Coun. Darren Hirsch providing a spirited defence of a tax penalty increase during Monday's council meeting. (CHAT News photo)

By Alex McCuaig

Tax penalties

Tax penalty bylaw sent back to drawing board as doubling rate too much to stomach for council

Nov 2, 2020 | 9:56 PM

MEDICINE HAT, AB – A bylaw that would see the city’s municipal tax penalties reach parity with other jurisdictions landed with a thud Monday night as what some councillors and staff called an “invisible subsidy” was sent back to committee.

“Explain to me where is the subsidy,” asked Mayor Ted Clugston regarding the proposed bylaw which would see tax penalties double from seven to 14 per cent.

The proposed bylaw which came forward from last week’s Corporate Services Committee would have seen Medicine Hat’s penalties brought in line with the average of those found in Lethbridge, Red Deer, Calgary and Edmonton.

Coun. Darren Hirsch implored his council colleagues to accept the recommendation to increase the penalties as the city is chasing a “financially fit bogey” in the form of a $27 million operating deficit.

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Hirsch added that the city needs to find those funds to plug that gap and, “if not this then what?”

The bylaw was estimated to bring in a little more than $400,000.

However, Clugston said the city always gets its money from property taxes whether it’s from the home owner, from the banks in cases of foreclosure or through auction in the cases of property forfeiture for lack of tax payments.

“Seven per cent is already too high for me because it’s secured credit,” said Clugston, highlighting the city borrows at a rate of two per cent interest and even at the current rate it benefits from a five per cent differential.

City CAO Bob Nicolay told councillors the “artificial subsidy” is indiscriminate and is just as likely to benefit a multi-millionaire than a taxpayer of far more modest means and the option to slowly increase the penalty over time has been discussed before but, “it never gets done.”

But prior to councillors getting to first reading of the bylaw, it was sent back to the Corporate Services Committee for reconsideration by a unanimous vote.

However, the bylaw for raising of the penalty rate for utility arrears was passed.

That bylaw will see penalties rise from two per cent to 2.56 per cent and raise an estimated additional $96,000 for city coffers.