Tax Sale Policy Well Conceived??
Ron Bolin — September, 29, 2010
Darrell Bellart’s story in today’s Daily News: “Tax sale policy well conceived” fails to make its case. While embroidering the concept, the fundamental nature of the obligations which the city has taken on is absent. For example:
- Were the houses we have purchased owner occupied, rented or vacant and as they are all now, in effect, rental properties, who gets the rent for these city owned houses?
- Are they encumbered by mortgages or other pledges and who pays those mortgages or pledges now?
- Who pays the insurance on these properties?
- Is there a fixed term for which the city will carry these properties before taking possession, i.e. the same as the one year moratorium currently in effect? Or does the city have longer range plans?
- The province has a number of tax deferral programs at very low rates, i.e. less than one can make on a secure bank investment or savings bond. Why aren’t they used by the owners and if they do not use them are they likely to ever be able to repay the back taxes and fees to the city?
- Does this move by the city, as the tax deferral programs seem to do, make money for the deferrer as the final repayments are below the rate of return on the money saved?
- Is this a method by which the city can relatively inexpensively acquire residential properties which may then be used for public housing?
I hasten to add that at this time I can neither support nor oppose this new strategy which could, depending on circumstances and financial details make a great deal –or very little– sense, as it has not been sufficiently exposed. I hope I may be pardoned for being somewhat skeptical of Council’s business acumen in the light of murky and expensive deals with Mr. Berry, with our conference centre “partners” and our constantly increasing rate of property taxation. If these issues have been addressed and answered, Mr. Bellaart’s article did not present them. Perhaps he could in a future piece.
Posts and Comments on Nanaimo Governance 
I haven’t yet pondered the points you make here Ron enough to offer any useful comments but it does occur to me that it’s time to come down on one side or the other of the Provincial Government’s Property Tax Deferment Program. The financing is at prime, there is a registration fee, it’s secured on title by property and it’s all paid back by the estate or after the sale of the property.
It is aimed at seniors and families with children under 18. It has the element that I think is key to the relative success of Canadian social policies — universality. The serfs don’t have to go hat in hand to a bureaucrat to pass a means test. As in other programs this runs the risk of some who don’t need it using it — as is also the case with Medicare, EI, welfare (is it no longer pc to say welfare?)etc.
It’s a government’s right — and obligation — to find effective ways to use tax policy to achieve social goals. I think this merits support — at least it merits being cut a little slack. Otherwise it’s more “no matter what we try to do the naysayers are agin so we don’t listen to people we just go ahead and do what we think is best.” Short of identifying the underlying fault here — and it may well exist — I think this deserves your support. More on your other points later…
To qualify for the deferment the owners in default would have to be 55 or more years old; live in the home; hold at least 15% equity in it; or have children under the age of 18. I think all taxes and penalties would have to be paid in full as well.
Also not all banks will allow this claim on title that they hold a primary mortgage on. They can veto the application even if the province approves it.
This from the City’s website:
Financial Hardship Property Tax Deferment Program
This is the last year for this deferment program. . To qualify for the program you:
are a Canadian Citizen or permanent resident of BC for at least one year;
are currently experiencing financial hardship due to economic conditions;
must have & maintain a minimum equity of 15 percent of the current BC Assessment value on your home;
must have a current fire insurance policy on your home for an amount not less than the current BC assessment value, and;
applying on a home in which you live.
Before applying for tax deferment you must:
pay all penalties, interest, previous years’ property taxes, user fees and utility charges
complete any title ownership changes, such as adding or removing owners, subdivision or refinancing.
Deferral of your 2010 taxes will not automatically result in the deferral of your 2011 taxes. The Province charges simple interest on your deferment account and is based on the bank prime rate. There are no administration fees on the hardship deferment program.
But to your more central point: the reporter’s embroidery. Reading it online, there’s nothing to indicate it’s an opinion piece not a news story. It may well be that this is at base an enlightened policy by our City managers and Council. But I cringe when the local journalists do City Hall’s pr and spin at the expense of their arm’s length objective critical role. They should be asking the sort of questions asked in this post.
Frank: Despite the fact that my piece did not deal directly with the provincial tax deferral schemes, yet will I try to present again my view on same. I’ll try to hit on the points you made in all three of your comments in this one response, so bear with me.
In the provincial property tax deferral programs, what you pay depends on the type of tax deferral program in which you are involved. The basic 55+ plan sets its rate at 2% under prime and is now at 1/4 of 1%, moving to 1/2 of 1% on October 1. The interest charges for other two plans, one for persons with disabilities and the other for families with children under 18 are both charged out at 2.5%.
I’ll grant that these plans may help some people. What I am struggling with is the extent to which these plans, and in particular the 55+ plan which has an interest rate which appears that it must be highly subsidized, is open to millionaires as well as those who must live at or even below the poverty line. I do not mind helping those who are worse off than I. I heartily protest subsidizing those who are better off than I. If there is something wrong with my logic when I calculate that I can borrow money at from .25 to .5 of a percent and invest it in very secure government savings bonds at 2%, please let me know. In short, I prefer that government subsidies should be out in the open and recognized as such. I do not resent assistance to those in need, but need needs to be established, not taken for granted. It is the wealthy that most often know how to make the system work for them.
We now come to the point of my piece, the city’s purchase of properties which, under provincial legislation, were up for tax sale after failure to pay property taxes for two years. This is a new policy of the city and, as I noted, I do not have, nor was given, the information necessary to decide whether this is going to help families, to help the city, or both. All I ask is “Show us the money!” I have been gulled before and I do not appreciate it.
As for embroidery, well if you take a blank program and then weave all kinds of assertions about it and no hard facts, then I guess that constitutes embroidery. How much did we spend? How much will our operating costs be? What is our plan at the end of the year when the sale, if not repaid, becomes permanent? From what part of our budget did the fund come? etc. We deserve better journalism. Who, Where, What, When, Why and in such cases How Much…
Upon refection I see that I missed directly commenting on the issue which you raised concerning universality. I believe that this banner, while often raised high and vigourously waved, is highly misleading. First, one does need to go to a bureaucrat to get access to these programs, one does need to follow bureaucratic procedures to use them, and they have limits which are set by bureaucrats, rightly or wrongly, to try to maintain solvency and fairness in the system.
People who are not ill are not treated by our medical system, people who are not unemployed do not receive EI, and if one cannot show indigence you will not get welfare. But if you are over 55 you are eligible for property tax loans at subsidy level rates without further qualification.