ADMINISTRATIVE REPORT

Date: July 10, 2002
Author/Local: T. Corrigan/7225

RTS No. 2845

CC File No. 1551

Council: July 23, 2002

TO:	Vancouver City Council
FROM:	General Manager, Corporate Services/Director of Finance
SUBJECT:	Tax Installment Prepayment Plan (TIPP Program)

RECOMMENDATION

THAT City Council set an annual interest rate of 1.25% for 2003 real property tax payments paid in advance through the City's Tax Installment Prepayment Plan (TIPP program) to be effective for the period August 1, 2002 to July 31, 2003.

COUNCIL POLICY

In March 1998, Council approved the establishment of a voluntary monthly instalment plan for the prepayment of property taxes through pre-authorized charges to the taxpayer's bank account. TIPP was implemented on August 1, 1998.

In January 2001, Council approved two changes to the initial TIPP program, effective August 1, 2001 as follows:

· interest be paid on prepayments at an interest rate to be set annually at August 1 based on the interest rate paid on savings accounts by the City's corporate banker as at June 30.
· any balance owing on the due dates for advanced and final billing be automatically withdrawn from the taxpayer's account at the designated financial institution.

PURPOSE

The purpose of this report is to recommend an interest rate to be applied to 2003 real property taxes paid in advance through the City's TIPP program.
DISCUSSION

Section 412 of the Vancouver Charter allows Council to accept prepayments from property owners that can be applied to property taxes billed at a later date. In March 1998 Council approved the implementation of a prepayment plan which became effective August 1, 1998. In January 2001 Council amended the plan to include payment of interest and automatic withdrawal of advance and final billing balances.

The following chart shows the growth in enrolment since inception of the plan.

Tax Year	Plan Enrolment	% Change	Amount	% of Property Accounts
1999	350	N/A	$108,600	0.2%
2000	1626	364%	$384,958	1.0%
2001	2823	74%	$814,511	1.8%
2002	4483	59%	$1,267,802	2.8%

The growth in the participation levels can in part be attributable to the amendments made to the TIPP program last year to automatically withdraw the outstanding balances at advance and main bill due dates and to pay interest on prepaid amounts. Based on feedback, both were very well received by taxpayers.

It is recommended that the City adopt a rate of 1.25% per annum for the period August 1, 2002 to July 31,2003. The recommended rate is unchanged from the previous year. At June 30, the Bank of Montreal was offering interest at 1% per annum on a premium saving account balance of less than $5,000.

The recommended rate provides an incentive for taxpayers to participate in the program by reimbursing them for foregone interest, yet is not great enough to encourage property owners to use the City as an investment institution. It also maintains a sufficient spread between interest earned and paid to taxpayers by the City on prepayments to cover direct and indirect costs of the program.

CONCLUSION

TIPP is a convenient option available for taxpayers for paying taxes. Participation in the program is increasing with maturity of the program and user acceptance. The program should continue to be supported.

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(c) 1998 City of Vancouver