If Stelco deal OK’d, city gets $9.5M in back taxes

Company was allowed to stop paying levies in 2014 as part of creditor protection measures

The City of Hamilton will be a major beneficiary if the Bedrock Industries Group purchase of Stelco goes through — it will be able to collect more than $9.5 million in back taxes, interest and penalties.

“The city will have to be paid before Bedrock takes over the business or simultaneous with the closing of Bedrock’s purchase,” said Bill Aziz, chief restructuring officer for Stelco.

Stelco — or U.S. Steel Canada, as it was previously known — has been under creditor protection since the fall of 2014. A year into the Companies’ Creditors Arrangement Act (CCAA) process, a judge granted a company request to forgo paying municipal taxes as well as health insurance payments to more than 20,000 eligible pensioners.

More recently Bedrock emerged as an interested suitor, and for the past several months has been negotiating a final deal.

On Wednesday, Stelco announced that a major hurdle had been crossed with an agreement in principle with its salaried employees and retirees. Still required are an acceptance vote by non-secured creditors scheduled for April 27 as well as successful completion of collective agreements with United Steelworkers locals 1005 and 8782, which represent workers in Hamilton and Nanticoke, respectively.

Once those things are in place, the City of Hamilton, as well as Haldimand County, will be paid their back taxes. The judge’s order to suspend municipal tax obligations also extended to Stelco’s operation in Nanticoke. Figures about money owed in Haldimand were not available.

Aziz said Hamilton and Haldimand, in essence, have liens against Stelco that would need to be paid before a deal goes through.

The city’s head of finance, Mike Zegarac, says “it is our understanding that as an ‘unaffected creditor,’ that we would realize the full amount outstanding.”

Stelco owes $8.7 million in taxes with an additional $820,000 in interest and penalties, said Zegarac. Included in that total is more than $2 million that the city collects on behalf of the Hamilton-Wentworth Board of Education.

Asked about the financial ramifications if the taxes weren’t paid, Zegarac said a one-per-cent tax increase across the board would be required to offset the money owed.

The city will have to be paid before Bedrock takes over … BILL AZIZ CHIEF RESTRUCTURING OFFICER