Medicine Hat News
Penalty and discount rates on city property tax accounts are set to rise along with general interest rates.
For decades the city has tied the interest it charges on overdue tax accounts to the Bank of Canada lending rate plus five per cent.
Since that rate has been hovering at historic lows for much of the last 10 years, it’s only been adjusted downward in the recent past.
Now though, the national rate is rising, and local administrators outlined Tuesday that the Hat’s rate for 2019 should be set at 6.83 per cent, up a little more than half a percentage point, starting on Jan. 1, 2019.
“It’s the first time in years that we’ve seen an adjustment up,” commissioner Brian Mastel told the city’s corporate services committee on Tuesday. “It’s a reflection of the Bank of Canada rate.”
Similarly, the city will also increase the rate of interest it pays to account holders who overpay, or pay their taxes early. That “discount” rate would jump to 0.83 per cent, or one-third of one-point higher than at present, if council approves the change at its Dec. 3 meeting.
The result is that an immediate charge of 3.98 per cent is applied to unpaid taxes on July 1 — the day after they are due — then a further 0.57 per cent is charged each month that a balance remains.
In 2017, the last full year of tax collection, $277,200 in penalties were applied in total to overdue accounts. About $1,300 in total was paid in interest to account holders who prepaid taxes.
In 2015, the city adopted a policy to suspend the penalties on overdue amounts if account holders draw up and stick to a payment plan devised with administrators. Penalties are also only charged on the remaining balance of the principal amount in order to keep penalties from compounding.
