ADMINISTRATIVE REPORT

                                             Date:  August 2, 1995


     TO:        Vancouver City Council

     FROM:      Director of Finance

     SUBJECT:   1996 Interest Rate on Property Tax Arrears


     RECOMMENDATION

          That  City  Council  instruct  the  Director  of   Legal
          Services to draw  the necessary by-law  to implement  an
          interest rate of 11.00% for real property tax arrears to
          be effective after December 31, 1995, for approval on or
          before September 30, 1995.

     MANAGER'S COMMENTS

          The  General Manager  of  Corporate Services  RECOMMENDS
          approval of the foregoing.

     COUNCIL POLICY

     It has been Council practice to set an interest rate for real
     property  tax  arrears  annually,  in  accordance  with   the
     provisions  of the City Charter.  As explained in the body of
     this report, the interest rate on arrears approximates future
     market conditions and provides an incentive for taxpayers  to
     pay their outstanding taxes.

     PURPOSE

     The  purpose of this report is  to recommend an interest rate
     for 1996 to be applied to arrears of real property taxes.

     DISCUSSION

     The City Charter provides that Council may charge an interest
     rate on real property taxes that are in arrears  (outstanding
     after December 31st).  Council should also note that interest
     charges on arrears  are different than  penalties, which  are
     imposed on late payments of current  property tax levies made
     after the due date.  In setting an interest rate for arrears,
     we  attempt  to approximate  market  conditions  in the  next
     calendar year.   Experience has shown  that an interest  rate
     which is  at market,  or  slightly above  market,  encourages
     taxpayers to settle their outstanding taxes. 






     Conversely,  an  interest rate  which  is  lower than  market
     provides taxpayers  with an  incentive  to defer  payment  of
     outstanding  taxes  in order  to finance  other expenditures.
     This  puts the City in the position  of acting like a bank or
     other lending institution which, clearly, is not desirable.


     The Charter provides that Council may,  by by-law, passed not
     later than the  30th day of September in  any year, impose an
     interest  rate on real property tax arrears effective for the
     following  year.   The interest  rate set  out in  the by-law
     cannot be greater than four percentage points above the prime
     interest rate prevailing on the  31st of July of the year  of
     its enactment, as determined by the City's principal banker.

     The prime  rate on  July 31,  1995 was  8.25%.   This  report
     recommends that Council  establish the arrears  interest rate
     at 11.00% for 1995, which is 2.75% above the prime benchmark.
     This 11.00%  rate would be  an increase from the  rate in the
     previous year  of  10.00%.   At  this point  in  time, it  is
     difficult  to predict what interest rates  will be at the end
     of  the year, and more so  through 1996, but present economic
     indicators point to a slightly rising interest rate situation
     for the balance of 1995 and stable for the next year.  

     The Provincial Government's  policy is to  set their  arrears
     interest rate at 3% over prime, and their rate can be revised
     three times per year.  Their  current rate is 12.75% based on
     prime rate at April 15, 1995.


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