REQUEST FOR DECISION
DATE: April 6, 2021 Report No. FIN-21-007
TO: Laurie Hurst, Chief Administrative Officer
FROM: Ian Irvine, Director of Financial Services
SUBJECT:
Title
Alternate Municipal Tax Collection Scheme
End
RECOMMENDATION:
Recommendation
That Council give first, second and third readings to Alternative Municipal Tax Collection Scheme Bylaw No. 3025, 2021 and further rescind Alternative Municipal Collection Tax Scheme Bylaw, 2020, No. 2998 as outlined in Staff Report No. FIN-21-007.
Body
RELEVANT POLICY:
Community Charter S.235, S236
STRATEGIC RELEVANCE:
This decision does not relate directly to any strategic goal or objective
BACKGROUND:
Statutory powers for municipal property tax due dates and tax notices are regulated under the Community Charter. The Municipal Tax Regulation (B.C Reg 426/2003) outlines the penalty date and states that “the collector must add to the unpaid taxes for the parcel and improvements for the current year a penalty equal to 10% of the portion that remains unpaid”. The application of a penalty not only provides an incentive for taxes to be paid on time but serves to reduce cash flow concerns while generating interest revenues.
Property taxes are due each year on the first business day following July 1 however there is a provision under the Community Charter that allows a municipality to establish a different penalty under an alternative tax scheme. Under this provision, a municipality has the authority to establish terms for when a penalty may be applied. For instance, the Township can choose to have penalties apply to the non-homeowner grant portion of outstanding taxes or it can establish different penalty dates.
Currently, in addition to Esquimalt, there are five other municipalities in the CRD that operate under the general tax scheme. The other local municipalities have an alternate tax scheme in place to either to split the 10% outstanding tax penalty to be applied on two separate dates or apply a penalty on a later date only for those who have outstanding property taxes resulting from unclaimed homeowner grants (HOGS). A summary is attached to this report in Appendix A.
In 2020, given the challenges of the pandemic and related provincial health orders, the Provincial Government advised municipalities of a shift in the penalty date to October 1 for property classes 4, 5 and 6. The bylaw that was adopted last year changed the due date but shifted the penalty date to October 1 for all classes. This was intended to temporarily provide taxpayers with financial flexibility during a challenging and uncertain time.
ISSUES:
1. Rationale for Selected Option
Rescinding the Bylaw
During 2020, an alternate tax scheme bylaw was adopted to maintain the usual July due date but shift the penalty date to October 1. After this shift, approximately 96% of property tax folios were paid in full and those owners therefore did not incur any penalties. When comparing the collection rates on October 1 for years prior to 2020, it was noted that the percentages were consistent. At the same time, the penalty revenue collected by the Township decreased by more than $54,000 from the previous year when the July penalty date was in place.
By rescinding this bylaw, the penalty date would revert to the same July date as was the case prior to the 2020 fiscal year. This would represent a return to the timing that taxpayers are already familiar with and, in addition to alleviating any potential issues with the timing of the annual tax sale, it would re-establish a due date and penalty date that are consistent with all other municipalities in the Capital Region.
Establishing New Tax Scheme for HOG
Provincial Regulation requires the Township to apply a penalty to any outstanding property tax balance, including any portion related to an unclaimed homeowner grant. Many taxpayers who fail to claim a homeowner grant prior to the due date find this penalty excessive and feel it should not be applicable to that outstanding portion. Through the implementation of an alternative tax scheme, provisions can be made to allow for the reversal of any penalties directly attributable to the failure to claim a homeowner grant prior to the deadline. This would have minimal impact on the financial plan and would be well received by homeowners.
Each year, outstanding property tax reminder notices are sent to taxpayers in July and they trigger several calls and subsequent payments. These reminders notify taxpayers about outstanding balances, including those attributable to unclaimed homeowner grants. The recommended date of September 1 would provide sufficient time to claim the grant after receiving the reminder notice and would be consistent with other municipalities where this scheme is already in place.
With the homeowner grant process now centralized with the Provincial Government, the Township’s role will be more about education and support. As it will no longer be responsible for accepting and processing these grants, it is anticipated that more homeowner grants will be unclaimed before the July due date. A change to the due date, specifically for homeowner grant claims, will allow homeowners an extended period to avoid a related penalty.
2. Organizational Implications
The implementation of a second penalty deadline specifically for outstanding amounts due to unclaimed homeowner grants will not likely add any additional work for staff. In fact, the change could result in a reduction of time typically spent processing penalty payments and explaining why the penalty is valid and cannot be reversed. Additionally, there will be a reduced number of people required to attend the municipal hall to remit their penalty amount.
Under the Community Charter, should the Township establish an alternative tax scheme, a property owner may still elect to use the general tax scheme. This could result in the Township staff having to administer two separate tax schemes. However, other municipalities that have adopted alternative schemes indicated that there have not been any such elections made.
3. Financial Implications
Based on the 2019 fiscal year, when the due date and penalty date were July 2, there were a total of 106 accounts where the unclaimed homeowner grant represented the entire outstanding balance as of the penalty date. Assuming the grant were claimed by each of these accounts in advance of the new deadline, the Township would forego $6,317 in total revenue from penalties. While any revenue decrease would place additional burden on other taxpayers, the expected impact of this decision would be negligible.
4. Sustainability & Environmental Implications
There are no sustainability or environmental implications of this decision.
5. Communication & Engagement
The Township will continue to focus on communication, notices and reminders. The annual tax notice will be updated with information regarding the due dates, penalty dates and how to claim homeowner grants. Reminder notices will include information about the deadline for claiming grants without incurring a penalty.
As well, information will be added to the Township website and through social media and potentially an upcoming publication of The Current to educate people about the applicable dates and changes to the homeowner grant program.
ALTERNATIVES:
1. That Council give first, second and third readings to Alternative Municipal Tax Collection Scheme Bylaw No. 3025, 2021 and further rescind Alternative Municipal Collection Tax Scheme Bylaw, 2020, No. 2998, as outlined in Staff Report No. FIN-21-007.
2. That Council give first, second and third readings as amended to Alternative Municipal Tax Collection Scheme Bylaw No. 3025, 2021 and further rescind Alternative Municipal Collection Tax Scheme Bylaw, 2020, No. 2998, as outlined in Staff Report No. FIN-21-007.
3. That Council provide alternative direction to staff.