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NS deal to help restart a NewPage paper mill approved, but under scrutiny

Canadian Taxpayers Federation calls it ``tax trickery,” and too expensive.


September 24, 2012
by CANADIAN PRESS

HALIFAX — After a year of legal wrangling, the $33-million sale of the former NewPage Port Hawkesbury paper mill to Vancouver-based Pacific West Commercial Corp. was officially sanctioned Thursday by the Nova Scotia Supreme Court.

“We’re hopeful that everything is in place,” George Kinsman, a spokesman for court-appointed monitor Ernst & Young, said outside the Halifax courtroom. “We are ready to go.”

However, the sale wasn’t expected to close until late Friday when the province, company officials and a battery of lawyers sign the closing documents in Halifax and Toronto.

As well, the Nova Scotia Utility Review Board has to sign off on an amended discount power rate agreement with Nova Scotia Power Inc., which was also expected by Friday.

But the new agreement that the Nova Scotia government reached with a Vancouver company to reopen an idle paper mill in Cape Breton was described by the Canadian Taxpayers Federation as “tax trickery,” but Premier Darrell Dexter says his government has reached a deal that secures jobs in an industry that has a future in the province.

Dexter announced the revised deal late on Sept. 22 with Pacific West Commercial Corp., which has offered $33 million for the 50-year-old facility in Port Hawkesbury, less than 24 hours after an original agreement to restart the former NewPage mill collapsed.

Dexter said the agreement means the money the provincial government has spent in an effort to restart the mill should be repaid in full in as little as 12 years. That includes a $124.5 million aid package announced last month and $36.8 million that the government has spent so far to keep the mill in a so-called hot idle state in order to quickly resume operations.

But Kevin Lacey, the federation’s Atlantic Canada director, said it remains an expensive deal and the province’s taxpayers are shouldering all the risk.

“What the government is claiming here is that this deal is better because they are now getting the money from tax revenue. But the money that we’re getting is money that (Canada Revenue Agency) has ruled that we were owed in the first place,” said Lacey in an interview.

“Rather than do this tax trickery, which the premier is trying to announce with moving these taxes around, he should call it what it is. … This is a bailout.”

On Saturday, Dexter defended the mill’s viability, calling it “one of the most high-tech mills anywhere in the world.”

“We were not prepared to support something that was backward-looking,” he said.
“The paper industry is going through change, but there’s always going to be a paper industry.”

The government first announced the $124.5 million funding package in August. At the time, it included $66.5 million in loans, $40 million of which would have been repayable. The other $26.5 million would be forgiven if certain criteria, such as wage targets, were met.

But the government said a week ago it would sweeten the fund after the Canada Revenue Agency rejected a tax arrangement sought by Pacific West.

On Saturday, the government said the previously repayable loan of $40 million to Pacific West Commercial would be forgiven if Nova Scotia Power paid the same amount in taxes as a result of energy purchases under a proposed new tariff.

“But all that does is give back the tax money that this company owes the province,” said Lacey.

Nova Scotia’s profit-sharing cap of $9 million will also be increased to $24 million under the new agreement.

Lacey said profit sharing assumes that the mill will make money but he questioned whether that will happen in the short-term given the mill’s and the paper industry’s track record in the province.

“We have seen in this province these types of deals before. They cost taxpayers millions of dollars,” said Lacey, alluding to the government’s $50-million deal last December aimed at saving the Bowater Mersey paper mill in Brooklyn, only to see the plant close about six months later.

“One of the reasons why we pay the highest taxes and we have some of the highest debt in all of Canada is because we’ve made decisions like this in the past that have gone sour.”

© 2012 The Canadian Press