http://www.saultstar.com/2017/05/11/city-must-wait-for-judges-decision-on-taxes

The City of Sault Ste. Marie will have to wait a little longer to see if a judge will order Essar Steel Algoma to pay its property taxes.

On Wednesday, lawyers for the City of Sault Ste. Marie and Essar Steel Algoma appeared before a judge arguing whether the steelmaker should be required to pay its $11 million post-filing property taxes.

The city is currently owed a total of about $26 million in unpaid taxes from Essar, representing about 25 per cent of its annual tax levy.

The city argued for full payment of the taxes, noting that its residents depend on Essar Steel Algoma and payments from the post-filing tax obligations to provide its residents, including the applicants with satisfactory services and to avoid “draconian measures" that could include raising taxes 12 to 20 per cent, laying off staff and/or cutting services.

Essar Steel Algoma argued that the steelmaker's property assessment notice for 2017-2022 has dropped about 50 per cent and the property tax assessment for 2014-2016 remains before an appeal assessment court. In other words, even if the court orders the company to pay its property taxes, lawyers for Essar Steel Algoma argued the award shouldn't be for the full amount because it believes it will win the appeal and have its assessment reduced.

The court monitor, in his 30th report to the court, said the integrated steel mill said the DIP lenders have opposed the property tax payments. They argue that the steelmaker requires a liquidity cushion of about $25-$30 million as a result of the magnitude of their business and payment obligations.

Volatile steel prices and recent steel pricing over the past few weeks suggest a “softening” of the markets and the financing risk exists because Essar Steel Algoma is unable to repay the DIP facilities and could require more additional borrowing to fund the winter raw materials build this fall.

In addition, Brian Denega's report states that Essar Steel Algoma needs to rebuild one of its four stoves, starting in July, which will reduce production and ultimately impact cash flows.

Justice Frank Newbould has reserved his decision and said he would provide a written decision within seven to 10 days, said CAO Al Horsman.

Horsman said he hopes a decision is released prior to the May 29 council meeting so elected officials can be fully informed.

In the meantime, city staff is still working on a worst-case scenario and a report will be prepared for June outlining options to improve the city's cash flow.

That report will explain options that include raising property taxes, borrowing money, cutting or reducing services, or delaying capital projects, he said.

Horsman said the Corporation will need a decision by city council in June if Essar Steel Algoma isn't ordered to pay its tax bills.

Meanwhile, details of the results of a confidential report to the courts that was to be provided by May 10 have not been released.

Newbould had ordered that the written report be "comprehensive and an analysis of the various proposals put forward" and submitted to the court by May 10 and that no DIP proposal be signed without further direction from the court.

It's anticipated that the report includes proposals by others to purchase the steelmaker, including Maga Steel Corp.

The Sault Star earlier reported that Maga Steel Corp. is aligning itself with United Steelworkers Local 2251. The union has signed a letter of support with the company, owned by Virginia billionaire Tom Clarke.

Essar Steel Algoma has been under the protection of the Companies Creditors' Arrangement Act since November 2015.