Business __

23 - Sunday, August 10, 1986 - North Shore News

Don't pay more to municipalities than need be

IF YOU are a homeowner who pays property taxes together

with your monthly

mortgage

payments, you may be

cheating yourself out of potential interest.

Many mortgages combine your
mortgage payments together with
monthly property tax payments.
While lenders collect’ your tay
money in advance, some offer you
no interest payments. Instead, the
lender gets to use your money to
earn interest until municipal tax
time.

You could be earning this inter-
est yourself by making these mon-
thly deposits to a savings account.

Or you might wish to take part
in a municipal tax prepayment
plan that offers interest on ad-

money
matters

by Lisa
Smedman

vance payments of property taxes.
Two such plans are currently
available on the North Shore, and
other plans may soon be offered.

Both the District and City of
North Vancouver have offered an
advance payment plan for
municipal taxes for several years.
Similar in structure, the plans dif-
fer in certain details.

Both allow ratepayers to make
an advance payment on_ their
property taxes during the manth of
January. These advance payments
then earn interest at a rate that is
two per cent less than the prime
rate in effect on the day the pay-
ment was received, (The prime rate
is the interest rate banks offer their
best corporate customers).

The city bases iis payments on
the prime rate of the Royal Bank,
while the district uses the Bank of
Commerce.

Interest is paid from the date of
receipt of the advance payment,
until the July due date for
municipal taxes.

North Vancouver City limits the
amount that can be prepaid to the
approximate amount of your
previous year’s net taxes (gross
faxes minus any homeowner's
grant).

With the district's advance
payment plan, there is no limit, so
far, those using the plun have only
prepaid amounts that are less than
their total yearly tax ‘ill.

In January, some 323 ratepayers
made advance tax payments totall-
ing about $424,000 to the City of
North Vancouver. In the District,
some 819 taxpayers made advance
payments totalling about $771,400.

North Vancouver City is in the
process of considering another
prepayment plan, to be known as a
“pre-authorized payment plan.”

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This plan could be in effect in time
for the 1987 tax veur.

ff adopted, the plan would allow
a ratepayer to make regular, mon-
thly payments of municipal taxes.
The payments then carn interest.

City treasurer David Moulding is
proposing a five per cent interest
rate for the pre-authorized pay-
ment plan, Although the rate
seems law, Moulding points out
that any interest earned through
the plan would be tax-free.

(The tax-free status of the inter-
est is referred to in a Revenue
Canada _ interpretation — bulletin).

“So, it would be similar to an
after-tax rate of about ¢cight per
cent," says Moulding.

West Vancouver Municipal trea-
surer Gorge Horwood takes a
More cautious view.

“That interpretation
interest is tax-free) could be
challenged in) court,’ says Hor-
wood. He worries that the interest
might: indeed be considered tax-
able, and that the municipality
would be forced to issue TS slips.

The added paperwork and ad-
Ministration costs could spell the
difference between a prepayment
program that benefits the
municipatity.

“But tnat doesn’t mean that we
won't go ahead with looking at

(that the

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