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Municipalities could face cash flow challenges as pandemic slows tax payments

Some municipalities already extending municipal tax payment deadlines

Municipal number crunchers are scrambling to react to a pandemic that threatens to throw a monkey wrench into many carefully laid budget plans.

To ease the financial burden on residents feeling the brunt of the pandemic, some municipalities are extending tax deadlines or eliminating penalties for late taxes, among other measures.

Red Deer County director of corporate services Heather Surkan is combing through the books and talking with provincial financial officers to try to anticipate how COVID-19 and the government’s response will impact how the municipality goes about the business of collecting and spending tax dollars.

The province has already announced a planned 3.4 per cent increase in education taxes has been rolled back. Also, only 50 per cent of education taxes will be due on Oct. 1, and the rest will be deferred to future years.

While easing an immediate financial obligation, the changes can be difficult to implement immediately.

“It’s complicated and it doesn’t work well with our software systems,” she said. “Regardless, we’re trying to figure out what our municipal taxes will be across the board.”

Some municipalities have pushed back the date municipal taxes are due. In Sylvan Lake, taxpayers have until the end of the year to pay their taxes; others have picked the end of October.

Surkan said she is working on a recommendation on what to do about the county’s June 30 deadline that she will be taking to council next month.

For now, the county is keeping track of all those who have asked for extensions and provided information on how to stop automatic payments.

In the meantime, Red Deer County — like all municipalities — has a budget built on assumptions about how much in tax revenue is going to come in, and when it is likely to arrive. These are assumptions that may prove out of whack, depending on how the pandemic unfolds in central Alberta.

“So cash flow is a challenge, and we’ve got a huge budget this year,” said Surkan, referring to $54.3 million operating and $32.3 million capital budgets.

“I’ve looked at the cash flow situation. We do have some investments and reserves we can pull from to help bridge. We’ve also got our overdraft line of credit.

“We could still maintain our program. That’s what the expectation is right now.”

The province has already announced some changes to ease financial pressure. Residential, farm and small commercial customers can defer electricity and natural gas payments for 90 days, regardless of the service provider.

Small, medium and large private sector employers can also defer Workers’ Compensation Board premiums until 2021. The government will cover half of the 2020 premium for small- and medium-sized businesses, saving them $350 million.

City of Red Deer residents can defer paying their water, sewer and garbage pickup bills by 90 days without penalty as of March 19 to help ease their financial burden.

At that point, a payment plan can be worked out to avoid being dinged with a triple bill for one month, said Karen Mann, city emergency management co-ordinator.

Those who can pay are encouraged to continue though, she said.

So far, municipal tax bills are still due by June 30, but that is under review.

“It is being considered from all angles right now and additional information will be forthcoming.”

Like the other municipalities, Mann emphasized that decisions related to the health and safety of staff is the first consideration and financial impacts come later.

“That doesn’t mean that we aren’t considering the financial implications, and we’re looking at all of the different impacts and how we can navigate those different financial impacts as we move forward.”

The Town of Sylvan Lake has responded to COVID-19-related concerns by extending the tax deadline to the end of the year and dropping late payment charges. Utility payments can be deferred until Aug. 31 with no penalty.

Town communications officer Joanne Gaudet said their financial people are talking to their provincial counterparts to get a read on what is coming.

“We’re really not speculating a whole lot, given the current environment. It’s just too unpredictable,” said Gaudet.

“We don’t even know what supports might be available at some point from the province or the federal government.

“Really, we’re just focusing on the health and safety of residents,” she said.

“We do have staff who are reviewing current and future projects to determine whether or not we can defer them or alter them in some way. But right now, we don’t have that list in front of us.”



pcowley@reddeeradvocate.com

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