Staff Report - 2020 Alternative Municipal Tax Collection Scheme

Financial Implications

A number of other important considerations are outlined below.

While the City of Langford has significant cash invested that should allow us to maintain cash flow if we decide to change to the penalty date, one item that will present a challenge is we still must remit all of CRD, CRHD, BC Transit and BC Assessment funds by August 1st (in 2019 this amounted to approximately $14,400,000). This is where the change to the remittance requirements for School Tax will significantly benefit the City as the $14,400,000 figure would be closer to $22,800,000.

Under a normal year, we would have collected the vast majority of taxation revenue by July 2nd, which includes these balances so it is simply a flow through from the City’s perspective. If we are not collecting taxes by this deadline, under the current legislation outlining remittance dates, we would still be required to make these remittances without collecting the funds to cover it, with the exception now of school tax.

While we may still have the necessary cash flow to cover this through our investments, it would make this much more challenging and further analysis will be required on this. Section 177 of the Community Charter allows the municipality to adopt a Revenue Anticipation Borrowing Bylaw which would allow us to borrow adequately for the term between when we need to make these remittances and when we would be collecting the taxation revenue. This bylaw is attached to the agenda under separate cover.

Recommendation: All of the CRD area CFO’s have been in discussion over the last number of weeks. While there would be significant benefit to having consistency across the region, and in this case we are working towards that as much as possible; however, during unprecedented times like these and with varying situations in each municipality, it appears one consistent program will not be achieved. What we feel is the best approach is to do what we feel works best for our individual municipality, while working towards as much consistency as possible in the region.

With this said, staff are recommending the following which is outlined in Option 1 below and is detailed below. Note that the penalty date(s) do not have to match the due date.

1. For Property Classes 4, 5, 6, 7 and 8 the province has made a province wide decision that the penalty will be applied October 1, 2020. Staff are recommending that we continue with a due date of July 2, 2020. We are recommending this to maintain consistency year over year and in hope that many property owners that can pay will pay by the due date and that we apply a penalty of 5% on outstanding balances as of October 1, 2020 and an additional 5% penalty on any balance owing as of December 1, 2020. This approach has been recommended to encourage businesses to pay by the regular due date but it will also mean those that can’t afford to or feel they do not wish to will not have a penalty applied until October 1 as per the Provincial decision, and allows an additional two months before the full 10% penalty is applied.

2. For Property Classes 1, 2, 3 and 9, for which the province has not changed anything, staff are recommending a due date of July 2, 2020. We are recommending this to maintain consistency year over year, in hope that many residents that can pay will pay by the due date and to hopefully collect payments from the banks who pay on behalf of the tax payer.

Staff are not recommending following the same with these property classes as the Province has mandated for the “business” property classes as there is a need to collect some tax revenue before August 1 in order to have the cash flow to make the remittances to the other taxation authorities (CRD, CRHD, School, BC Assessment, BC Transit, MFA). As such, staff are recommending that instead of a penalty of 10% on July 3rd we instead apply a 5% penalty on August 1, 2020 and a further 5% penalty on October 1, 2020.

Staff believe the above recommendation best reflects the financial needs of the City in maintaining cash flow as best as possible and it also best reflects the changes announced on April 16th by the Province as well as allowing some leeway for Class 1, 2, 3 and 9 property owners should they need it as the first penalty for these property classes will be applied August 1 rather than July 3rd and it would be only 5% initially compared to the regular 10%, with the remaining 5% applied October 1, 2020.

Legal Implications

The City is required to approve the Five Year Financial Plan Bylaw and the Tax Rates Bylaw before May 15th each year.

Should Council choose to adopt an Alternate Municipal Tax Collection Scheme, this must be done by Bylaw and must be approved before the tax notices go to property owners with the revised penalty amounts and/or dates.

Options

1. That Council approve, for the 2020 Taxation Year only, an Alternate Tax Collection Scheme Bylaw that maintains the tax due date as July 2, 2020 and that the penalty will be applied as follows: a. Class 1, 2, 3 and Class 9: 5% on August 1, 2020 and an additional 5% on October 1, 2020.
   b. Class 4, 5, 6, 7 and 8: 5% on October 1, 2020 and an additional 5% on December 1, 2020.
   AND
   That Council proceed with consideration of Alternative Municipal Tax Collection Scheme Bylaw No. 1914, 2020 first, second, third readings and final adoption.

OR

2. That Council direct staff to bring forward, for the 2020 Taxation Year only, an Alternative Tax Collection Scheme Bylaw that maintains the tax due date as July 2, 2020 and that the penalty will be applied as follows: a. Class 1, 2, 3 and Class 9: ___% on _______, 2020 and an additional ___% on ________, 2020.
   b. Class 4, 5, 6, 7 and 8: ___% on October 1, 2020 and an additional __% on ______, 2020.

Respectfully submitted

Submitted by:
Michael Dillabaugh, CPA, CA, Director of Finance

Concurrence:
Matthew Baldwin, MCIP, RPP Director of Planning
Adriana Proton, Manager of Legislative Services
Michelle Mahovlich, P.Eng, P.Geo, Director of Engineering
Audrey Kryklywyj-Shortreid, Deputy Director of Finance
Darren Kiedyk, Chief Administrative Officer

New COVID-19 supports for businesses, local governments

NEWS RELEASE
For Immediate Release
2020FIN0020-000703
April 16, 2020

VICTORIA — The Province is providing enhanced relief for businesses by reducing most commercial property tax bills by an average of 25%, along with new measures to support local governments facing temporary revenue shortfalls as a result of COVID-19.

“We know that B.C. communities and businesses are suffering from the economic impacts of COVID-19,” said Carole James, Minister of Finance. “That is why our B.C. COVID-19 Action Plan is focused on the health and safety of British Columbians, direct support for people and businesses and economic recovery for our province. We are providing further support by making additional temporary property tax changes to provide provincewide relief for business and local governments to help weather the pandemic, continue to deliver the services people count on and be part of our province’s economic recovery.”

The Province is taking significant new steps to support B.C. businesses, non-profits and other organizations through the COVID-19 pandemic by:

• further reducing the school property tax rate for commercial properties to achieve an average 25% reduction in the total property tax bill for most businesses, providing up to $700 million in relief. This enhances the 50% reduction to the provincial school property tax rate that was originally announced for classes 4, 5, and 6 as part of B.C.’s COVID-19 Action Plan.
• Postponing the date that late payment penalties apply for commercial properties in classes 4,5,6,7 and 8 to Oct. 1, 2020, to give businesses and landlords more time to pay their reduced property tax, without penalty.

Responding to key concerns from local governments, the Province is addressing cash flow and revenue shortfalls with new measures that provide additional support:

• authorizing local governments to borrow, interest-free, from their existing capital reserves to help pay for operating expenses, such as employee salaries.
• delaying provincial school tax remittances until the end of the year. This will provide significant relief to local governments facing cash flow issues.
• providing local governments greater flexibility to carry debt for an additional year.

These measures will provide local governments with the resources to meet their operational costs and required remittances to regional districts, regional hospital districts, TransLink and transit authorities, BC Assessment, the Municipal Finance Authority and other taxing authorities. This will ensure that other minor taxing authorities can count on receiving the full amount they bill to municipalities and the Province’s surveyor of taxes before Aug. 1, 2020.

Ministry of Finance
Ministry of Municipal Affairs and Housing

Learn More:

• For more information on B.C.’s COVID-19 Action Plan, visit: http://news.gov.bc.ca/factsheets/bc-takes-steps-to-support-people-businesses-during-covid-19-pandemic
• For information about federal supports for businesses, visit: https://www.canada.ca/en/department-finance/economic-response-plan.html
• For the latest medical updates, including case counts, prevention, risks and testing, visit: http://www.bccdc.ca/ (or follow @CDCofBC on Twitter)
• For provincial health officer orders, notices and guidance, visit: www.gov.bc.ca/phoguidance
• For non-health related information, including financial, child care and education supports, travel, transportation and essential service information, visit: www.gov.bc.ca/covid19
• Or call 1 888 COVID19 (1 888 268-4319) between 7:30 a.m. and 8 p.m., seven days a week.

A backgrounder follows.

Changes to B.C.’s property tax framework respond to COVID-19

BACKGROUNDER
For Immediate Release
2020FIN0020-000703
April 16, 2020

Building on B.C.’s COVID-19 Action Plan, the Province is making temporary changes to B.C.’s property tax framework to provide financial support for businesses and local governments.

Property tax measures for local governments:

• Local governments will have the ability to borrow, interest-free, from their capital reserve funds, freeing up billions in assets to cover temporary revenue shortfalls. They will have up to five years to build back the reserve funds.
• Municipalities will be able to access school tax revenue collected for the Province until the end of the year. If a local government chooses to hold onto the school property tax, it must first be used to pay other taxing authorities, including regional districts.
• Working closely with the Municipal Financing Authority (MFA), local governments will be able to extend their revenue anticipation borrowing for a second year past the current limit of one year. To minimize impacts on the MFA, the Province is asking local governments to first use the delayed school property tax payment and their own capital reserve funds before seeking short-term borrowing through the MFA.
• Municipalities will still be required to make all their required remittances to other taxing authorities. Additionally, municipalities will be required to make the full annual payment to TransLink and BC Assessment in August 2020, rather than August and December.

Property tax measures for B.C. businesses:

• Late payment penalties for commercial properties (classes 4, 5, 6, 7 and 8) will be postponed to Oct. 1, 2020.
• The school property tax rates for classes 4, 5, and 6 were reduced by 50% in the Province’s initial economic response to COVID-19. Further reducing the provincial school property tax and introducing an equivalent tax reduction for classes 7 and 8 will lower the overall commercial property tax bill for most businesses by an average of 25%.

Breakdown of tax relief for B.C. businesses:

• Major industry (property class 4)

  • Budget 2020 mill rate: 3.72
  • March 23 mill rate: 1.86
  • April 16 mill rate: effectively zero
  • Tax cut as a per cent of total tax bill: 4%

• Light industry (property class 5)

  • Budget 2020 mill rate: 3.72
  • March 23 mill rate: 1.86
  • April 16 mill rate: 1.0561
  • Tax cut as a per cent of total tax bill: 25%

• Business/other (property class 6)

  • Budget 2020 mill rate: 3.72
  • March 23 mill rate: 1.86
  • April 16 mill rate: 1.1070
  • Tax cut as a per cent of total tax bill: 25%

• Managed forest (property class 7)

  • Budget 2020 mill rate: 1.87
  • March 23 mill rate: 1.87
  • April 16 mill rate: effectively zero
  • Tax cut as a per cent of total tax bill: 20%

• Recreation and non-profit (property class 8)

  • Budget 2020 mill rate: 2.29
  • March 23 mill rate: 2.29
  • April 16 mill rate: 0.7844
  • Tax cut as a per cent of total tax bill: 25%

Changes to British Columbia’s property tax framework are in addition to measures announced as part of B.C.’s Action Plan to support businesses, including:

• Effective immediately, many provincial tax filing and payment deadlines are deferred to Sept. 30, 2020.
• Businesses with a payroll over $500,000 can defer their employer health tax payments until Sept. 30, 2020. Businesses with a payroll under this threshold are already exempt.
• Payments for provincial sales tax (PST), employer health tax, municipal and regional district tax on short-term accommodation, carbon tax, motor fuel tax and tobacco tax are also deferred.
• The scheduled increase to the carbon tax rate, and application of PST to e-commerce transactions and sweetened and carbonated drinks, will be delayed.

B.C.’s COVID-19 Action Plan complements federal measures to support businesses:

• The federal government is providing up to 75% wage subsidy for qualifying businesses, for up to three months, retroactive to March 15, 2020, to help businesses to keep and return workers to the payroll.
• The maximum duration of the Work-Sharing program has been extended from 38 weeks to 76 weeks.
• The Business Credit Availability Program will provide $65 billion of additional support and credit solutions for individual businesses, including the Canada Emergency Business Account and the Loan Guarantee for Small and Medium-Sized Enterprises.
• All businesses can defer, until Aug. 31, 2020, the payment of any income tax amounts that become owing on or after March 18, 2020, and before September 2020. No interest or penalties will accumulate on these amounts during this period.
• All businesses, including self-employed individuals, can defer payments of GST/HST and customs duty until June 30, 2020.

Connect with the Province of B.C. at: news.gov.bc.ca/connect

For non-health related information, visit: www.gov.bc.ca/covid19
Or call 1 888 COVID19 (1 888 268-4319) between 7:30 a.m. and 8 p.m., seven days a week.

For media only:
Ministry of Finance Media Relations 250 213-7724
Ministry of Municipal Affairs and Housing Media Relations 778 584-2433

Contacts: Ministry of Finance; Ministry of Municipal Affairs and Housing