Dubbo City Council has pressed ahead with plans to collect an estimated $1.3 million annually from a mining company in the future.
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This week it created a mining land rate category in anticipation of a proposed $1 billion venture at Toongi gaining a green light from state authorities.
It also set an ad valorem rate of six cents for every dollar of a land valuation.
Alkane Resources subsidiary Australian Zirconium Limited (AZL), the company proposing the Toongi project, will have to pay an estimated $1.3 million in the first full year after it receives a mining lease, even if it generates no revenue.
AZL told the council it agreed with the introduction of a mining rate, but appealed for it to be introduced in stages, reaching the six cents in the dollar rate by 2017-2018.
AZL chief operations officer Nic Earner said in the submission the proposed ad valorem rate should reflect the company's cash outflow and inflow, increasing as the company's cash inflows started.
He proposed growing the ad-valorem rate from 1.33 cents in the dollar in 2014-2015 to the full 6 cents in the dollar by 2017-2018.
Council organisational services director Craig Giffin argued against AZL's proposal in a report to the council's finance and policy committee meeting last week.
He said it would result in a potential income increase of $289,674 in 2014-2015, compared with an estimated $1.3 million if the council stuck to its plan.
"There are no doubt many other local businesses, certainly smaller in size, that would enjoy special exemptions to have in place a sliding rate payment based on their anticipated cash flow..." he said.
"The fact that the land has such an estimated value ($30 million), and based on what other mines are paying, the inclusion of a 6 cents per dollar mining category... is a one-off opportunity for council to obtain a substantial gain in its notional income to provide funding for community-wide infrastructure and improvements."
Mr Earner repeated the company's case at the committee meeting last week.
After he spoke, councillors Greg Matthews, Bill Kelly, Kevin Parker and John Walkom declared pecuniary, significant interests and left the chamber.
The remaining councillors voted to endorse the recommendations of the director.
The same councillors made the same declarations this week and left the chamber.
The council resolved to introduce a mining rate category, part of the $168 million operational plan and budget.
Mr Earner said last week the company would continue to work constructively with the council regardless of the outcome.