Pulp Mill sale update from City of Prince Rupert

When council passed the first three readings of the 2011 budget on Tuesday night, one city councillor took issue with the City’s spending habits.

Coun. Sheila Gordon-Payne, who voted against the budget, said she was continuing to “raise the red flag” over counting on money coming from the Watson Island pulp mill. She said money from the pulp mill has not come into municipal coffers, but the City is spending as if it has come in.

Coun. Gordon-Payne also said it’s a risky decision to spend money the City doesn’t have, and predicted that the City will one day have to raise taxes just to live within its means.

In an interview after the meeting, Mayor Jack Mussallem said he understood Coun. Gordon-Payne’s concerns, but he argued the City is going through a period of growth and opportunity.

“We can get beyond it after this year,” said Mussallem. “It’s a reasonable way to proceed at this time. I wouldn’t do it continuously year after year after year, and I think that’s her point. But at this time, going forward, we have cash flow that we can do that.”

Mussallem also said the sale of the pulp mill would help pay down the “extraordinary” debt load the city is under.

The City took the property at Watson Island after the previous owner, Sun Wave Forest Products, didn’t pay its taxes. In February 2010, SunWave filed a lawsuit against the City, claiming the City set unrealistic timetables for the removal of its property. Sun Wave also claimed the City was barring it from accessing its property on Watson Island.

On top of those legal costs were the maintenance fees for the property. After the City took over ownership of the mill in December 2009, it had to pay to maintain the property. According to the draft budget, those costs came to over $1 million in 2010.

The draft budget also states the City will actually be increasing its budgeted expenditures for Watson to $1.225 million for 2011 to “begin compliance with Ministry of Environment direction as well as some provision being made for cost of impending lawsuits.”

In September last year, a joint venture – comprising Metlakatla, Lax Kw’alaams and the Prince Rupert Port Authority – signed an exclusivity agreement by the City to do its due diligence in consideration of buying the mill. In return, the joint venture would pay most of the maintenance costs. At this point, it’s still not known whether the joint venture will buy the property.

The City’s next court date with Sun Wave is June 15, and another one is scheduled for June 22. Mussallem said there probably won’t be news of a sale of the mill until after those dates.

This year’s budget also sets aside $118,000 from its accumulated surplus to fund the net cost of holding Watson Island. The budget states the balance of the surplus on Dec. 31, 2010 was $2.5 million.

~Written by Chris Armstrong. Muskeg News