ERIN – As the cost of COVID-19 emergency measures becomes clear in monthly financial statements, Erin councillors are concerned about finding a balance between meeting the town’s financial obligations and offering relief to residents.
Like other municipalities, Erin announced to its residents in mid-March that it would waive penalties on late taxes for 60 days due to the sudden COVID-19 emergency measures.
At the May 5 council meeting, council passed an amendment to the tax bylaw that’s essentially retroactive – that “penalties on 2020 unpaid taxes not be imposed on April 1, 2020 and May 1, 2020.”
Councillors became concerned when they realized taxpayers already in arrears before emergency measures began would reap the same 60-day tax penalty relief.
“I had a problem with deferring the first time,” said councillor Rob Smith.
“We were only two weeks out [from the first tax instalment]. They should have had the money.”
Councillors had a broad discussion about the life situations of their residents, and why they might opt to put off paying their taxes.
“When you’re looking at a long blank period, I understand why people, even if they had the money, why they wouldn’t pay it,” said councillor John Brennan.
“My question is, is this enough? Is a two-month deferral enough?”
Mayor Allan Alls pointed out the town made the move to assist residents before federal and provincial income programs were in place and they might be in a better position to pay the next tax instalment.
Later in the meeting Smith softened his stance:
“My question is what will happen June 1? And my point is that we will probably need to revisit this. I believe the second wave will be harder than the first.”
Finance director Ursula D’Angelo said default on the March 31 payment “almost doubled from prior years.”
She said for the May 29 tax deadline, 38 per cent of ratepayers are enrolled in automatic payment plans, “but that leaves a question mark on 62 per cent.
“Will they pay on time? Will they pay online? It’s difficult to predict.”
D’Angelo said staff members in the tax office are working with residents who call.
“We encourage them to go monthly,” she said. “Even if they pay less, just regular payments will help.”
Interest is charged on the principle owing, she said.
D’Angelo explained the cost to the town for waiving penalties for April and May is approximately $98,000 and, going forward, every month that penalties and interest are waived, the town will lose about $49,000 in revenues, increasing the forecasted deficit.
In anticipation of cash flow issues, municipalities have the option of deferring what they owe to local school boards until December, but then two payments would be due.
D’Angelo said Wellington County is “open to us paying proportionally depending on how much we collect.”
“If we collect 70 per cent, that’s what we’ll pay,” Alls said emphatically. “If we take a penalty, everybody has to take a penalty.”
D’Angelo said she won’t be able to report the financial impact of the May 29 tax instalment until the June council meeting. That report will also include ways the town has reduced expenses.
However, she did present a financial forecast based on two scenarios – and they both point to deficits.
Scenario 1 has a partial opening of public spaces on June 1 and 80% public opening on Sept. 1. Scenario 2 has an 80% public opening on Sept. 1 and nothing open over the summer.
Scenario 1 indicates a $27,000 deficit; in Scenario 2 it’s $42,000.
Robins noted that according to the report, “there is a $1.2-million cash flow impact on our revenues. To me, this is an indication of risk.”
The biggest concern I have with this council and its knowledge of economics is highlighted by the statement:
“D’Angelo explained the cost to the town for waiving penalties for April and May is approximately $98,000 and, going forward, every month that penalties and interest are waived, the town will lose about $49,000 in revenues, increasing the forecasted deficit.”
They are talking about revenue due to penalties and interest charges. These should not have been (and should never be) planned for in a budget. Waiving the penalties and interest charges HAS NO IMPACT ON THE BUDGET. Revenue from such sources should be seen as a ‘bonus’ (for lack of a better word) that can be put aside for a rainy day. Well today it is pouring!
Waive these fees and save families and people’s lives that are tragically affected by this pandemic. It will not hurt the ‘town’ and will greatly help a lot of people.
Ron F.