== COUNCI

TO: Mayor and Council Lo November 25th, 1977 |
FROM: L.D. Pollock - NOV 28 1977
City Administrator

Re: Interest Rates on Taxes

Interest rates on arrears of taxes and on prepaid taxes can
be set by Council annually. We have generally reviewed these annually
to keep them in line with going interest rates. The interest rate that
we have set for arrears of taxes of 11% and it would appear that this
could remain for another year. Most other municipalities are charging
the same or a 12% rate. :

With regard to the interest rate applied to prepaid taxes, this was set

at 9 1/2% and short-term interest rates have taken quite a drop since ©

this rate was set. I have noted that some municipalities have set their
interest allowance at the Bank Prime Interest Rate or at the Prime Rate

Less 1%, that is in effect as of January lst of each year. This might

be a simpler way for us to handle the interest rate as it would automatically
adjust, according to Bank rates. - If Prime Rate is selected, it would result
in an interest rate,at the present time, of about 8 1/4%; if Prime Less

1% is selected, it would result in a 7 1/4% rate.

Over the years we have had interest allowances that were either above or
below Prime and it has never seemed to drastically affect the amount of
taxes that are paid in advance. The interest rate is not a great in-
ducement and in fact, if set too high, it is a cost that only serves to
increase taxes to the detriment of those that are unable to pay their
taxes in advance: Te

In view of this I would suggest that we set the interest allowance on
prepaid taxes at the Prime Rate in effect on January 1st in any year
LESS 1%.

eho
L.D. Pollock