The City of Castlegar is expected to give its biggest employer an extra six months to pay its property taxes, as Mercer International faces what it describes as an “exceptionally challenging period.”
In a letter to the city this month, senior vice-president Bill Adams formally requested a deferral of municipal taxes for the Celgar pulp mill.
Adams said the BC forestry sector is up against a “myriad of external and domestic pressures that have severely impacted our overall liquidity.”
“Globally, the pulp market has suffered from prolonged weakness driven by volatile markets, overseas overcapacity, and historically low list prices,” he wrote.
“Domestically, the situation is compounded by escalating trade disputes, including crushing U.S. tariffs, which have crippled the broader BC lumber market.”
As a result, BC has seen a “devastating wave” of sawmill closures. Because the local pulp mill relies on residual wood chips from those sawmills, Adams said their access to fibre has been “drastically limited.”
“Coupled with globally uncompetitive operating costs within the province, these compounding factors have placed immense strain on Mercer Celgar’s cash flow and financial flexibility,” Adams wrote.
Mercer International asked that its property tax bill be deferred to the end of the year to “provide the necessary cash flow to support our operations to bridge this volatile economic downturn.”
Municipalities can extend tax deadlines, but only for an entire tax class, not an individual business, city manager Chris Barlow explained. Celgar falls in the major industrial tax class along with the Interfor sawmill, so granting an extension to one affects both. The two operations combined make up about 30 per cent of the city’s tax base (of that 30 per cent, Celgar accounts for 84 per cent and Interfor 16 per cent).
“So when you get a request from that size of contributor to our tax base, it behooves us to sit up and take notice,” Barlow said.
Chief financial officer Steffan Klassen said a six-month deferral to Dec. 30 for both mills would result in $61,000 less to the city in interest payments. However, he added the blow wouldn’t be enough to affect the city’s operations.
“It does impact our interest revenue that we earn on those funds, which does go into our operations and helps fund projects,” he said. “But in terms of actually being able to continue our business, there’s no impact.”
3 months vs. 6 months
Staff initially recommended a three-month deferral of taxes that would otherwise be due July 2, but explained the company has since asked for six months’ grace.
Another key factor is the mill’s maintenance shutdown, scheduled for October, which will see the company make $30 million in capital investments.
Vanessa Terwoort, Celgar’s environment director, told council the mill has moved to an 18-month cycle for shutdowns, so the next one won’t be until the spring of 2028.
She said revenue generated between now and October will fund the mill improvements and then revenue collected at the end of the year, once the mill restarts, will go toward the tax bill. Terwoort said they expect pulp prices, now sitting at about $680 per ton, to rebound.
“2026 is our really tough year and we’re hoping that in 2027 things can recover,” she said.
Council thought about granting a three-month tax deferral, but after learning they probably wouldn’t be allowed to offer another three months after that, they focused on the six-month extension.
“I’m confident that we can weather this storm and help one of our major employers weather their storm,” councillor Shirley Falstead said.
Mayor Maria McFaddin agreed, although she suggested that once the company’s financial picture improves, it could help offset some of the city’s lost $61,000 through an investment in the community.
“I would propose six months with the understanding that we are putting a lot of good faith into this, that Mercer will be a good partner,” she said. “We are more than willing to make sure we can keep our forest industry.”
Some councillors wondered if granting Celgar’s request would open the door to similar requests from other businesses, but staff reiterated that the rules only allow for extensions to entire tax classes.
While council endorsed the six-month extension, the bylaw still needs to be adopted.
It wasn’t immediately clear if Interfor will also take advantage of the opportunity to hold off on paying its taxes until the end of the year, although the city is assuming that it will. If if does not, then the loss of interest to the city will be about $50,000.
