SOMBA K'E/YELLOWKNIFE - City hall officials say unpaid taxes at Giant Mine is at least part of the reason why property taxes need to be hiked throughout the city next year.

Property taxes haven't been paid at the mine since 2005, when Miramar Mining Corporation - which had paid Indian and Northern Affairs $10 for the mine in 1999 after previous owner Royal Oak went into receivership - closed it down and handed it back to the federal government for cleanup.

Carl Bird, the city's director of corporate services, said a total of $328,645 is owed in property taxes for Giant, but there are some questions over who should be paying it - the territorial Department of Municipal and Community Affairs (MACA) or Indian and Northern Affairs (INAC).

"It's a jurisdiction issue," said Bird.

Bird recommended a 5.95 per cent property tax increase next year to city council on Monday, plus a five per cent increase to water and sewer rates, and a five per cent hike in solid waste management user fees.

Mayor Gord Van Tighem said he received a phone call from a "senior government official" who told him MACA and INAC were close to reaching an agreement.

Beverly Chamberlin, director of lands administration with MACA, said she didn't have a time frame for an agreement when contacted by Yellowknifer on Monday.

"There are two components to the Giant Mine," said Chamberlin.

"The surface lands are under the administration and control of the commissioner (of the Northwest Territories), and MACA administers that land on behalf of the commissioner," said Chamberlin.

"Then there's the sub-surface ... and that land is under the administration and control of INAC."

Chamberlin said even though MACA owns the surface rights, the territorial and federal governments have an arrangement which gives INAC exclusive use of the surface land to ensure it is cleaned up properly.

Bill Mitchell, INAC's acting director for the contaminants and remediation directorate, said the property taxes may very well not get paid at all.

"The government doesn't pay taxes, per se. They pay these things called payments in lieu of taxes," said Mitchell.

"When our Payments In Lieu of Taxes office looked at that, they concluded that the arrangement, with which the federal government was on the site, does not meet the definition of federal property under the Payment In Lieu of Taxes Act. It does not meet that criteria whatsoever."

Mitchell said the territorial government has a similar system of awarding grants in lieu of property taxes.

"We've heard from them that that policy does not apply in the case of Giant Mine either," said Mitchell.

Mitchell said the city won't be getting either property taxes or payments in lieu of taxes from INAC, in any event.

He said his department pays for city services, such as for the fire department or ambulances, when they are required.

"We'll be spending a lot of money to remediate the site - I mean, hundreds of millions of dollars," said Mitchell.

"Ultimately, the city is going to benefit from the remediation of the site because the land could have future industrial development potential, or potential for other uses, and the city is not being asked to spend anything in terms of cleaning it up."

Bird said next year's property tax increase will cost the average taxpayer about $86 more for a home "at the average assessment value of $193,000."

He is projecting further property tax increases of 6.95 per cent in 2011, and by another 3.51 per cent in 2012.

Other property tax hike factors include rising power costs, wage increases, and a loss of $359,000 in insurance funding from MACA, said Bird.