Your Taxes Will Not Be Forgiven

The CBRM will borrow from the province to fund a property-tax deferral program to assist residents and businesses “significantly impacted” by the COVID-19 pandemic.

The first thing you must understand about this program — and you know this is vital because it appeared on the very first slide presented to council on Monday — is that it is tax deferral NOT tax forgiveness, so don’t be getting your socialist hopes up, you commies.

As CBRM IT director and deputy CAO John MacKinnon explained during Monday’s special session of council:

It would be wonderful to be able to do something like that, but unfortunately it’s just not possible that you can make everybody whole as part of this pandemic.

Nope, absolutely no way the provincial government could just borrow $380 million at a fixed rate of 1.1% and make up property tax shortfalls for municipalities. Simply no way that could happen, not even as a COVID-19-inspired one-off. Think of the moral hazard — it would be the municipal equivalent of giving Canadians $2,000 a month (a princely $24,000 a year, the kind of riches columnists like John Iveson and politicians like Andrew Scheer can only dream of) and destroying their desire to work.

So, no tax forgiveness. Instead, CBRM residents who’ve lost their jobs due to the COVID-19 pandemic will get 30 months to pay their 2020 taxes — which means, if they’re lucky, they’ll presumably be paying those taxes along with their 2021 and 2022 taxes. If they’re unlucky, they will lose their houses to tax sales.

Council heard on Monday that the CBRM has identified a $42 million potential revenue shortfall and will look to borrow roughly that amount from the province, which, as noted, has made $380 million available to municipalities.

CBRM Mayor Cecil Clarke, 4 May 2020

CBRM Mayor Cecil Clarke, still from virtual council meeting, Monday 4 May 2020

MacKinnon explained the $42 million figure was reached by looking at the various categories of taxpayer and estimating the extent to which each would be affected by COVID-19 (for example, restaurants, hotels and tourist operators would be expected to be hard hit). MacKinnon and CFO Jennifer Campbell provided council with a more detailed explanation of how they reached their $42 million conclusion but it was not attached to the meeting agenda. I requested a copy of the information from the clerk, but was informed that it was a “draft and subject to change and approval, thus the information will not be provided until it goes to Council next week.”

(I don’t think this holds any water — the idea that councilors could be provided information during a public meeting that the public is not permitted to see strikes me as seriously squirrelly, but here we are.)

In fact, Campbell said the final amount could probably be adjusted down somewhat before the official borrowing  resolution is presented to council for approval on May 12, because it includes some properties owned by the province which would not expect to defer its taxes.

To access the money, in addition to passing the borrowing resolution, the municipality must adopt a Property Tax Financing Plan Policy. Luckily, the Association of Municipal Administrators (AMANS) which, along with the Federation of Nova Scotia Municipalities (FNSM), assisted Municipal Affairs in developing the loan program, has created just such a policy which the CBRM can localize by determining its own eligibility criteria, minimum initial payments and administration fee.


Who qualifies?

AMANs has suggested criteria municipalities could adopt for determining which residential and commercial property owners qualify for tax deferment.

I’m not going to go into detail about the suggestions because what matters will be the criteria the CBRM actually adopts and, as noted, that won’t be known until May 12 at the earliest.

But I’ll attach the presentation below so you can see what AMANS is proposing. Basically, you need to be a resident, you need to have lost your job due to service reductions caused by the State of Emergency and your property needs to have a dwelling on it — vacant land will not qualify. If you own a home and a cottage in the CBRM, you will be able to apply to defer taxes on both.

Additionally, your tax account must be in good standing with the municipality.

Commercial properties will qualify up to a maximum assessed value (the presentation notes that the City of Ottawa, which has adopted a similar program, set this upper limit at $7.5 million.) There is a second category for certain types of commercial properties –including those in the hospitality industry — for which there is no limitation on assessed value.



How will it work?

Once council has passed the borrowing resolution and tax plan policy and the province has approved it and released the money through the Nova Scotia Municipal Finance Corporation (MFC), the CBRM will begin accepting online applications for tax deferment.

District 9 Councilor George MacDonald expressed concern that processing the expected volume of applications would overwhelm CBRM staff, but Campbell said she was confident the tax department, with three dedicated employees, would have no problem handling it, especially since tax sales have been suspended for 90 days, as of March 27.

If your application is accepted, you will begin paying your 2020 tax bill after it is due — on June 30 — but the first six months of payment will be at a nominal monthly amount (AMANS suggests $25, but MacKinnon told council it could set this at $1 if it wished).

The final balance will be paid in “24 equal monthly payments,” at an interest rate equal to the 1.1% rate the municipality will pay the Municipal Finance Corporation (MFC) to borrow the $42 million, plus some percentage to cover administration costs. AMANS suggests 0.25%. (Couldn’t they at least waive the admin fees?)


Good cashflow

Darren Bruckschwaiger

Darren Bruckschwaiger

The CBRM’s current cashflow situation is apparently good and MacKinnon said the $42 million shortfall — a worst-case scenario — represents only about 35% of property taxes (the CBRM collected $108 million in taxes in 2018/2019).

Campbell said the municipality already has a $44 million low-interest (1.45%) line of credit with the province to “bridge annual operating and capital cash flow fluctuations,” but this money will be needed to finance large capital projects this year:

Because the loan program offered through the province is at a favorable and fixed annual rate, it is recommended that CBRM initiate the process of obtaining the Property Tax Financing Loan to hedge this incremental cash flow pressure.

District 10 Councilor Darren Bruckschweiger expressed the only doubts about the program, noting that the municipality hasn’t done very much to help its residents during this pandemic, compared to other levels of government, and wondering if deferring taxes, which will eventually have to be paid, is the best the CBRM can do.

He was assured by Mayor Cecil Clarke that this represents just a “first step” and that the FNSM and AMANS and Municipal Affairs were working on other mysterious forms of assistance about which we apparently cannot yet speak.

MacKinnon noted that if the borrowing resolution and deferment plan are indeed passed during the May 12 meeting, it will represent remarkable efficiency — the whole thing turned around in just two weeks.

So, the municipality has good cashflow, a desire to do something to help its residents and can get complicated things done in two weeks when it really sets its mind to it.

Duly noted.