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HomeMy WebLinkAboutFCS-14-096 - Updated Collections Policy Staff Report rTC.�r R finance and Corporate Services Department www.kitchener.ca REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: June 23, 2014 SUBMITTED BY: Joyce Evans, Director of Revenue and Deputy Treasurer, 519-741- 2200 x7895 PREPARED BY: Saleh Saleh, Supervisor of Collections and Payment Processing, 519- 741-2200 x7346 WARD(S) INVOLVED: ALL DATE OF REPORT: April 24, 2014 REPORT NO.: FCS-14-096 SUBJECT: Updated collections policy RECOMMENDATION: That revised collection policy 1-517 Collections-Utility and Miscellaneous Receivable and new collection policy 1-518 Collection-Property Taxes be approved. BACKGROUND: The purpose of a collections policy is to encourage strong financial management practices and limit the amount of uncollectable accounts. A collections policy can help a municipality collect its revenues fairly and in a timely fashion. Efficient and effective collection of receivables will ensure the City has greater control over its cash flow and liquidity. A collections policy provides for consistent guidelines that will ensure customers are dealt with in a fair, transparent and equitable manner within the framework of the policy. REPORT: The current City of Kitchener utility collections policy has not been updated since September 2004. The City also does not have written policy to deal with miscellaneous receivables or property taxes. This report recommends the attached policies 1-517 and 1-518 be approved. The following two sections of this report highlight some of the key features of each policy recommended for approval. 1-517: Utility and Miscellaneous Receivable Policy • The disconnection process (steps) is now outlined in the revised collection policy. This further enhances transparency with respect to the collection process and is good practice as it is also encouraged by the Ontario Energy Board to be disclosed as part of our customer service practices. 3 - 1 • Disconnection of utility services for property owners is also outlined in the revised policy. If a property owner is in arrears on both utilities and taxes for a period of two years, the collection process for utility arrears will follow the same process as active tenants. This helps prevent property owners from incurring large arrears on their property tax accounts as presently utility arrears are added to taxes indefinitely. • The revised policy recommends that the interest rate paid on deposits be equal to the Prime rate less 2% (currently the rate is the Prime rate less 1%). This is consistent with the rate currently being paid by Kitchener Wilmot Hydro on utility deposits. • A section has been added to outline the process for the collection of miscellaneous receivables such as Fire Alarm Monitoring, Parking and Cemetery receivables. • It is being recommended that the write-off reports to Council be presented at a summary level twice a year. This is in compliance with the Municipal Freedom of Information and Protection of Privacy Act. For example, information such as customer names and account numbers will not be shown. It is expected that with the implementation of a new billing system (SAP) over the next two years, there may be adjustments required to collection policy I-517. Staff will bring forward any changes that are required to the collection policy once the new billing system is fully implemented. I-518: Property Tax Collection Policy • The City previously did not have a property tax collection policy. This policy is new and is based on the processes outlined in the Municipal Act. • The intent of this policy is to provide a basis for actions by staff and equal treatment for all property owners. • The policy outlines in detail the collection process for overdue property tax arrears. ALIGNMENT WITH CITY OF KITCHENER STRATEGIC PLAN: Foundation: Effective and Efficient Government Goal: Financial Management Strategic Direction: Initiate corporate wide customer service standards and policies to ensure consistent levels of service in all departments and locations. FINANCIAL IMPLICATIONS: Collection policies improve the collection process and help reduce arrears and write-offs of customer accounts. Efficient and effective collection of receivables will ensure the City has greater control over its cash flow and liquidity. CONCLUSION: Council approved collection policies are good practice for the Customer, Staff and Council. Written policies and procedures applied consistently encourage customers to pay in a timely fashion. Further, policies ensure that customers are treated fairly and 3 - 2 equitably while also providing staff with guidance. ACKNOWLEDGED BY: D. Chapman, Deputy CAO, Finance and Corporate Services & City Treasurer 3 - 3 COUNCIL POLICY RESOLUTION POLICY NUMBER: 1-517 DATE: JUNE 23, 2014 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE PURPOSE The purpose of the utility collections policy is to document and improve on existing collection practices as it relates to collection of utility and miscellaneous receivables. DEFINITIONS "Good Payment History"- Where a residential customer has been serviced by an electricity or gas distributor in North America for twelve consecutive months (within the last 24 months) and has not received any disconnection notice, late payment charge and has not had more than one pre-authorized payment or cheque returned due to insufficient funds. OBJECTIVES 1. Ensure the timely collection of utility receivables. 2. Establish processes to collect utility and miscellaneous receivables. GOVERNING PRINCIPLES 1. The procedure of collecting utilities and miscellaneous receivables should be applied universally, uniformly and consistently. 2. The City Treasurer may exercise discretion in furthering the objectives of this policy. 3. To clearly articulate the guidelines staff will follow for collections of utility and miscellaneous receivables. 4. At all times, the City should take reasonable care to respect and protect the interest of the customer as well as that of the City, including the rights to privacy and confidentiality. 3 - 4 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE CONTRACT FOR SERVICE Tenants requesting service with Kitchener Utilities (KU) will be required to: a) Sign a completed Tenant Contract. When signed, the Tenant Contract forms a legal and binding contract that the customer and KU have accepted and mutually agreed to the terms of the Agreement. b) Present one piece of appropriate picture identification or two pieces of government identification. c) If the property has multiple units, for any utility service where there is only one meter or one gate box, the utilities will remain in the owner's name. SECURITY DEPOSITS Residential and commercial tenants will be required to pay a Security Deposit to KU when applying for service unless the customer is able to provide confirmation of a "Good Payment History". Security Deposits may be required from any customer who does not maintain a "Good Payment History" for the required time period. Types of Security i. Security deposits may be in the form of cash or cheque. A letter of credit will not be an acceptable form of security deposit. ii. The tenant deposit will be charged to the customer's account at the time of the application. All normal billing rules apply to tenant deposits added to a customer account. Administration and Refund of Security Deposits i. All amounts held on deposit will be applied to the final bill on close of the customer account. ii. For existing customers where a Security Deposit has not been collected, or a customer who previously was granted a security deposit waiver, a Security Deposit will be required if the customer has not maintained a "Good Payment History" for the required time period. iii. A customer failing to provide the appropriate security deposit shall be deemed to be in the position as a customer in arrears and subject to collection procedures including service disconnection if the deposit remains unpaid past the due date. KITCHENER Page 2 of 9 JUNE 2014 3 - 5 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE iv. Deposits may be requested and may be adjusted to reflect changes in rates, actual usage, or if a "Good Payment History" was not maintained Tenant Deposit Amounts i. Residential Customers - Natural Gas • Minimum amount as specified on the Fees and Charges Schedule ii. Residential Customers - Water and Sewer • Minimum amount as specified on the Fees and Charges Schedule iii. Commercial Customers - Natural Gas • Minimum amount as specified on the Fees and Charges Schedule, or • Three times the monthly average of the previous twelve months consumption history • In the absence of consumption history, $200.00 per 1,000 sq. ft. of space rounded to the highest $25.00. iv. Commercial Customers - Water and Sewer • Minimum amount as specified on the Fees and Charges Schedule, or • Three times the monthly average of the previous twelve months consumption history. • In the absence of consumption history, Revenue staff will determine the deposit amount based on type of business. V. A commercial deposit amount may be reviewed, upon request, at any time if there is sufficient history to support a change. Waiving of Tenant Deposits i. The tenant deposit may be waived for tenants signing up for the pre- authorized payment plan. KU reserves the right to charge the deposit to the account if the pre-authorized plan is revoked by KU due to unacceptable payment history. ii. The tenant deposit may be waived for tenants providing Good Payment History. KITCHENER Page 3 of 9 JUNE 2014 3 - 6 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE Interest on Security Deposits Interest on cash security deposits is paid annually commencing on receipt of any paid deposit amount and will be credited to the customer's utility account. The interest rate paid on cash security deposits shall be at the Prime Business Rate as published on the Bank of Canada website less 2%, updated quarterly. Security Deposit Exemptions i. The following customers do not require a security deposit: • Banks and Credit Unions • Trust Companies (Trust Company Real Estate offices are not exempt) • Government Agencies including City, Region, Provincial and Federal offices including Liquor Stores. • Customers who own their own property. ii. A deposit is not required if a customer provides a letter of reference from a gas or electric distributor in Canada confirming a "Good Payment History" for the relevant time period. If an existing KU customer signs up at a different address and has "Good Payment History" with KU previously, the existing deposit on file may be refunded or transferred to the new account. iii. The Director of Revenue or a Revenue Supervisor may in special circumstances alter the deposit amount or payment arrangements of the Security Deposit. PAYMENT OF BILLS i. A bill is due when rendered by KU. ii. A customer may pay the bill without the application of a late payment charge on amounts paid on or before the seventeenth day after the bill is issued. iii. Payments will be deemed to be made on the date payment is received by KU. iv. A payment will be applied to any outstanding deposits and to any outstanding arrears before being applied to the current billing, unless KU has made special considerations. V. Unless otherwise specified, customers may tender post-dated cheques in payment of their utilities account. KITCHENER Page 4 of 9 JUNE 2014 3 - 7 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE vi. Notification of all past due amounts will be included on the following month's billing. vii. In the case of retroactive billing, payment arrangements for the back billed amount may be approved by a Customer Service Representative or Revenue Supervisor depending on the period back billed and the amount of the retroactive billing. LATE PAYMENT CHARGES i. If the bill is unpaid on the seventeenth day, a one-time "late" payment charge of two percent will be applied. ii. Late payment charges of up to $20.00 may be waived due to extenuating circumstances at the discretion of authorized Revenue staff. Late payment charges exceeding $20.00 may be waived due to extenuating circumstances at the discretion of a Revenue Supervisor. BILLING ERRORS i. Where billing errors have resulted in over-billing, the customer will be credited with the amount erroneously paid for a period not exceeding six years. ii. Where billing errors have resulted in under-billing, the customer may be charged for a period not exceeding: • one year or • six years in cases such as tampering or fraud iii. Where a customer is responsible for the under-billing, the utility may require payment of the full amount of the under-billing on the next bill or on a separate bill. UNAUTHORIZED CONSUMPTION i. Where meter tampering or theft of service has been detected, the customer may be charged for consumption based on previous history, or actual usage, or similar use properties for the applicable period. ii. In addition to the consumption charges outlined under billing errors above, an administration fee as outlined in the Fees and Charges Schedule will applied to the account where meter tampering or theft of service has been detected. TERMINATION NOTICES KITCHENER Page 5 of 9 JUNE 2014 3 - 8 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE A. Active Tenants i. Natural gas and water customer accounts with a past due amount greater than the parameters set by the Revenue Division, will be reviewed by a Collections Officer. ii. Natural gas and water customers will receive a termination notice in writing when the Collections Officer's assessment warrants this action. From November 1 to March 31 on tenant occupied properties, property owners will receive written notification of the pending service disconnection. iii. The customer will receive eight (8) calendar days' notice before termination of a service for non-payment. iv. Prior to disconnection, a representative of KU will make a reasonable effort to establish direct contact with the customer. V. If suitable payment arrangements have been made with Collections, further collection activity for that customer's billing period will be suppressed. vi. A 24 hour notice of disconnection will be delivered in person by a collection officer before service is disconnected. vii. Prior to actual termination, the customer's account is reviewed and approved for termination by a Collections Officer. viii. KU reserves the right to disconnect services as an alternative collection method. ix. Tenants with a service disconnected for a period greater than one year may be forwarded to a third party collection agency. B. Final Billed Tenants i. Collection letters will be sent to all tenants for accounts with a final billed arrears balance. All reasonable attempts to collect the arrears will be made. If the tenant has an active gas and/or water account, all unpaid arrears balances will be transferred to the active account. ii. If the final billed tenant does not have an active account, the arrears will be written off as an uncollectible debt following the bad debt write- off procedures as outlined in "Bad Debt Write off Procedures" section. C. Active Owners i. Natural gas, water and/or rental water heater customers' accounts with a past due balance greater than the parameters set by the Revenue Division, will be reviewed by a Collections Officer. ii. Natural gas water and /or rental water heater customers will receive a collections notice in writing when the Collections Officers assessment warrants this action. KITCHENER Page 6 of 9 JUNE 2014 3 - 9 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE iii. The customer will receive eight (8) calendar days' notice before transferring the debt to the property tax account. iv. If suitable arrangements for payment have been made with Collections, all further collection activity for that customer's billing period will be suppressed. V. Prior to actual transfer to taxes, the customer's account is reviewed and approved for transfer to taxes by a Collections Officer. vi. KU reserves the right to disconnect services as an alternative collection method. vii. The Collections Officer will send a letter of advisement to the Mortgage Company of the transfer of utility arrears to taxes when property taxes are paid by the Mortgage Company. viii. If a property owner is in arrears on both utilities and taxes for a period of two years, the collection process for utility arrears will follow the same process as Active Tenants. ix. In situations where property taxes are only being paid and not the utilities, the collection process for utility arrears will follow the same process as Active Tenants. D. Final Billed Owners i. A collection letter will be sent to a property owner for accounts with a final billed arrears balance. ii. All reasonable attempts to collect the arrears will be made. iii. If the customer still owns the property and taxes are paid by a Mortgage Company, a notice will be sent by a Collections Officer to advise the Mortgage Company of the transfer of utility arrears to taxes. RECONNECTION OF SERVICES i. Payment in cash, certified cheque, money order or debit is required for the total arrears due before the utility service is restored. ii. Disconnected meters will be reconnected after regular office hours as follows: • November 1 - March 31 Gas Service only will be reconnected without Revenue Division authorization. The customer is advised to contact a Collections Officer by 10:00 a.m. the next business day to arrange for payment. Customers who do not meet this requirement will be disconnected the same day. No further after-hours reconnection will be permitted in this instance. • April 1 - October 31 KITCHENER Page 7 of 9 JUNE 2014 3 - 10 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE Gas or Water Services will not be reconnected after hours without Revenue Division authorization. MISCELLANEOUS CHARGES i. Disconnection Fee - A disconnection fee as outlined in the Fees and Charges Schedule will be applicable for each disconnection. ii. Notice Delivery Fee- A notice delivery fee as outlined in the Fees and Charges Schedule will be applicable for each notice delivery. iii. Meter Removal due to Non-Payment - A meter removal fee as per the Fees and Charges schedule will be charged for each meter removal. iv. Utility Administration Fee- All customers who initiate service with Kitchener Utilities, or who change the location for service, shall pay a Utility Administration Fee for each transaction as outlined in the Fees and Charges Schedule. V. Returned Cheque Charge (or NSF Charge) - If a cheque is returned by the customer's financial institution as Not Sufficient Funds (NSF), the following will apply: o An administration fee as set out in the Fees and Charges Schedule will be charged to the customer's account. • A letter will be issued to the customer advising of the returned cheque. The payment will be requested in cash, debit, money order or certified cheque. • When the cheque returned by the customer's financial institution was made on a Disconnect Notice for a tenant, a subsequent Disconnect Notice will be issued to the tenant. (depending upon the time of year, the property owner may be sent a Notice of Pending Disconnect). MISCELLANEOUS RECEIVABLES i. Miscellaneous Receivables include billing for services other than property taxes or Utilities. Examples of these services include Direct Detect for Fire Alarm Monitoring, Parking and Cemetery sales. ii. Friendly reminder notices will be sent out to all accounts with amounts in excess of one month overdue. iii. For arrears greater than 60 or 90 days, a collections letter will be sent out advising the customer that the invoice is past due and a payment is required in full. iv. Accounts with arrears that are deemed as uncollectable by Collections Staff will be forwarded to a third party collection agency. KITCHENER Page 8 of 9 JUNE 2014 3 - 11 POLICY NUMBER: 1-517 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- UTILITY AND MISCELLANEOUS RECEIVABLE BAD DEBT WRITE-OFF PROCEDURES i. Staff will write-off uncollectable accounts for both Utilities and Miscellaneous receivables two times a year. ii. A summary of write-offs by account category will be provided to Council two times a year. iii. An electronic file is transferred to an outside collection agency containing all eligible accounts two times a year. iv. Uncollectable Utility and Miscellaneous receivable accounts will be written off to the Allowance of doubtful Utility and Miscellaneous accounts respectively. V. If a customer with a bad debt write-off subsequently opens a new account in the KU service area, the Collections Officer and the collection agency will work in conjunction to collect the bad debt, including termination of service at the new location. KITCHENER Page 9 of 9 JUNE 2014 3 - 12 COUNCIL POLICY RESOLUTION POLICY NUMBER: 1-518 DATE: JUNE 23, 2014 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES PURPOSE To establish efficient and effective City of Kitchener procedures and processes for property tax billing and collection and to ensure municipal tax revenues are collected in a timely and effective manner. SCOPE: The Municipal Act serving as the base, this policy provides a guide to staff on aspects of billing and collection of property tax as it applies to the City of Kitchener. OBJECTIVES 1. Establish processes for billing for property tax 11. Ensure the timely collection of property tax 111. Establish processes to collect property tax IV. Establish processes to collect property tax arrears GOVERNING PRINCIPLES 1. The procedure of collecting taxes should be applied universally, uniformly and consistently. 11. The City Treasurer may exercise discretion in furthering the objectives of this policy. 111. The City Treasurer may take all means necessary provided in the Municipal Act, 2001 to balance taxpayers' interests with that of the City. In so doing, KITCHENER Page 1 of 10 JUNE 2014 3 - 13 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES The City Treasurer will strive to keep to minimum the administrative and legal costs. IV. At all times, the City should take reasonable care to respect and protect the interest of the taxpayer as well as that of the City, including the rights to privacy and confidentiality. BILLING PROCEDURES 1. Billing will be in two stages, interim and final billing. A by-law passed in advance by the City is a requirement to bring into effect both the Interim and Final tax billings. 11. The tax billing will clearly identify the municipality, property, owner (s) and state the demand date. It will also identify the current year's assessed value, the annualized taxes for the prior calendar year, and any arrears owing against the property. 111. Interim tax billing shall be based on a percentage of the annualized taxes of the property for the previous calendar year, not to exceed 50% of the previous year's annualized taxes. IV. The tax billing may include local improvement charges, area charges, business improvement area charges and any special charges levied by the municipality or provincial government. Interim Tax Billing 1. Interim bills are based on the returned assessment from the Municipal Property Assessment Corporation. As authorized under Section 317 of the Municipal Act, 2001, the City will bill a property under this category based on no more than 50% of the previous year's annualized taxes billed. 11. Interim bills are produced in January of every year. 111. The treasurer shall send a tax bill to every taxpayer at least 21 days before any taxes shown on the tax bill are due. IV. The Municipal Act provides ground for the City to alter, to an appropriate level, the interim bills if it deems it too high or too low. KITCHENER Page 2 of 10 JUNE 2014 3 - 14 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES Final Billing 1. Final tax bills are based on tax rates established in the City budget by-law, the Region of Waterloo and the Ontario Ministry of Finance which sets the education tax rate. 11. Final Bills are produced in June of every year. 111. The treasurer shall send a tax bill to every taxpayer at least 21 days before any taxes shown on the tax bill are due. IV. Final Bills are based on the sum of the current market value of the property and the appropriate tax rate, all local improvement charges, business improvement charges, any special charges levied by provincial legislation. V. The Final tax bill payable will be the sum of the interim tax bill deducted from the final tax amount. Supplementary Tax Billing 1. The Municipal Property Assessment Corporation (MPAC) usually provides additional assessment information on properties that necessitates a supplemental billing. The City will bill for these supplementary assessments as soon as it receives the data from MPAC. 11. Supplementary taxes are due on the date identified on the supplementary tax bill. 111. Supplementary taxes may be paid in installments for a period of up to a maximum of six months providing the customer also registers for a preauthorized payment plan. IV. The Assessment Act provides two grounds when supplementary tax billing can be applied; Omissions and Additions: Omissions i. The Municipal Act Section 33 provides grounds for the taxation of real property liable for taxation if that property was omitted in the tax roll of that current year at the time of assessment. ii. The taxable period allowed are the current year and the preceding two years. KITCHENER Page 3 of 10 JUNE 2014 3 - 15 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES iii. The supplementary billing tax should be treated as a part of the full tax for the current year. iv. The supplementary tax bill will be post marked and mailed not later than 21 calendar days from the date of the first instalment due date. Additions i. The Municipal Act Section 34 provides grounds for taxation of assessment of real property that has increased in value or has been added after the return of the last revised roll. The real property could have increased in value through the erection, alteration, enlargement or improvement of any building, structure, machinery, equipment or fixture or any portion thereof that commences to be used for any purpose. ii. The supplementary billing tax should be treated as a part of the full tax for the current year. iii. The supplementary tax bill will be post marked and mailed not later than twenty one calendar days from the date of the first instalment due date. iv. The taxes apply to the current year only. Apportionment Tax Billing I. The Municipal Act, 2001, Section 356 provides grounds for apportioning realty taxes to present owners for lands previously assessed as one block but has been assessed to two or more parcels. 11. The apportionment should reflect the revised configurations and the levied and unpaid realty taxes. 111. The apportionment should be treated as a part of the full tax for the current year and payment period should not exceed time allowable as per the Municipal Act. Due Date Due dates for the payment of taxes shall be dependent, in the case of the Final Bill, on the final approval of Budgets by the City Council, Waterloo Regional Council and subsequent passing of the levy by-laws. Notwithstanding that there may be fluctuations as a result of budget approval, tax billing for residential properties will normally be as follows: KITCHENER Page 4 of 10 JUNE 2014 3 - 16 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES A. Interim Bill i. The first instalments of taxes are due and payable on the first business day of March. ii. The second instalments of taxes are due and payable on the first business day of May. B. Final Bill i. The first instalments of residential property taxes are due and payable on the first business day of July. ii. The second instalments of residential property taxes are due and payable on the first business day of September. iii. The first instalment of commercial, industrial and multi-residential property taxes are due and payable on the first business day of September. iv. The second instalment of commercial, industrial and multi-residential property taxes are due and payable on the first business day of October. MAILING OF BILLS 1. Any notices sent by ordinary mail are considered delivered to and received by the addressee unless the notice is returned by the Post Office or an error in the mailing address is proven. Failure to notify the Revenue Division of an address change is not an error. 11. Section 343 of the Municipal Act, 2001 provides that tax bills shall be sent to the taxpayer's residence or place of business or the premises where the taxes are payable for, unless that taxpayer directs the municipality otherwise. Further, Section 343 (8) of the Municipal Act, 2001 directs a municipality to continue to deliver tax bills to the address in its records until it is revoked in writing by the taxpayer. PAYMENT OF BILLS 1. Payment will be in the form of cash, cheques, money orders, bank drafts, pre- authorized payment plans, internet and telephone banking made payable to the City of Kitchener. Cheques which are post-dated to the tax due date will be accepted and held by the Revenue Division. Payment of taxes will be KITCHENER Page 5 of 10 JUNE 2014 3 - 17 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES accepted at the City of Kitchener, Revenue Division, at local banks or via mail to: City of Kitchener, Finance and Corporate Services Revenue Division P. O. Box 1113 STN C Kitchener, ON N2G 4R6 11. "Third Party" cheques will not be accepted. A cheque payable to the property owner is considered to be a third party cheque and is not accepted as payment. 111. Change will not be returned for cheques accepted in excess of the amount due on the tax account. Should a credit appear on the tax account as a result of the payment, it will be applied to subsequent instalments not yet due in the current year. However, at the request of the taxpayer a refund cheque will be requisitioned, after allowing sufficient time (15 business days) for the taxpayer's cheque to clear their financial institution. The minimum amount for a refund request to be processed will be $25.00, unless the amount is in excess of the next tax instalment that is yet to become due. IV. Should a payment be tendered in U.S. funds, it will be accepted at the exchange rate established by the financial institution holding the accounts of the City of Kitchener on that day. COLLECTION PROCEDURES 1. Past due notices shall be sent once a year in early October. Notices are to be mailed no later than the 15th of the month. 11. In addition to past due notices, Collections Staff will issue no less than two letters twice per year on accounts that are two years in arrears. 111. The Director of Revenue, or designate, in this case, Collection Staff, will attempt to contact the owner of a property at least once per year if taxes are in arrears for two or more years unless suitable payment arrangements have been established. KITCHENER Page 6 of 10 JUNE 2014 3 - 18 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES IV. Payment Arrangements i. The City may, at any time, enter into a payment arrangement with the property owner, in arrears for three years, before registering for a Certificate of Tax Arrears on a title to a property. The property owner shall provide a written commitment to pay all the outstanding taxes on terms agreeable to the City Treasurer. The agreement to commit to pay all realty taxes due by the tax payer, may cause the Treasurer to forego or forestall the registration of a Certificate of Tax Arrears. ii. Satisfactory payment arrangements would be a series of post-dated cheques or a commitment to make payments on prearranged dates via Telephone or Internet banking or in Person. iii. The City may accept verbal arrangements pertaining to any property arrears less than three years. V. Penalty on late or overdue payments i. Penalty at a rate of 1.25% of the amount of taxes due and unpaid, will be imposed as a penalty for the non-payment of taxes on the first day of default. ii. Interest charges at a rate of 1.25% each month of the amount of taxes due and unpaid, will be imposed for the non-payment of taxes. Interest will accrue only after the first day of default. VI. Returned Cheques i. If a cheque is returned as "non-sufficient funds" on a taxpayer's account, the taxpayer will be requested to replace the amount either by certified cheque or in cash. ii. A returned cheque fee will be applied to the tax account on all returned cheques regardless of reason. KITCHENER Page 7 of 10 JUNE 2014 3 - 19 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES ARREARS COLLECTION Collection Process 1. For tax accounts which indicate two years taxes owing, a collection letter is sent in the first quarter of the current year to the property owner (s) advising of the tax arrears situation and asking for payment in full or satisfactory payment arrangements to be made by a given date. If acceptable arrangements are made, the account is monitored for compliance and follow- up is done by telephone or in writing as required. Telephone contact is only used when the taxpayer has provided the municipality with a telephone number. 11. If no reply is received, a second letter is sent in the second quarter of the year stating that failure to reply will result in further action being taken to collect the outstanding taxes, which could result in additional costs to the property owner. 111. If no reply is received, another letter will be sent in the fourth quarter of the year. IV. No letter will be sent to a property owner whose tax account is in one year arrears. V. All second year tax arrears property owners will receive at least two letters per year. VI. If a property is in a tax sale position, a registered letter will be sent in the first quarter of the third year. If no reply is received then a title search shall be performed to notify any, and all, mortgage holders of the property and the property owner will receive a final notice at this time. Thirty days will be given to pay out the arrears from the date of the letter. If no response or payment is received, contact is attempted by telephone or outside visit. VI 1. Having failed to obtain any response or satisfactory arrangement, the Director of Revenue will forward the property to the City's Legal Department for action. Tax Sale 1. Properties that are in arrears on January 1 of the 3rd year the taxes are due are eligible for tax registration under Section 373 of the Municipal Act. The property owner or interested party has one year from the date of registration KITCHENER Page 8 of 10 JUNE 2014 3 - 20 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES in which to redeem the property for all taxes, interest and penalty outstanding, including any associated costs. 11. Registration is a last resort and should be avoided if possible by encouraging the ratepayer to either make full payment or a mutually agreed upon payment plan. 111. Letters and correspondence should encourage payment. It is only as a last resort or if numerous cheques are returned, that the property would become subject to tax registration. Small Balance Write offs 1. The Treasurer may cancel any overdue amount less than $10 that the taxpayer owes to the City for the preceding year. 11. The City shall not, otherwise, cancel any outstanding debt above $10, unless the City Treasurer deems it appropriate to do so. The Treasurer's reasons for writing off any outstanding debt that is above $10 should be communicated in writing to Council stating the reasons for taking such a decision. Interest on overpayment of taxes 1. The City will pay interest on tax overpayments resulting from appeal decisions released to the City by the Assessment Review Board. 11. Section 345 (6) of the Municipal Act, 2001 provides grounds for payment on tax overpayments by a municipality to the taxpayer. Interest would begin to accrue 120 days after the date of the decision is made known to the City. The rate of interest payable is in the same manner as interest is paid under subsection 257.11(4) of the Education Act, which states the rate of interest payable is the lowest Prime Rate reported to the Bank of Canada by any of the banks listed in schedule 1 of the Bank Act (Canada) on the date interest is paid. This interest rate will be paid commencing at the end of the 120-day period until the date the appeal adjustment is applied to the tax account. 111. The appeal adjustment amount plus any applicable interest will be credited to the relevant tax roll number. KITCHENER Page 9 of 10 JUNE 2014 3 - 21 POLICY NUMBER: 1-518 POLICY TYPE: FINANCIAL SUBJECT: COLLECTIONS- PROPERTY TAXES Tax Refunds 1. Section 354.1 of the Municipal Act provides grounds for a municipality to pay a tax refund arising from assessment and tax appeals. 11. The City will pay a tax refund to the owner of a property for any overpayment that arises because the land was assessed under Subsection 33 (Omissions) of the Assessment Act. 111. Section 351 of the Municipal Act, 2001 provides grounds for recovering taxes and any other funds owed to a municipality in the case that a municipality has to provide a refund to the property owner after selling off property belonging to a property owner whose property was disposed of under Tax Sale. IV. The City will deduct any tax refunds if the property owner has tax, utilities arrears or unpaid finance invoices at the same or other properties registered under that property owner's name. Refund from Reassessment 1. If ownership of property will change or has changed prior to the rebate as a result of reassessment, the City shall refund any overpayment to the owner of the land as shown on the tax roll on the date the adjustment is made. 11. The City will endeavour to do everything within its ability to notify the prior owner and the current owner of the rules that apply in refunding any overpayment as a result of reassessment of the property. KITCHENER Page 10 of 10 JUNE 2014 3 - 22