I was interested to see that the idea of a seniors’ property tax deferral program has been floated as part of the 2014 election campaign. I remember Council looking at this soon after BC introduced their provincial program a few years ago, to see if we could make it work in Brandon. Basically, the tax deferral program is a home equity loan secured by a lien against the property, and paid back when the property is sold. Some provinces open the program to anyone in financial need regardless of age, and others allow a spouse to also be on the loan so that the repayment isn’t triggered by the death of a husband or wife. As we did more research, a couple of aspects caused some concern. Firstly, there was some uncertainty whether the City of Brandon could loan money. If we could get clarity on the jurisdictional issue, we did not have the resources to add the risk assessment and oversight expertise to our Treasury Department that a “loans department” traditionally has. We also considered how we would finance these loans in order to replace the deferred revenue in our operating budget, especially in light of the number of people who were moving into the 55+ category. How would other tax payers feel if we directed a portion of their taxes to create a reserve for this purpose? There were several operational hurdles to overcome if we were to pursue this further as a stand-alone Brandon program. In most cases, these types of programs are offered at the provincial or state level, and then made available to the municipality. This transfers the risk and the operating expenses to the provinces, and it also ensures that the municipalities don’t suffer any negative consequences because of deferred taxes. Another concern centered on the residents themselves. If you are disciplined at managing debt, tax deferral may work to help with cash flow problems. However, there were also some heartbreaking stories of seniors who lost most of the equity in their home when it was sold, when the deferral loan and the interest were paid back. This was especially troubling if they were planning on using the money from the sale of their home to move into an assisted living or personal care situation. Another sad tale was having their most significant asset that they were planning on leaving to their children, money from the sale of their house, lost because of the debt. Perhaps the most disturbing story that we learned about were the wealthy property owners who were deferring their taxes, taking the money and investing it at a greater rate of return, and thereby profiting from the program. This could be solved by a means test to prove that only seniors needing the loan received the money, but that would add even another layer of bureaucracy and additional expense into the system, especially at the municipal level. Watching for fraudsters is another reason why this type of program is best left to the provincial level of government who already have the resources in place to validate the claims through their existing income subsidy programs. We did talk with members of the Manitoba government to see if they would be interested in offering such a program at the provincial level. They introduced instead the seniors’ tax credit, which is a benefit to all seniors and doesn’t hurt the equity they may have built up in their homes. As the property tax deferral program matures and the various kinks and loopholes are worked out, there will be an opportunity to again approach the province about introducing the program here in Manitoba. It does provide cash flow relief to seniors when confronting unexpected expenses or facing financial hardship. It does help seniors manage the expenses. We need to continue to evaluate it and see if some of the obvious shortcomings and abuses can be resolved. We’re also watching with interest to see if any communities of our size can make it work independent of provincial or state support.
Posted on: Sat, 27 Sep 2014 04:15:13 +0000
Trending Topics
Recently Viewed Topics
© 2015