Vancouver City Council |
ADMINISTRATIVE REPORT
Date: July 10, 2003
Author/Local: T. Corrigan/7225
RTS No. 3479
CC File No. 1552
Meeting Date: July 22, 2003
TO:
Vancouver City Council
FROM:
General Manager, Corporate Services/Director of Finance
SUBJECT:
Tax Instalment Prepayment Plan (TIPP program)
RECOMMENDATION
THAT City Council set an annual interest rate of 1.25% for 2004 real property tax payments paid in advance through the City=s Tax Instalment Prepayment Plan (TIPP program) to be effective for the period August 1, 2003 to July 31, 2004.
COUNCIL POLICY
In March 1998, Council approved the establishment of a voluntary monthly installment 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- any balance owing on the due dates for advanced and final billing be automatically withdrawn from the taxpayer's account at the designated financial institution.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 2004 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 that 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%
2003
6016
34%
$1,925,194
3.7%
Council policy has been to set the rate paid based on the rate paid by the City's corporate banker on savings accounts as at June 30. The rates set for 2002 and 2003 tax years have been higher than the interest rates paid by the corporate banker. During this period interest rates paid by financial institutions were low and the City offered a marginally higher rate as an incentive to participation in the program.
For the 2004 tax year, it is recommended the City adopt a rate of 1.25% per annum for the period August 1, 2003 to July 31,2004. The recommended rate is the same rate as was paid in 2003 however is slightly less than the 1.5% rate offered by the City=s corporate banker at June 30 on a premium saving account balance less than $5,000. The recommended rate is set to align with economic forecasts that indicate interest rates will decrease and average 1.25% over the next period for which this interest rate is set.
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.
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