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HomeMy WebLinkAboutFSD-003-21Clarington Staff Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: Council Date of Meeting: January 18, 2021 Report Number: FSD-003-21 Submitted By: Trevor Pinn, Director of Financial Services Reviewed By: Andrew C. Allison, CAO Resolution#: C-023-21 File Number: By-law Number: Report Subject: 2021 COVID-19 Property Tax Deferral Program Recommendations: 1. That Report FSD-003-21 be received; 2. That the Director of Financial Services/Treasurer be directed to establish a COVID- 19 Property Tax Deferral Program allowing a deferral of taxes, interest and penalty free, to qualifying taxpayers for a period of up to sixty days for the first six months of the year; and 3. That all interested parties listed in Report FSD-003-21 and any delegations be advised of Council's decision. Municipality of Clarington Report FSD-003-21 Report Overview Page 2 The COVID-19 pandemic continues to cause financial concerns for some taxpayers, as well as physical and mental health concerns. The Municipality of Clarington implemented several financial supports in 2020 during the first wave Iockdown. These supports were time specific. With the second Iockdown that started on December 26, 2020, the Municipality should consider if a second round of financial support is needed, learning from support offered by other municipalities and feedback from taxpayers regarding the 2020 support. This report explains an administrative change to pre -authorized payment plans that will be implemented in order to make it easier for taxpayers to join this plan and spread their outstanding taxes out over the remaining payment period for 2021. A proposed deferral plan of 60 days for those impacted by COVID-19 is also suggested which will benefit those impacted by COVID while not writing off the interest and penalties that accrued prior to the pandemic. 1. Background COVID-19 Dates and Restrictions 1.1 On March 17, 2020, the Province of Ontario declared an emergency under the Emergency Management and Civil Protection Act as it relates to COVID-19. 1.2 On June 19, 2020, the Region of Durham entered Stage 2 of the Provincial restart program for the first wave and entered Stage 3 on July 24, 2020. Stage 3 allowed nearly all businesses and public spaces to open, however restrictions still applied on capacity, operating hours and other public health measures as applicable. 1.3 The Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 came into force on July 24, 2020 as the provincial declared emergency came to an end. The ROA allows certain orders to be amended, subject to criteria, and does not allow new orders to be created. 1.4 The Province of Ontario announced a lock -down effective December 26, 2020 lasting for at least 28 days, potentially ending on or after January 23, 2021. Many retailers, personal services, restaurants, gymnasiums, and recreational/social businesses are forced to shut down or provide curb -side service. Municipality of Clarington Report FSD-003-21 COVID-19 Financial Support Provided in 2020 Page 3 1.5 On March 23, 2020, Council approved tax relief measures outlined in report FND-007- 20 which included a 60-day waiver of penalties and interest (May 1, 2020 and June 1, 2020) starting after the April 23, 2020 due date, waiving of service fees and delay in the due date for the June installment by one month. Similar measures were taken by other local area municipalities. This relief provided over $200,000 in financial support through waived penalties and interest to all taxpayers in Clarington. 1.6 On July 6, 2020, Council approved the creation of the COVID Community Support Grant Program, which provided $100,000 to local non-profit organizations who were impacted by COVID-19. This funding provided support to offset increased operating costs or forgone revenues as a result of the first -wave lockdown measures that were in effect from March 2020 to June 2020. 1.7 Council also approved up to $1 million for a COVID-19 Property Tax Rebate Program which would provide qualifying residential taxpayers with the local portion of their taxes back in the form of a refund. There were no qualifying applications under this program. 1.8 In September, the COVID-19 CIP Program was approved by Council to provide up to $1 million in financial support to local small businesses in addressing capital costs of reopening and adhering to public health measures that are in place. This program would provide funding to qualifying businesses which were forced to close as a result of the emergency orders in March to June 2020 and met a financial means test. This program is still open, and we have approved payments to three businesses so far. Staff will be reporting back to Council in the first quarter of 2021 with an update on the program. 1.9 Municipalities in the Region of Durham passed similar measures as mentioned above. Legislative Ability to Write-off Taxes 1.10 Section 354 of the Municipal Act, 2001 states that "Taxes shall not be written off except in accordance with this section." The section goes on to provide three times when the Treasurer of a local municipality shall remove unpaid taxes from the tax roll: • The council of the local municipality, on the recommendation of the treasurer writes off the taxes as uncollectible; • The taxes are no longer payable as a result of tax relief under section 319, 345, 357 358, 362,364,365,365.1 or 365.2 or a decision of any court; or The taxes are no longer payable because the tax liability arose as result of the assessment of land under subsection 33(1) of the Assessment Act for a period during which a regulation made under subsection 33 (1.1) of that Act provides that subsection 33(1) of that Act does not apply to land. Municipality of Clarington Report FSD-003-21 Page 4 1.11 At this point, it is my opinion that there are no taxes that are uncollectible from 2020 given the variety of tools that are available for collection and the allowed timeframe for collection. Historically in Clarington, the provision for uncollectible taxes has been used for small value write-offs where the cost to try and collect outweighs the actual amount outstanding. 1.12 Section 319 of the Municipal Act, 2001 does not apply to the Municipality of Clarington as it applies to a municipality other than a lower -tier municipality. This section provides relief to low-income seniors and low-income persons with disabilities. The relief is in the form of a tax deferral or cancellation of a tax increase on residential property. Any relief under this section is determined by the Region of Durham. 1.13 Section 345 of the Municipal Act, 2001 relates to late payment charges for the non- payment of taxes or any instalment by the due date. The local municipality shall cancel or refund late payment charges for penalties and interest on overcharges of taxes arising as a result of errors or changes (an assessment change, property class change or allocation of property class change). Relief as a result of COVID-19 would not be applicable under this section of the Act. 1.14 Section 357 of the Municipal Act, 2001 allows the local municipality to cancel, reduce or refund all or part of taxes levied on land in respect of which the application is made if: a. As a result of a change event, as defined by the Assessment Act, during the tax year, the property or portion of the property is eligible to be reclassified in a different class of real property which has a lower tax ratio for the taxation year (e.g. a commercial property becomes a residential property during the year taxes may be written off); b. The land has become vacant land or excess land during the year or the preceding year; c. The land has become exempt from taxation during the year or preceding year after the return of the assessment roll for the preceding year; d. During the year or during the preceding year after the return of the assessment roll i. a building on the land was razed by fire, demolition or otherwise, or ii. was damaged by fire, demolition or otherwise so as to render it substantially unusable; d.1 The applicant is unable to pay taxes because of sickness or extreme poverty; e. A mobile unit on the land was removed during the year or during the preceding year after the return of the assessment roll for the preceding year; Municipality of Clarington Report FSD-003-21 Page 5 A person was overcharged due to a gross or manifest error that is clerical or factual in nature, including the transposition of figures, a typographical error or similar error but not an error in judgment in assessing the property; or g. Repairs or renovations to the land prevented the normal use of the land for a period of at least three months during the year. (this was removed for years after 2007) 1.15 From the above, the only authority under section 357 would be due to sickness or extreme poverty. This would be on a case by case basis and would not be, in my opinion, justification for a broad write-off of taxes. This section could allow for an application -based program for relief, this could be administratively burdensome and potentially subjective which is why this section is not typically used for tax relief. Report FSD-002-21 recommended that the Municipality delegate authority to the Assessment Review Board for relief sought under this section. 1.16 Section 358 of the Municipal Act, 2001 relates to overcharges. Upon application to the Treasurer of a local municipality, the local municipality may cancel, reduce or refund all or part of taxes levied on land: a. In one or both of the two years preceding the year in which the application is made for any overcharge caused by gross or manifest error in the preparation of the assessment roll that is clerical or factual in nature; b. In the year or years in respect of which an assessment is made under section 33 or 34 of the Assessment Act for any overcharge caused by a gross or manifest error in the preparation of the assessment that is clerical or factual in nature. 1.17 Relief under section 358 would not be applicable in the current situation. 1.18 Section 362 of the Municipal Act, 2001 does not apply to lower -tier municipalities and is therefore not applicable to the Municipality of Clarington. This section relates to relief for those properties which are subject to capping on property taxes. 1.19 Section 364 of the Municipal Act, 2001 no longer applies as it related to vacant unit rebates. This program was ended within the Region of Durham, as well as many municipalities throughout the Province of Ontario, in 2019. This program was available to commercial and industrial properties which had vacancies of at least 90 consecutive days. 1.20 Section 365 of the Municipal Act, 2001 the Council of a local municipality may, in any year, pass a by-law to provide for the cancellation, reduction or refund of taxes levied for local and school purposes in the year by the council in respect of an eligible property of any person who makes an application in that year to the municipality for that relief and whose taxes are considered by the council to be unduly burdensome, as defined in the by-law. Municipality of Clarington Page 6 Report FSD-003-21 1.21 Under section 365, eligible properties are those within residential, farm or the managed forest property class. This would not apply to multi -residential, commercial or industrial properties. Further, there is no requirement that the upper -tier have the same program, if they do not the lower tier municipality would be required to pay the upper tier for the full amount of the taxes. This is the section that the COVID-19 Property Tax Relief Program was established in 2020. Clarington is, to my knowledge, the only municipality in Ontario that established a program under this section for COVID-19. 1.22 Section 365.1 of the Municipal Act, 2001 provides for cancellation of all or a portion of taxes for municipal and school purposes levied on specified properties (a property for which a phase two environmental site condition has been conducted) in respect of the rehabilitation period and/or the development period of the property. This would not be applicable in this situation. This type of relief is common in attempts to redevelopment brownfield sites. 1.23 Section 365.2 allows tax reductions for heritage properties outlined in the Municipal Act, 2001. Again, this would be a targeted relief for specified types of properties that are designated under the Ontario Heritage Act. This would not be COVID-19 related. 1.24 The difficulty with application -based programs is the added layer of administration, potential subjectivity unless the program is clearly prescribed. Feedback from the 2020 COVID-19 relief program included statements that the program only applied to residential taxpayers (which legally is all it could apply to), it did not take into consideration self-employed or business owners, it did not assist retired individuals or those who had to quit or reduce their work hours to care for someone with COVID-19. The program was very prescriptive which eliminate subjectivity, ensures equal treatment of taxpayers and is able to be consistently applied; however, this provides limited targeted relief. Ability to Provide Financial Support 1.25 Section 106 of the Act prohibits a municipality from assisting directly or indirectly any manufacturing business or other industrial or commercial enterprise through the granting of bonuses for that purpose. 1.26 The Municipal Act, 2001 provides municipalities general powers, notwithstanding section 106, to make grants in section 107 of the Act. Grants under this section includes several powers including guaranteeing loans, providing for use of property, staff, sales of property at a nominal price or the donation of foodstuffs and merchandise purchased by the municipality for that purpose. These would be to those organizations that are not considered a manufacturing business or commercial enterprise. 1.27 Using the above authority, the Municipality could provide financial or in -kind support to non-profit organizations that support the community. The Municipality's Community Grants Program is an example of this. Municipality of Clarington Page 7 Report FSD-003-21 1.28 Providing support or services for small business counselling is permitted under section 108 of the Municipal Act, 2001. This service could include the ability to acquire land and buildings to provide leased premises to eligible small businesses, provide grants to corporations, lease land to small businesses. 2. Options for Financial Support in 2021 Providing flexible payment options 2.1 While not a relief program, the Municipality does provide taxpayers the ability to have taxes withdrawn from their bank account monthly. This provides taxpayers the ability to spread their payments out monthly rather than four larger payments in February, April, June and September. Staff will be increasing the communication for this program to ensure taxpayers are aware of this option. 2.2 For new registrations enrolled during the year, a lump sum payment is required in order to place the account in a similar position to all accounts on the plan. For example, an account that missed the January first payment would pay the January withdrawal up- front and begin withdrawals on February first. To provide an additional option for residents requesting additional support, upfront payments can be spread over the remaining months. Our pre -authorized payment plan is not currently setup this way due to increased risk of clerical error. Given the pandemic, staff feel this option outweighs the risk and could help residents avoid falling behind if they are unable to pay the catch- up payment. 2.3 Staff will be temporarily changing the normal process, which is more manual due to system limitations, to allow for new registrants to spread the balance of taxes over the remaining period equally. 2.4 Taxpayers enrolled in the pre -authorized payment plan do not pay penalties or interest during the period of enrollment, provided that payments are made as scheduled. 2.5 If taxes are withdrawn as part of the taxpayer's mortgage payment, any changes to that payment schedule need to be worked out between the mortgage company and the taxpayer. Financial Services staff received many requests to hold payment or skip a payment; however, we are only able to do that with pre -authorized payments set up through the Municipality. 2.6 The Municipality continues to provide the ability to make payments through financial institutions, including the institutions online or telephone banking programs. These payments can be made at the taxpayer's convenience without having to come to the Municipal Administration Centre. 2.7 Cheques may be mailed to the Municipality or dropped off at the Municipal Administration Centre. Municipality of Clarington Report FSD-003-21 Page 8 2.8 Currently, the Municipal Administration Centre is open, and payments may be made in person through debit, cheque or cash. Staff are recommending the use of debit cards or cheques. Changing the due date for payments 2.9 The interim due dates were set in December 2020 with the passing of By-law 2020-087. The due dates are set for February 18, 2021 and April 22, 2021. The interim tax bills are currently being processed and will be mailed no later than January 28, 2021; due to processing times for the tax bills it is not possible to have the due dates changed on the tax bills and meet the statutory timelines. To meet the cash -flow needs of the Municipality it is not recommended to change the interim tax levy due dates at this time. 2.10 In April or May when the final tax by-law is brought to Council, the due dates for the final two installments may be changed from the typical June/September (residential) or August/September (non-residential). 2.11 Taxpayers entering into the pre -authorized payment plan arrangement with the Municipality will be able to spread the payment of taxes over the remaining period for the year which could provide for better cash flow. Waiving of Interest or Penalties 2.12 As a work -around for the due dates in 2020, staff recommended the waiving of penalties and interest for 60 days which in essence moved the due date by two months. This remains an option for Council. 2.13 One of the drawbacks for this method is that all penalties and interest are waived not just the penalties and interest for those impacted by COVID-19. This costs approximately $100,000 per month in lost revenue, most of which would not be related to COVID-19. Administratively, this is the easiest option to process; however, it is felt that this does not provide fair and equitable treatment to taxpayers as those who were in arrears prior to March 2020 when COVID-19 started would have no interest and penalties on their total arrears. Deferral Program 2.14 An option that has been used by several municipalities including the City of Ottawa and the City of Kitchener is an application -based tax deferral program. This program allows qualifying taxpayers to defer payment of their taxes for a set period of time and avoid penalties and interest, if the deferred amount is paid by the due date in full. Municipality of Clarington Report FSD-003-21 Page 9 2.15 Unlike the property tax relief program, there is no requirement to meet the criteria under a by-law defining "unduly burdensome taxes"; this would eliminate the need to provide personal financial information and would be easier to administer as financial means would not need to be required. It also does not provide interest and penalty relief to all taxpayers, even those not impacted by COVID-19. 2.16 This program would also be eligible for business owners as it would not be considered bonusing as no financial support is being provided. 2.17 It is recommended that the deferral program be administratively easy to apply. Staff will utilize online forms for taxpayers to register for their property and answer a series of questions to determine if they meet the criteria. They will be required to certify that they are providing accurate information and that if the information is not accurate that they will be removed from the deferral program. 2.18 While the wording of the program will be determined, the criteria is suggested to include: a. Experienced a financial hardship such as a loss of pay/employment, excessive revenue loss (greater than 30 per cent), business closure; b. Taxes were current as at December 26, 2020; c. Residential property tax class; d. Commercial business property owners with an assessed value of less than $5 million; e. Cannot receive compensation from business interruption insurance for property taxes; and Taxes deferred under the program must be paid in full by June 21, 2021 (60 days). 2.19 The tax deferral program would provide qualifying taxpayers an extension on their tax due date which could assist in cash flow issues resulting from the second wave. 2.20 Depending on the economic situation in June 2021, a second intake for this program could occur to provide a 60-day deferral. The 60-day deferral appears to be the length of time most commonly used for deferral programs or penalty/interest waivers in Ontario. 2.21 A concern with the deferral program would be that two payments would be due in June, as well, regardless of the payment arrangements the Municipality puts into place there are still obligations to make payments to the Region of Durham and the School Boards. Extending payment terms too far could result in cash flow issues for the Municipality. Municipality of Clarington Report FSD-003-21 Page 10 2.22 We hope that more taxpayers would opt for the pre -authorized payment plan which allows for monthly payments (interest free) rather than deferring two payments and having three payments due in June. The pre -authorized payment plan, modified from current practice, provides a win -win for the Corporation and taxpayers. Tax Rebate Program 2.23 Council could consider re -instituting the COVID-19 Property Tax Rebate Program under S.365 of the Municipal Act, 2001 for "unduly burdensome taxes". This program requires a means test be established to ensure equitable treatment and objective decisions on qualification for the program. 2.24 The program would not take as long to set up this year as the means tests, by-laws and research to establish the program have already occurred. 2.25 Staff do not recommend this approach, it is administratively burdensome, requires personal information such as bank statements to be collected, which taxpayers are hesitant to do, and in 2020 did not result in any fiscal support being provided. 3. Concurrence Not Applicable. 4. Conclusion It is respectfully recommended that Council approve the creation of a tax deferral program for qualifying taxpayers. This program as well as a change in the administration of the pre -authorized payment plan for the 2021 tax year will provide payment options for taxpayers seeking to mitigate personal cash flow concerns. Staff Contact: Jessica James, CMRP(A), Taxation Services Manager, 905-623-3379 ext 2609 or jjames@clarington.net. Attachments: Not Applicable Interested Parties: There are no interested parties to be notified of Council's decision.