schell outlines several options councillors have in fulfilling the college’s request, but none are recommended.

Both city staff and the Economic Devlopment Corporation have panned the idea of maxing out the Economic Diversification Fund until 2018, and increasing taxes to cover the grant would force the city to raise taxes by about .5 percent for the average homeowner, an option that apart from not being recommended by staff, also “may not be politically palatable.”

Providing the money as a loan from current reserves or taking the money out of other reserves could affect the city’s credit rating, the report says.

Council will be asked to turn down Sault College's request at its meeting on Monday.

Sault College has so far secured $10.6 million in provincial funding for the institute and is also seeking federal funding for the project.