By Kevin Werner, News Staff
The announcement by U.S. Steel Oct. 29 to end its steel and iron operations in Hamilton won’t immediately impact the city’s financial bottom line, say city officials.
“We don’t see much of any change,” said City Manager Chris Murray.
The company, said Mike Zegarac, Hamilton’s acting corporate finance general manager, remains paid up in its taxes to the city. This year U.S. Steel paid $9.1 million in municipal taxes, with $6.9 million going to the municipality, and the other $2.2 million forwarded to education.
In addition, the U.S. Steel, which is the municipality’s sixth largest customer, will continue to pay its water rate, which for this year was about $1.2 million. But since 2008-09, when the recession hit, and the company idled its steel-making operations, the company has curbed its water consumption by at least 10 per cent, saving U.S. Steel about $600,000.
Murraysaid U.S. Steel is also obligated to pay $14 million of the $138.9 million cost to renovate Randle Reef. Murray said U.S. Steel signed an agreement to pay its portion of the price tag.
City officials and politicians are more concerned about what U.S. Steel has in mind for itsHamiltonfacility in the long run, since anything it does will have a tremendous ripple effect to the city.
For instance, Zegarac said U.S. Steel is appealing to the Municipal Property Assessment Corporation’s assessment its property assessment made from 2009 to 2013. MPAC has assessed the 1,000 acres of land at $166 million.
If the company is successful in appealing its assessment, said Zegarac that could mean the city would lose millions in tax dollars.
Ward 2 councillor, and mayoral candidate, Brian McHattie, said city officials should also begin looking at what can be done with the company’s land if U.S. Steel decides to sell it.
“There is a need to think about the 1,000 acres,” he said.
Councillors are also calling on the federal government to reveal what was contained in an agreement between the Conservatives and U.S. Steel that was signed in 2011. When the company bought the Hamilton and Nanticoke plants in 2007 for $1.1 billion, U.S. Steel promised to keep a certain amount of jobs at the Hamilton facility. The federal government took legal action against U.S. Steel over those promises. The conflict was settled without a hearing in 2011, with the Conservatives saying U.S. Steel had agreed to operate both mills until 2015, and the company would invest $243 million.
The company also locked out 900 workers in 2010 after it failed to reach an agreement with the union over pension plans and retiree benefits.
“My concern is by 2015 (U.S. Steel) will walk away from their responsibilities,” said Mountain councillor Terry Whitehead. “How do we make the best of a bad situation?”
Mountain councillor Scott Duvall said “nobody knows” what is contained in the agreement, which has never been made public.
“We need to try and find out what is next after the agreement is over,” he said. “It could be very, very, costly, over hundreds of millions of dollars. It could put a company in not a favourable (place to make) decisions.”
For Ward 4 councillor Sam Merulla, the city should be concentrating on the estimated 8,000 former workers who may end up losing their pensions.
“Under the circumstances, (the company) should be dealing with (the issues) publicly,” he said. “We need to find out the federal government’s role. Can (U.S. Steel) default on their pension payments?”
U.S.Steel’s Chief Executive Officer Mario Longhi made the announcement that steel and iron making would cease at the end of the year during an Oct. 29 conference call with analysts.
“Decisions like this are always difficult, but they are necessary to improve the cost structure of our Canadian operations,” he said.
The move will see 47 salaries positions eliminated, but it won’t impact the 600 employees of Local 1005 United Steelworkers, or the 228 salaried positions at the plant.
U.S. Steel had idled the steel and iron operations since October 2010, laying off about 1,500 workers in the process.
Hamiltonwill continue its coke and finishing operations.
Mayor Bob Bratina said the decision was “unfortunate, but not completely unexpected based on the reduced operations at Hilton Works.”
Andrea Horwath, Ontario NDP leader, said she was “extremely disappointed with this decision. Today’s announcement makes it clear that U.S. Steel has no plans to make steel inCanada.”
She also blamed the Liberals for having no strategy to encourage the return of manufacturing jobs to the city.
Analysts said they were surprised the company took this long to end the steel making operations at Hamilton. They said there was no demand for the semi-finished steel Hamilton had once produced.
Along with the Hamilton operations, U.S. Steel is ceasing operations at two of its oldest coke batteries in Gary, Indiana, and severing a partnership with another company in an effort to cuts costs and boost revenue. The strategy is part of Longhi’s Project Carnegie, a value-enhancement initiated to turn around the company.
On Oct. 28, the company reported a three-quarter loss of $1.79 billion or $12.38 per share. The moves by U.S. Steel will record a non-cash charge in the fourth quarter of about $225 million to write down the assets, resulting eventually in a $50 million savings.
Bratina has called for a face-to-face meeting with U.S. Steel officials in Pittsburgh, but Hamilton councillors approved again a motion Oct. 30 asking company representatives to appear before council. They originally made the request in February 2012, and so far the city has received no answer from U.S. Steel.
Councillors will also reactivate its steel committee, composed of councillors Whitehead, Merulla, Duvall, and Bratina. They are looking at questioning federal and provincial officials about the future of U.S. Steel and what they will do to protect Hamilton, and its workers.