Municipal Affairs takes Town of RR to task over high percentage of unpaid taxes

By Ken Johnston
Editor

Two officials with the Ontario Ministry of Municipal Affairs and Housing (MMAH) visited Rainy River's Town Council meeting Monday evening to express concern about two high risk factors appearing on the community's annual Financial Indicator Review.
Cherie Pohler, Assistant Municipal Advisor, ran through the review step by step, noting that for the most part Rainy River gets good marks for its financial performance. However two areas sent up red flags and that is what brought MMAH to Rainy River.
The first area sparked the most concern from Pohler and Acting Senior Municipal Financial Advisor Heather Brown's need to offer the town advice. The area is the "Total Taxes Receivable as a % of Total Taxes Levied." At the end of 2004 Rainy River had 49.47% of its taxes still owed to it. Then in 2005 it skyrocketed to 64.75% but then dropped to 38.38% in 2006.
Brown said that the reason for the fluctuation could have been as simple as one big taxpayer not paying before year end and then the next year paying up. However, even at 38.38%, Brown said that number is way too high.
The average in communities under 1,000 people in Northern Ontario is 16.9% for 2006. "We want to get Rainy River's number well below the 38.38% mark," said Brown.
She did however note that Rainy River is not alone in the region with this problem. In Northwestern Ontario there are currently 26% considered "High Risk" like Rainy River, 21% "Moderate Risk" and 53% "Low Risk."
When a community is at high risk for three years MMAH is mandate to come to the community to offer suggestions.
Brown suggested Rainy River create a written collection policy; something it does not have now. She said the policy outlines how it works and ensures fairness for all taxpayers.
She said she would also like to see Rainy River set up an "Allowance for Doubtful Accts." That is the budgeting for accounts that they feel are doubtful to be paid.
High percentages of receivables versus taxes levies also begs the question from MMAH about people's ability or inability to pay. Brown said that council can do some things to make it easier for people to pay. One idea was to have more than two bills per year. (i.e. more bills makes the amount payable each bill smaller and more manageable for taxpayers).
Brown noted that the sooner the taxes are collected the less the town has to borrow. "Unpaid taxes costs everyone money," said Brown pointing to the fact that in 2006 RR had $201,681 in unpaid taxes (38.38%) that had to be borrowed.
The other area of concern that MMAH brought up as a high risk area is that of running a deficit. In 2006 it was 14.87%, 2005 8.16% and in 2004 they had a surplus of 12.68%.
Brown said that one year's deficit was explained by an accounting error. The gas tax rebates was recorded as a revenue when it should have been put into reserves. "You kinda got a double whammy on that," said Brown.
Brown said that if council does nothing to improve the situation MMAH will be back. However, she noted that Town Clerk Veldron Vogan has been very cooperative and has already taken steps to improve the situation including obtaining a copy of another community's collection policy as a guide. Brown and Pohler also left a copy of another community's policy for reference.
Councillor Brent Anderson asked if the town auditor should be discussing the need for putting money aside for doubtful accounts.
Brown noted that auditors will look at a community's working reserves and say things are fine. Incidentally Rainy River does have good marks in the working reserve category, but MMAH would like to see an allowance for doubtful accts. set up also.
Other business
•Council passed its annual borrowing bylaw with CIBC to allow operations to continue until taxes can be collected.
•Council reimbursed Administrative Assistant Corey Dyck $320.25 for taking a municipal finance course.
•Council agreed to the terms of engagement hiring BDO Dunwoody as their auditors for 2008.
•Council hired Sparkcheck to do all fire extinguisher inspections and recharging for 2008.
•Council authorized Mayor Debbie Ewald and Clerk Vogan to sign the OSWAP Funding Agreement with the Ontario Government. It will see the town receive $33,000 annually for five years to help with operational costs at the local water plant.
•Council amended the cemetery bylaw as per advice from the government.
•Council went in camera at the end of its meeting to discuss legal matters.