Kelowna city council will be considering a plan this week to borrow up to $150 million in the short-term to cover the late payment of taxes during the coronavirus pandemic.
To try to alleviate some of the financial hardship faced by residents and businesses during the health crisis, the city is giving taxpayers a longer grace period this year before they are penalized for unpaid property taxes.
However, the late payment of property taxes could leave the city short on funds to cover its obligations, including distributing tax funds to other branches of government, according to a staff report presented to city council in early April.
As a result, the city is now considering approving borrowing up to $150 million to ensure the city doesn’t run out of cash.
The proposed bylaw requires the money to be paid back by the end of the year and city staff said the municipality would not necessarily take out the full amount.
Instead, the staff proposal is for the city to “only borrow what is necessary to cover determined cash flow shortages.”
The city has given property taxpayers till Sept. 1 to pay their taxes before facing a 10 per cent penalty.
However, it is urging those who can meet the July 2 due date to pay on time “to maintain the city’s cash flow for essential services.”
Last week, the province announced help for cash-strapped municipalities including allowing cities to delay remitting school taxes to the province, letting them extend their debt repayment or borrow from their own capital reserves.
Whether the provincial changes will impact Kelowna’s proposed short-term borrowing is unclear.
On Thursday, responding to the provincial announcement in general, the city said it would need time to look at how the measures would impact the city’s cash flows.
“Staff will then be able to consider if other measures such as borrowing from our capital reserves for short-term operational expenses are a financial strategy we need or want to pursue in the short-term,” the city said in a statement.
The city is also looking at ways to cut costs during the pandemic.
Kelowna’s director of financial services said in a statement the city is looking at ways to cut its budget including eliminating new positions and programs and deferring some capital projects.
A final budget is expected to go before Kelowna’s city council in early May.View link »