Mayor, councillor tussle over tax penalties
Mayor Ted Clugston and Coun. Darren Hirsch both agree cost cutting is needed to address a gaping hole in the city’s budget.
But the two men squared off in pointed debate on Monday night over a plan to raise new revenue by increasing penalties on unpaid taxes.
Hirsch said the change — to charge the average penalty of other Alberta cities — shields those who pay their taxes on time from other measures needed to deal with a $27-million budget shortfall.
Clugston, on the other hand, said that even the current rate is too high, and the city should pride itself on offering financial advantage to residents.
“This is not the rest of the province, this is the City of Medicine Hat,” declared Clugston.
“Well,” replied Hirsch, “We’re not in Kansas anymore.”
The measure would raise the annual penalty rate on money owed for back taxes rise from the current 7 per cent to 14 per cent in 2021. It will go back to committee for more discussions toward a possible timeline of staged increases.
The issue surrounds a move by administrators to find new revenue sources to help offset the need to raise taxes to replace natural gas dividends in the city’s operational budget.
When local rates are substantially less than prevailing rates, say administrators, the difference is made up by the general tax base.
The change would raise about $400,000 per year, equal to about half a per cent in increased taxes, said Hirsch, and that revenue and more will have to be found in budget talks.
“This sort of issue will come back before this council again and again,” he told reporters. “It’s one of many asks that were made of administration to look at expense control, and revenue that ... we need to look at before going to the taxpayer (for an increase).”
Clugston said that the city’s current rate could be seen as too high considering tax arrears are almost always recovered by the city.
“It’s a perfectly good argument,” Clugston later said of Hirsch’s position.
“In this case, to me, this only affects a small portion of the population that is at their most vulnerable — it’s a burden at 14 per cent,” he said.
Other councillors said they also felt the timing was bad to raise penalties on unpaid property taxes, though debate and responses from administrators pointed to current COVID taxrelief programs.
As well, residents also avoid penalties once they work out a payment plan with city collections office.
And, they argue, the low rate puts tax payments behind other higher-interest debts in some residents’ financial planning.
“We’re certainly not trying to be a big bad banker, trying to take advantage of people,” said CAO Bob Nicolay. “(A low rate) feels benevolent, but it’s the same discount for multi-millionaires as it is for people who really are in serious financial trouble.”
Four years ago the city began a program to replace $23 million in the budget previously made up of natural gas dividends. That shrunk to $16 million per year last year, but with added pandemic costs and $8 million in reserve spending for COVID relief this year, the gap could grow to $27 million.
It is the first in several revisions to city fees and charges that aim to set them at the average of comparable cities in the province.
Red Deer, Lethbridge, Edmonton and Calgary were considered in determining the average.
A new schedule of fee increases for services and permits in the planning department will be introduced at committee meeting on Wednesday.