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RFD- 4087 Administrative Updates   Item #   9. b.    
Regular Council Meeting Agenda   
Meeting Date: 09/28/2020  
Title:    COVID-19 Financial Update - Frostad
Department: Corporate Services  
Strategic Vision Element: This topic relates to all three of the City’s strategic vision elements contained in Council’s Strategic Plan Related Goal: Citizens consistently express high levels of satisfaction with municipal services.

Request for Decision Summary
To provide a report to Council on the payment of taxes and utilities and impact of COVID-19 to date on such payments.
Proposed Motion
That the COVID-19 Financial Update be received as information. 
Utility Deferral Program
Utility penalties were deferred for April 1, May 1, and June 1 of 2020.  Penalties resumed on July 1. The City bills approximately 12,700 accounts each month. The number of accounts outstanding increased from 2,534 at the end of March to 2,817 at June 1. Therefore, 2% of customers chose to take advantage of the penalty deferral program during the time of the offering. The amount of outstanding accounts further increased to 3,096 by July 1.  

By September 1, there were 2,688 accounts outstanding so the numbers are now approaching pre-COVID levels and should return to normal in the next month or so as customers catch up on their outstanding amounts. The overall accounts receivable balance is currently lower than pre-COVID levels so even though there are more accounts outstanding, the balances owing at September 1 are $141,765 lower than March 1 of this year.   

The penalties waived during the program totalled $29,819. Penalties applied July 1 were $10,555, August 1, $9,615, and September 1, $10,140, totalling $30,310 for the three month period since the deferral program ended.  Normal penalties during a three month period would amount to approximately $19,758; this represents a 53% difference. The difference is due to the increased balances owing after the deferral and the compounding effect of those outstanding amounts.  The penalties being reinstated have reminded customers to bring their accounts back into good standing and we are seeing most accounts falling back into normal patterns. The state of the Utility outstanding accounts at September 1 compared to the same time period last year (2019) shows that the balances owing are higher by only $44,843. This proves that normal patterns are resuming. 

The deferral program provided a perfect opportunity to discuss with customers the benefits of the pre-authorized payment program.  As of September 1, the City has 49 more customers on the program, a 2% increase. Staff have always encouraged customers to consider this option for the future and any progression is good.  The more customers choose the pre-authorized option, the more predictable cash flow is for the municipality and the less likely customers are to incur penalties in the future.

The Utilities staff has commenced normal collection processes and will work with customers to create repayment plans. The deferral program was a successful method for bringing relief to customers during COVID-19.

Property Tax Deferral Program
On May 22, 2020, 15,599 property tax bills were mailed to taxpayers.  We have completed analysis of the pattern of levy collection over the past five years.  Taxpayers have a consistent approach to paying the tax levy over the course of the year with 85% remaining outstanding at May 31, and then 30% at June 30, 15% at September 30, and 4% outstanding by December 31.  At June 30, 2020 39% of the levy was outstanding.  At September 21, 2020 that percentage is 21%.  We still anticipate that the levy outstanding when penalties resume October 1 will more closely approximate the normal September 30 outstanding amount of 16%. 

As of September 3, the Property Tax Deferral program had been requested by 541 applicants (3.5% of billings); 481 Residential and 60 Non-Residential.  There were  61 Residential and 3 Non-Residential applicants were ineligible. The reasons for ineligibility relate to properties already in tax recovery process, applications from vacant land owners and accounts already being paid through a mortgage company payment.   The 420 approved residential applications amount to $1,089,667 in deferred balance and the 57 approved non-residential applications amount to $3,048,503 in deferred balance for a total deferred balance of $4,138,169 to date.  This represents 7% of the annual levy.   Penalties waived for this level of deferral have totalled $220,225.  The impact to the City’s cash flow during the deferral period has been $4,000,000 at the height and has reduced to $3,000,000 as of September 21.  Applications will continue to be taken until September 30 and adjusted retroactively if necessary. 

Administration views that the tax deferral program has been successful and has provided relief to taxpayers during COVID-19.

Managing Cash Flow
In preparation for the possible cash flow impacts of COVID-19, the organization increased the operating line of credit capacity to $30 million.  To date the organization has not yet advanced the need for such borrowing.  Analysis of the upcoming cash flow projection reveals that advances will likely not be required by September 30. Cash Flow has been managed through the overall reduction in accounts payable during this time. 
COVID-19 impacted the citizens of the community and Council desired to respond to that impact by providing financial relief.

The Utility penalty deferral program was open to all ratepayers and was accessed by 283 customers with penalties of $29,819 waived over the three month period.  Penalties have resumed and customers are progressing to bringing accounts back into normal collection patterns.

The Tax penalty deferral program is still in progress and is administered through an application process based on demonstrated need.  To date there are 477 eligible applications representing outstanding balances of $4,138,169 requesting deferral to September 30.  Penalties waived total $220,225.  Penalties will resume October 1 but it is anticipated that many deferred accounts will be paid by that date and normal collection patterns will resume.

The City is effectively managing the cash flow impacts of COVID-19 through reduction of expenditures.

The City made adjustments to the 2020 budget during the Spring Budget Adjustment and reduced the overall tax increase from 3.9% to 0% in light of the economic pressure on the community during COVID-19. 

Progress on the 2020 budget for the third quarter will be reported to Council on November 9, 2020.
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