Staff Report: 2021 Alternative Municipal Tax Collection Scheme (Finance)

Staff Report

to
Council

Date:

April 19, 2021

Department:

Finance

Subject:

2021 Alternative Municipal Tax Collection Scheme

Background

As Council is aware, the regular process for property taxes is the due date is July 2nd and on July 3rd the municipality applies a 10% penalty on outstanding balances of current year taxes. Under the General Tax Collection Scheme, the due date and penalty are provincially legislated through the Community Charter, Section 234, and Municipal Tax Regulation. The City of Langford has always followed a General Tax Collection Scheme as is described above.

In 2020, due to the COVID-19 Pandemic, the Provincial Government made a number of legislative changes to municipal tax penalty dates for property classes 4, 5, 6, 7 and 8. In conjunction with these adjustments the City of Langford also adjusted the penalty dates for all property classes to be the following:

• 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

Commentary

Staff have found the following and will outline options that are available to the City, and what are the pros and cons to these options:

1. Status quo (prior to 2020):
   Property Tax due date is July 2nd and on July 3rd the 10% penalty is applied to any outstanding current year taxes.

2. Alternative Municipal Tax Collection Scheme:
   Community Charter Section 235, Alternate Municipal Tax Collection Scheme, allows the municipality to, by Bylaw, establish one or more dates on which property taxes are due, or when the penalty is applied. It is also worth mentioning that the changes made in 2020 did result in reduced revenue from the property tax penalty.

Perhaps the most obvious positive is Council is able to effectively defer the property tax due date by shifting the penalty date or amounts and thus provide additional support to the tax payer during this difficult time. This is essentially what the City and the Province did in 2020. It may also provide an extended tax season, thus reducing the traffic to City Hall at once.

In order to lessen the impact of tax payer confusion in future years, we will have to do a strong messaging that this is just for 2020 and 2021 due to COVID-19 and we will be going back to the normal property tax process for 2022.

Another negative worth considering is around cash flow and it is outlined further in the financial implications section below. By delaying the collection of taxes from July 3rd to a later date, we are not able to delay or amend the date on which we must remit funds we have levied on behalf of other taxation agencies. We must remit these funds whether we have collected the funds from the tax payer or not.

As outlined in the recommendation below, staff feel that the positives of an Alternate Tax Collection Scheme outweigh the negatives as it related to the 2021 Property Tax Season in light of the current COVID-19 pandemic.

While the City did implement an Alternative Tax Collection Scheme in 2020 due to the COVID-19 pandemic, for a number of reasons we are unable to implement the exact same scheme for 2021. While this may lead to some additional confusion, Council may wish to proceed with an Alternative Tax Collection Scheme for 2021 in an effort to assist those tax payers who have been negatively affected by the COVID-19 pandemic.

Irrespective of the property tax scheme chosen by Council for 2021, as was done in 2020 staff will continue put in place appropriate measures to minimize the number of people that would be coming into the office during tax time and to continue all measures needed to protect staff who are working in the office during this time.

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). In addition, we must remit to the Province, a significant portion of the School Taxes collected within the first month after the due date (approximately $8,600,000). In 2020, the Province allowed municipalities to remit the school tax by December 31st rather than the usual remittance schedule which allowed the municipality to adjust penalty dates even more than staff are recommending for 2021.

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.

Recommendation:

Staff are recommending the following which is outlined in Option 1 below and is detailed below. 1. For all Property Classes, as the Province has to date not made a province wide decision in 2021, staff are recommending maintaining a due date of July 2, 2021. 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 scheme as was implemented in 2020 for a number of reasons related to statutory deadlines that have reverted back to their usual dates from those that were adjusted by the Province for 2020. Another reason is that tax sale will be held on the usual date, each year it is held on the last Monday of September. In 2020, the Province allowed municipalities to defer their tax sale for one year. All penalties must be applied before the tax sale date, as such the 2020 penalty schedule will not work for 2021. In recognition of the successful collection of taxes in 2020 and in recognition of the ongoing challenges associated with COVID-19, staff are recommending that instead of a penalty of 10% on July 3rd we instead apply a 1% penalty on July 3rd, 2021 and a further 9% penalty on September 1, 2021. 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 allows some leeway for property owners should they need it as the first penalty for these property classes will be 1% rather than the regular 10%, with the remaining 9% applied September 1, 2021.

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 2021 Taxation Year only, an Alternate Tax Collection Scheme Bylaw that maintains the tax due date as July 2, 2021 and that the penalty will be applied as follows:
   a. Class 1, 2, 3, 4, 5, 6, 7, 8 and 9:

   • 1% on July 3, 2021; and
   • An additional 9% on September 1, 2021.

   AND
   That Council proceed with consideration of Alternative Municipal Tax Collection Scheme Bylaw No. 1978, 2021.

OR

2. That Council direct staff to bring forward, for the 2021 Taxation Year only, an Alternative Tax Collection Scheme Bylaw that maintains the tax due date as July 2, 2021 and that the penalty will be applied as follows:
   a. Class 1, 2, 3, 4, 5, 6, 7, 8 and Class 9: ___% on _______, 2021 and an additional ___% on ________, 2021.

Respectfully submitted,

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

Concurrence:
Matthew Baldwin, MCIP, RPP Director of Planning

Concurrence:
Marie Watmough, Manager of Legislative Services

Concurrence:
Michelle Mahovlich, P.Eng, P.Geo, Director of Engineering

Concurrence:
Audrey Kryklywyj-Shortreid, Deputy Director of Finance

Concurrence:
Braden Hutchins, Director of Corporate Services

Concurrence:
Darren Kiedyk, Chief Administrative Officer