Bethlehem will not pay county taxes

Bankruptcy forbids firm from paying property levy

It paid $2.6 million in 2000

Baltimore County views amount as `relatively small'

November 10, 2001|By Kristine Henry | Kristine Henry,SUN STAFF

Bethlehem Steel Corp. will not pay the multimillion-dollar Baltimore County property tax bill on its sprawling Sparrows Point complex because of its bankruptcy filing.

The steel maker said yesterday that it would not make local property tax payments for unpaid taxes incurred before its Oct. 15 filing for Chapter 11 bankruptcy protection. Company officials declined to discuss specifics but did say its Sparrows Point division, which employs nearly 4,000, paid about $2.6 million in property tax in 2000 - and hasn't paid since.

The latest annual tax bill was due Oct. 1.

While Bethlehem is a major taxpayer in the county, it pays far less than the county's largest payer, Constellation Energy Group Inc., parent of the Baltimore Gas and Electric Co., said Elise Armacost, a spokeswoman for the county. Constellation, she said, pays nearly $25 million a year.

"Bethlehem Steel has been an important corporate player here for a long, long time and we want to see them healthy," Armacost said. "But in the scope of our [$1.2 billion] budget, it's a relatively small amount of money."

The majority of the property taxes - about 90 percent - go to the county and the remainder goes to state coffers.

"We certainly hate to see a major employer like Bethlehem Steel have the financial problems it's having, not only because of what it means for employees but what it means for the state as well," said Michael Golden, a spokesman for the state comptroller's office. "As a loss to the state, it's not as significant as it is for the local jurisdictions, but it's a loss nevertheless."

Bethlehem said the bankruptcy filing precluded it from paying the tax.

"Any property obligations that were incurred before Oct. 15, 2001 are considered pre-petition obligations and cannot be paid under the bankruptcy law," the company said in a statement.

"Bethlehem regrets the disruption and difficulty this situation may cause the many local governments serving the communities we have called home for so many years."

Attorney Malhar Pagay of the Los Angeles law firm Pachulski, Stang, Ziehl & Young said the action was in tune with bankruptcy law.

"In general, the minute you file a bankruptcy case you are not allowed to pay for anything that happened before," he said. "The reason being is that then you would be paying some and not others, and you would be preferring some and not others."

Over the past several years the country's No. 3 steel maker has invested more than $650 million at Sparrows Point to build a new cold-rolled steel mill and renovate a blast furnace, among other improvements.

But it has been hurt by competition from low-cost imports and the high costs associated with its pension and health care obligations.

The company said at the time of the filing that it is looking for ways to remain viable, which could include selling assets or merging with another steel maker. The company and the union are in negotiations to revise its labor contract.

Bethlehem has lost $1.4 billion so far this year, and, as of Sept. 30, it had a negative net worth, with a shareholder equity at minus $303 million.

Its shares closed unchanged yesterday at 35 cents.

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