The City of Sault Ste. Marie is owed $26 million from Essar Algoma Steel in property taxes and wants the cash now.
The City is in court pleading for the tax arrears dating back to 2015, that amount will increase to $29 million by September 2017. The amount owed equates to 25 percent of the city’s overall operating budget and if the arrears are not paid, Sault Ste. Marie ratepayers could end up paying the bill.
The City argues that is should be paid before any other creditor of Essar Steel Algoma.
City Hall has already had to borrow $8 million from reserve accounts to meet it’s cash flow obligations. That money will have to be paid back in 2018 because that money was earmarked for sanitary sewage and capital expenses.
The City tells the court that it has three options if the property tax arrears are not paid and none of the options are good.
One, could see residential property taxes balloon to an additional 12 to 20 percent, that’s on top of the 3 percent levy increase council approved this year.
Two, layoff city employees to the tune of about 80 to 150 employees or cut the city’s capital budget which could and likely result in the City losing about $16 million in provincial funding.
Or three, borrow the money from a $40 million fund set for road and bridges construction. There could also be a combination of those options depending what the court decides.
Another creditor of Essar Algoma Steel, Port of Algoma, will be in court Thursday to make a plea for the money it is owed by the steelmaker. The company claims it has not been paid since April of 2016 and now owes $17 million it its creditor in missed interest payments.