Tax Payment Options - Realty Tax Installments and

Pre-Authorized Tax Payment Plan (All Wards)

The Corporate Services Committee recommends the adoption of the report (March 12, 1998) from the Chief Financial Officer and Treasurer.

The Corporate Services Committee reports, for the information of Council, having requested the Chief Financial Officer and Treasurer to submit a report directly to Council for its meeting scheduled to be held on April 15, 1998:

(1) on other methods of payment of realty taxes including the use of credit cards;

(2) on what it would mean to have five realty tax installments for the remainder of 1998; and

(3) on the financial implication of having eleven realty tax installments in 1999.

The Corporate Services Committee submits the following report (March 12, 1998) from the Chief Financial Officer and Treasurer:

Purpose:

This report sets out the proposed tax bill payment options, which are recommended to take effect beginning with the 1998 Final Realty Tax Bill.

Source of Funds/Financial Implications:

The payment options included in the recommended tax payment plan will improve customer service due to the expansion of the Pre-authorized Tax Payment plan (PTP). This would improve Finance Department tax processing efficiency with resulting savings dependent on the degree of participation by taxpayers in the PTP plan.

Recommendation:

It is recommended that Council approve two payment plans for payment of realty taxes whereby all Toronto taxpayers will have the option of:

(i) paying their taxes by instalment, with final taxes being payable in three instalments beginning in 1998, and interim taxes being payable in three instalments beginning in 1999, or

(ii) through a Pre-authorized Tax Payment plan.

Council Reference/Background/History:

All of the former Area Municipalities allowed the payment of realty taxes in instalments. However, the number of instalments differed for each of the Interim and Final billings, from four instalments in the former City of Toronto to two instalments in the former City of Scarborough.

Due to timing constraints for the 1998 interim tax bill, each of the former municipalities issued their own interim tax bills and the number of instalments for the payment of interim taxes continued as had previously been the case. However, the installation of the new tax system will enable the City to have a combined billing for the 1998 final realty tax bill. This report recommends a harmonization of tax instalments for the payment of realty taxes for Council's consideration.

Comments:

The former Area Municipalities billed realty taxes in two phases - an interim and a final bill. Each billing allowed for payment of taxes by instalment which varied by municipality. Appendix 1 outlines the previous schedule of tax instalments. The cities of North York, Etobicoke, Scarborough, York and East York also offered taxpayers the option of paying their taxes through a PTP plan. (Approx. 2,500 East York taxpayers took advantage of this program). However, in the fall of 1997, the contract with their outside service provider expired and was not renewed due to the impending amalgamation. As a result, East York temporarily discontinued its PTP plan. The former municipality of Toronto did not offer the option of paying their taxes through a PTP plan. With the installation of the new tax system, a PTP plan will now be available to all taxpayers across the new City. Approximately 64,400, or 16.7 percent, of taxpayers in these municipalities are currently enrolled in a PTP plan.

To encourage taxpayers to use the monthly Pre-authorized Tax Payment plan, it is recommended that realty taxes be required to be paid in six instalments, with 1998 final taxes paid in three instalments and in 1999 and thereafter, in two billings with three instalments each (See Figure 1). This combination of tax payment options is consistent with the payment plans offered by the surrounding GTA municipalities, where interim and final realty taxes are paid in either in two or three instalments, or monthly through a PTP plan. In the former municipalities of Etobicoke, North York, Scarborough and York, the implementation of their PTP plan coincided with changes to the number of instalments available for payment. These combined changes resulted in a substantial number of taxpayers enrolling in the pre-authorized tax payment plan.

Figure 1: Recommended Instalments and Pre-authorized Tax Payments (PTP)for 1998

and Future Years

One of the future considerations for Council should be the movement towards two instalments per billing. This is the practice that the former municipality of Scarborough had and is one that other surrounding GTA municipalities have or will adopt. This can be considered as the final harmonization point. The move to two instalments would be revenue neutral to taxpayers because we would have the dates two months apart (e.g., June and August as opposed to June, July and August). Taxpayers would make a larger payment one month earlier (i.e., June), but would make the same payment one month later (i.e., August) with no July payment. The two installment method would greatly reduce the amount of manual processing (i.e., post-dated cheques for the months of March and July) which will cause financial savings and processing efficiency.

The Pre-Authorized Payment Plan Design:

The PTP plan will offer taxpayers a convenient method of paying their realty taxes, with the tax payments being spread through the year. It is anticipated that a substantial number of property owners in the City of Toronto will take advantage of the PTP plan and significant savings in postage and payment processing costs will be achieved. This has already been documented in the former municipalities who offered this plan.

Enrollment in the PTP plan for 1998 will be offered in two parts. The first part will involve PTP plan application form mailings to the taxpayers of the former municipalities of Toronto and East York in April to ensure enrollment for the final tax billing. The reason for the mailing to those two municipal sites is that Toronto previously did not offer a PTP plan and East York's plan was done by an outside service provider. The second part will involve a PTP plan application form being sent to all taxpayers as part of the final tax bill mailing in June. This will give taxpayers the option of enrolling in the plan for 1999.

Projections based on existing bank agreements in the former Area Municipalities indicate that expanding the PTP across the new City may increase bank service charges by approximately $50,000.00. However, the final amount will not be known until negotiations with banking services are completed. It is anticipated that these costs would be more than offset by savings resulting from greater efficiencies in the City's payment processing activities as well as potential increased interest income resulting from the move to three common instalment dates for the final realty tax billing.

It is proposed that taxpayers taking advantage of the PTP plan in future years would pay their taxes over eleven months with no payment being deducted from the taxpayer's bank account for the month of December. This will provide taxpayer's with a one month break that will coincide with the holiday season.

Due to the delay in receiving the assessment roll for 1998, it is proposed that the 1998 final tax bill be payable through the PTP plan over a five month period of July 1 to November 1, 1998. It is anticipated that the final realty taxes will be required to be paid in three instalments in June, July and August, starting with the 1998 final bill. However, the assessment roll for 1998 is not scheduled to be delivered until April 30, 1998. Any delay in the delivery of the assessment roll will determine whether the proposed June, July and August instalment dates are possible for 1998.

Conclusions:

It is recommended that taxpayers in the City of Toronto pay their realty taxes in six instalments by conventional payment processing. Beginning with the 1998 Final Realty Tax Bill, final taxes would be payable in three instalments (June, July and August). Starting in 1999, interim taxes would be paid in three instalments (February, March and April).

Taxpayers will also be able to use a convenient alternative to paying their taxes by instalment through the Pre-Authorized Tax Payment plan which will spread their tax payments over 11 months of the year.

Contact Name:

Ed DeSousa Audrey Birt

Phone: 397-4226 Phone: 392-7820

Fax: 392-3649 Fax: 392-0364