Council Report - Interest Calculation Bylaw 820, 2012

Interest Calculation Bylaw 820, 2012

RECOMMENDATION:

THAT Interest Rate Bylaw No 820, 2012 be read a first, second and third time.

CHIEF ADMINISTRATIVE OFFICER'S COMMENTS:

I concur with the recommendation.

PURPOSE OF REPORT:

To establish a manner in which interest is calculated on security deposits.

BACKGROUND:

Historically, the Town has paid daily interest, compounded monthly, at a set 1% interest rate.

1. This current manner of calculating interest is not established by Bylaw.
2. In today's economy a 1% interest rate is high. a. Our bank's prime rate is currently at 3%. b. Under the bylaw, the interest rate used would be 0.25% not 1%.
3. The manner of calculating interest set out in this bylaw, is the same manner used to calculate the interest on the property tax pre-payments with the following exception: a. The interest calculation for the property tax pre-payments is on a daily basis, not a monthly basis.

BUDGET IMPLICATIONS:

This will save the Town interest charges at this time.

If our banks' prime interest rate increases to higher than 4%, we will be providing a higher interest rate than the current 1% but this would be in line with the "norm".

POLICY IMPLICATIONS:

Adopting a bylaw setting out the manner in which interest is calculated will put us in compliance with the Community Charter.

ALTERNATIVES TO STAFF RECOMMENDATION:

1. Vary the interest calculation methods used, and / or
2. Remove paragraph 4, which lists the situations where the Town will not pay interest on security deposits.

RECOMMENDATION:

THAT Interest Rate Bylaw No 820, 2012 be read a first, second and third time.

SUBMITTED BY: Kathleen Day, Director of Finance

REVIEWED BY: Kim Anema, Chief Administrative Officer