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Prince Rupert taxpayers may be on hook for millions with Port and City disputing land value

Council connects executive bonuses to port’s claim for refund of past payments in lieu of tax
The City has filed a dispute over Payment in Lieu of Taxes after Port Authority devalues land, possibly requiring millions to be repaid, council heard at the regular meeting on Jan. 9. (Photo: K-J Millar/The Northern View)

The City of Prince Rupert is challenging the Prince Rupert Port Authority’s (PRPA) devaluation of its land, which could cost property taxpayers millions.

Since 2019, the port has been making payments in lieu of taxes (PILT) based on BC Assessment Values provided by the city ranging from roughly $72 million (2019) to $139 million (2021). But the PRPA contracted its own appraiser and appealed provincially to BC Assessment, who came back with values in the range of $25 million (2019) to $26 million (2021), city staff stated at the regular council meeting on Jan. 9.

City Chief Financial Officer, Corinne Bomben, stated in a report to council that the city is disputing the PRPA land and improvement values from 2018 through to 2021 at the Federal Dispute Advisory Panel (DAP). However, no date has been set for the proceeding.

Councillor Wade Niesh voiced that he felt the numbers are very bleak and it will be “a huge impact to the community, whether it’s residential, commercial, light industrial — basically everyone except for the port authority,” if the city has to pay back three or four years’ worth of money because the PRPA values have decreased.

“You know, it just kind of disgusts me in the fact that … for how many years, 2018, ‘19 and ‘20, we had a value of close to give or take $70 million and then with their new valuation, [we’re] losing almost $45 to $48 million …”

“I just want the community to be very prepared for what’s coming in our budget season because of these valuations on port land,” Neish said, adding if the decision is in favour of the port-assessed values and the city does not win at the advisory panel people are going to be “disgusted” with their property taxes.

Bomben explained that dependent on the outcome of the DAP proceedings, any advice provided to the PRPA could impact the PILT already received for those years,” she said.

“If any amount is found to be owing to the PRPA on the basis of land values, those amounts could or would negatively impact future budgets of the city through further reduction in PILT.”

Municipalities can request Payment in Lieu of Taxes from federal entities when they are not subject to taxation like property taxpayers are. The city uses BC Assessment values to send PILT requests to federal organizations such as PRPA.

Bomben’s report to council states the city sent a request for PILT to PRPA based on the values provided by BC Assessment. In return, PRPA made interim payments while they contracted a private appraiser to provide a value of their land Hence the PRPA made a final determination of the land values at the end of April 2022, the report states. Once the final determination is made, the city has 90 days to appeal.

“The city applied to the Dispute Advisory Panel to challenge the final values for those years within that 90-day timeframe given the significant difference,” Bomben said.

City councillors voiced their upset at the situation during the meeting.

Councillor Nick Adey asked why the 2021 original value of $139,359,600 dropped to a little more than $27 million.

“We understand that was a function of an appeal to the BC Assessment numbers that was launched by PRPA. I would note that the city was advised that it wasn’t a significant appeal, so we didn’t involve ourselves at that time, Rob Buchan, city manager, replied. “But, it did turn out to be a very significant appeal.”

The meeting conversation continued into the 2014 Variable Compensation Progam Document for Prince Rupert Port Authority executive staff detailing bonus structure for the same years the city is disputing the PILT, which was included with the CFO’s report.

“… What we can say, from what we understand, from the policy that’s attached to the package is that the bonuses are determined in significant part from profitability. So the less that is paid out and the more that was retained is more profit,” Buchan said.

The report to council shows Total Variable Compensation Program Payments to executive and non-executive staff of PRPA as being: 2018 $1,706,999.27; 2019 $1,983,220.06; 2020 $1,946,947.70 and 2021 $1,761,506.88.

Councillor Nick Adey drew attention to the correlation he saw between the bonuses paid to port staff and the PILT payments.

“Based on my reading of the bonus package, if part of the bonus comes from net profit, and if the people who are conducting the appeal, and getting this change in the numbers, it would seem to me there must be a connection between the bonus packages and the successful reduction of those values because the money becomes profit for the port corporation. Is that a fair speculation?” Adey said.

Buchan responded.

“I think that’s our read of it. Unless we can be shown otherwise, profitability is based on how much money you make and part of that has to do with how much money you don’t have to pay out. So, … I think that’s our understanding,” the city manager said.

Neish said he wants residents to take note.

“I want people to be quite aware of that … if you look at this other information that we [have in the agenda] the bonuses paid to port authority employees, basically, the bonuses paid in the last four years are equivalent to the taxes that we are going to be having to pay them back. So, just be aware of that.”

Adey hopes the public will take time to have a look and form their own opinions now that the issue is on the table and “in the public realm”. He said he doesn’t necessarily object to corporations having incentive packages but has some apprehension.

“I think my concern is when those incentive packages are connected to an effect upon a community. And so I hope that this will become fodder for a broader public discussion and that it may prove in the end to be one step further toward what I think that various players on all sides of this would like — that is, to reach a place where the community and the port have found a more comfortable way of relating to each other in a way that benefits the community in a fair way.”

Councillor Barry Cunningham said in the overall picture, everyone has to contribute to the community and he believes everyone should pay their fair share. He hopes when a sit down with the PRPA happens to discuss the situation that they will feel the same way.

“They are an intricate part of this community. If the community fails, they’re going to fail too. It’s in their best interest that this community thrives,” he said.

Read next week’s The Northern View for Port or Prince Rupert’s response