Section 193.1 of the Community Charter provides authority for municipalities to establish, by bylaw, the method of interest calculation where interest is payable on amounts owing to, or by, the municipality, unless the method has already been set by the province. The provision is paralleled for other bodies as follows:
These provisions are virtually identical therefore they are all referred to below as
Community Charter section 193.1, and the comments regarding municipalities
apply to all of the bodies.
The bylaw authority does not relate to
circumstances in which interest may be charged, or to the interest
rates themselves, but rather to the “method of calculation” only.
“Method of calculation” is not defined, but is intended to mean the
compounding period and the calculation period. For instance, the
provincial government sets out its method of calculation of interest
payable on amounts due to government under the Taxation (Rural
Area) Act as “…calculated on a daily basis and compounded
monthly” (section 7 of the Taxation (Rural Area) Act Regulation).
Similarly, local government bylaws need to specify the
authority for the interest as well as the calculation period and the
compounding period (e.g., interest authorized under
section 234 of the Community Charter is calculated on a
daily basis and compounded semi-annually).
Municipal authority to establish the method of interest calculation
is only available where that calculation is not set by the
provincial government by way of legislation or regulation. For
example, section 415 of the Vancouver Charter provides that
interest on delinquent taxes is to be compounded annually.
Therefore, the City of Vancouver would not have the power to change
this compounding by bylaw. Similarly, the Municipal Act Tax
Regulation prescribes the compounding period for interest on
refunds of overpayment of taxes to a municipality, so municipalities
would not be able to set out a different calculation method by bylaw.
What is Required
If the method of calculation is not otherwise specified in a provincial statute or regulation, and a
municipality intends to calculate interest in any manner other than simple interest, it must do so by
The authority applies both to the calculation of interest where interest is applied to money that is
owed to the municipality, and where interest is applied to money that the municipality owes to another party.
What to Consider
Whether the municipality has the same practice for all circumstances where interest is charged or
different practices or methods of calculation in relation to different interest charge circumstances
will be an important consideration. For example, a municipality may use a monthly compounding formula
for interest in relation to property taxes, but a semi-annual compounding formula for interest on
overdue fees. Similarly, it may have one practice with respect to money owed to the municipality and
a different practice for money that the municipality owes to another person.
Municipalities may want to review their current practice with a view to determining whether there are
inconsistencies and if these inconsistencies are appropriate and defensible. For instance, the municipality
may currently have a practice of compounding interest for some fees, but not for others.
How to Proceed
When developing the calculation bylaw, a municipality must decide whether to do one omnibus bylaw to
establish the method of calculation for all interest, or include a calculation provision in each bylaw
that imposes a tax, fee or charge, or that sets out the interest payable by the municipality on its debts.
The key elements of the interest calculation bylaw would likely be:
Please direct questions or comments to
Infrastructure and Finance Division.