Significant increases to City of Powell River late charge penalties would be an untenable proposition for Mayor Dave Formosa.
At the Thursday, June 25, finance committee meeting, council reviewed several policies relating to financial services in the city. Shehzad Somji, chief financial officer, said one policy that is being proposed for amendment is the one pertaining to accounts receivable. The suggested amendment was for penalties on late charges and late fees.
“We want to make it so there is an incentive to pay on time,” Somji said. “The interest rate that was set seemed low so we bumped it up more equivalent to your credit card statement, up to 24 per cent. That is the recommendation.”
Formosa said he very much understands the fact the city is not a bank. However, he believes penalties by the provincial government for late municipal taxes are set at 10 per cent, which is “fairly stiff in today’s world.”
Formosa said he suggests the city stick with that rate for people who are in arrears, rather than charging the proposed 24 per cent.
Somji said that municipal property tax is separate and the accounts receivable policy does not apply to city property tax. He said it would apply to people who are late on their harbour charges, lease payments and the like.
Formosa said the 10 per cent penalty on delinquent taxes is a heavy hit in today’s world, where mortgages can be negotiated at three per cent. He said he did not know what kind of interest utilities charge on late accounts but credit card fees are typically high.
Somji said the city currently charges 12 per cent interest on receivables. He said the increase was to provide an incentive to pay on time because he did not want city staff to be chasing people down to collect, or to hand off delinquent accounts to collection agencies, where the city would be paid 50 cents on the dollar.
“At 12 per cent I don’t think that’s an incentive,” said Somji. “These are small amounts we are talking about, like $300. You are talking about a $36-penalty per year for being late. At 24 per cent, people will look at that and say I don’t want to pay 24 per cent on $300. I was okay with 12 but not 24.”
Somji said utility companies are charging upwards of that figure.
Councillor Maggie Hathaway said she believed the city has an obligation on behalf of the citizens of Powell River to collect debts that are owed. She said it is not council’s money; it is the people’s, so she agrees the city should look at mechanisms that will result in prompt payment.
Councillor CaroleAnn Leishman asked if this penalty would apply to non-profit organizations. Somji said most non-profits receive grants in aid so it wouldn’t apply.
He said most of the city’s late charges are connected to harbour payments.
Formosa said if the city had a policy that allows for 12 per cent interest and it hasn’t been used, the city should have been making use of it.
“To say we have a policy of 12 per cent and it’s not working so we have to raise it to 24 per cent, well, we weren’t even using it and didn’t even try, so it sounds like you’re getting what you want, but I just have a hard time charging the same rate as credit cards.”
Further to the policy review, Formosa asked about people who are paying for moorage who also have to pay for parking at the wharf. He said he hears complaints from the public about the matter. He wondered if this is common practice in other communities.
“I think we used to allow them free parking but now we charge them for parking,” he said.
Somji said this would be looked at when the policy comes up for review. He did not know the policies in other municipalities. Formosa said he’d like a discussion on that matter at council. He said he thought the revenue for the city was small.
Mac Fraser, the city’s chief administrative officer, said that generally, paid municipal parking is not intended to make money. It is intended to provide incentive not to park for a long time.
“That’s why you’ll often find two-hour parking because most shoppers can do what they need to do in two hours and move on,” he said.
“We are victims of our own success,” he added. “If everyone who has a slip paid for in the North Harbour was granted parking, the parking lot would be more than full. If we had 500 parking spaces, great, but we have more slips than we have parking spaces.”
Any increases reviewed at the finance committee level have to be deliberated by city council before such policies become finalized.
