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TO: |
Mayor and Members of Council |
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FROM: |
Barb
Cribbett, Treasurer |
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PREPARED BY: |
Paul
Wealleans, Director, Taxation |
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DATE OF MEETING: |
2003-Sep-08 |
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SUBJECT: |
Tax System (TXM 2000) Agreement |
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RECOMMENDATIONS:
THAT Council delegate to the Treasurer and Chief Information Officer
authority to approve the execution of a three year License Agreement and
Maintenance and Support Agreement with the City of Mississauga, and when so
approved, the Mayor and Clerk be delegated the authority to execute such
agreements in a form satisfactory to the Town Solicitor;
AND
THAT Council delegate to the Treasurer and Chief
Information Officer authority to approve the execution of a three year joint
development agreement with the City of Mississauga, City of Brampton and Town
of Richmond Hill, and when so approved, the Mayor and Clerk be delegated the
authority to execute such agreements in a form satisfactory to the Town
Solicitor;
AND THAT 2003 maintenance
and support costs amount of $53,105 for 2003 be approved and funded from
Operating Account 400-400-5361, and $271,460 for new 2003 development be
approved and funded from Capital Account 49-6150-5247-005;
AND
THAT a
by-law be enacted to delegate to the Treasurer and
Chief Information Officer authority to approve the execution of the three year
Licensing, Support/Maintenance and Development agreements noted in the above
recommendations and when so approved, the Mayor and Clerk be delegated the
authority to execute such agreements in a form satisfactory to the Town
Solicitor.
PURPOSE:
The purpose of this report is to seek Council’s
approval to delegate to the Treasurer and Chief Information Officer authority
to approve the execution of three year agreements with the City of Mississauga
as well as the Town of Richmond Hill and City of Brampton for the licensing,
maintenance and support and development of the TXM2000 tax system.
EXECUTIVE SUMMARY:
The municipalities of Mississauga, Brampton, Richmond Hill and Markham have been using a computerized property tax system known as TXM 2000 since 1998 for the billing and collection of property taxes. Although no formal agreement was ever entered into, the four municipalities informally agreed to partner to develop the system for the period 1998 to 2002, after which time a renewal or new arrangement would be necessary. Staff from the four municipalities have been working on a new framework for agreement since late 2002 and have now reached a point where a new agreement effective January 1, 2003 needs to be approved by the respective Councils. This report recommends that the authority to approve the execution of the necessary agreements be delegated to the Treasurer and Chief Information Officer and when so approved, the Mayor and Clerk be delegated the authority to execute the agreements in a form satisfactory to the Town Solicitor.
BACKGROUND:
The implementation of property tax and assessment reform by the
provincial government in 1998 required a more sophisticated and complex tax
system by the Town of Markham. The City of Mississauga was developing a new tax
system (TXM 2000) with the City of Toronto. The City of Brampton, Town of
Richmond Hill and Town of Markham were offered the opportunity, and agreed, to
join in the system’s development. Shortly thereafter, the City of Toronto
withdrew from the project, opting instead to utilize the tax system of the
former City of North York.
Mississauga was then left as the developer of the system with Brampton,
Richmond Hill and Markham as user municipalities. Due to Toronto’s leaving and
the ensuing complexities in its arrangement with Mississauga, no formal
agreements with the user municipalities were entered into although basic
principles were accepted for a five year term that expired December 31, 2002.
The informal agreement required the Town of Markham to pay an initial licence fee of $50,000 for 1998 and $28,000 annually for 1999 to 2002. The total cost to date is $162,000.
Since the
initial tax reforms in 1998, significant legislative changes have occurred that
have complicated tax calculations and tax billing. Examples of these changes
include: the capping and clawback provisions between 1998 and 2000 to cap tax
increases at 10-5-5% respectively; a 5% cap on increases as of 2001 on a
permanent go forward basis; tax deferrals; standardized tax bills; new
construction rebates and vacancy rebates. Considerable programming changes to
the system as well as the development of new modules to address the new
legislated requirements were necessary.
Staff of
the three user municipalities have assisted Mississauga in the business user
input and system development of TXM 2000. Considerable effort and time has been
expended to ensure our billing follows the legislated requirements as set out
by the province.
Mississauga has indicated that it has spent
approximately $6.3 million on the system to the end of 2002 and has also
indicated that it has recovered approximately $750,000 from the three municipal
users. The TXM 2000 system includes features necessary to allow the billing of
the complicated tax system implemented by the province and between 1998 and
2002. The costs to the Town of Markham for the system during this period were
minimal.
Additionally, TXM 2000 is a unique system in that it is a fully
integrated system that incorporates all initial calculations for capping
adjustments as well as all subsequent recalculations. An underlying principle in the development has been that the
system should be as automated as possible to reduce processing time, reduce
staff time and ensure accuracy and consistency. TXM 2000 allows the Town of Markham to efficiently and accurately
issue property tax bills to 67,000 residents and businesses in Markham, and to
generate approximately $73 million for Town of Markham purposes and $286
million for Region of York and York Region School Board Purposes.
OPTIONS/DISCUSSION:
Although
the informal 5 year agreement with the City of Mississauga expired on December
31, 2002 the three user municipalities have since had continued uninterrupted
use of the TXM 2000 system on a status quo basis. Staff of the four
municipalities have been working to reach an acceptable framework in three
areas: licensing agreement; maintenance and support agreement; and a joint
development agreement. The first two agreements would be between each user
municipality and Mississauga and the third would be a four way agreement
between all parties.
The
framework document for the licensing, maintenance/support and development
agreements continues includes provisions with respect to operational aspects,
licenses, project planning, service levels, etc.
On
August 13, 2003, Council for the City of Mississauga adopted recommendations
for it to enter into agreements with the three user municipalities. Staff of
the municipalities of Brampton and Richmond Hill are submitting reports to
their respective Councils in September 2003 in this regard. This report is
recommending that the Treasurer and Chief Information Officer be delegated the
authority to approve the execution of these agreements to ensure that
Mississauga is able to commit necessary resources to complete the development
of TXM 2000.
The
initial costs for the licensing agreement of $50,000 was a one time payment for
which no new additional fees will be required.
Future
costs for maintenance and support are to be prorated based on the number of
actual tax accounts for each municipality. The per account cost is the same for
all municipalities and is as follows:
2003
$0.75
per account
2004
$0.77
per account
2005
$0.80
per account
The
projected costs for maintenance and support for Markham are as follows:
2003
$53.105
2004
$57,537
2005
$63,084
For 2006 and subsequent years, the rates will be determined by July 31
of the preceding year. Mississauga has noted that the per account cost for 2006
and beyond may be higher as the component for system development will be
incorporated into the maintenance/support costs as the joint development
agreement will expire in 2005. It is expected that much of the system’s future
development will have been completed by 2005.
The
development component costs for 2003 to 2005 will also be based on the number
of tax accounts and these costs for the life of the development agreement are
estimated to be as follows:
2003
$271,460
2004
$224,801
2005
$228,498
The
main elements for development over the period 2003 to 2005 include:
The
process for staff to provide input to the development of the TXM 2000 tax
system is by means of Business User Group comprised of staff from the four
municipalities. Meetings are held regularly and concerns, new issues and
development requirements are discussed and recommendations forwarded to the TXM
2000 Project Team (made up of City of Mississauga IT staff) and finally to the
Steering Committee (made up of City of Mississauga senior staff). Decisions
with respect to TXM 2000 development are ultimately made by the Steering
Committee, however, past experience has been that our input for problems and
module design has been effective.
The
total estimated costs for the three years combining the maintenance/support and
development are as follows:
2003
$324,565
2004
$282,338
2005
$291,582
Should
the Town of Markham extend the agreements beyond 2005, the 2006 and 2007 total
costs for maintenance/support and development are estimated to be $142,000 and
$156,000 respectively. These costs are decreased from 2005 levels and only
increase in 2007 because of an estimated increase in the number of tax
accounts, not the cost per account. It is important to note that given the time
frame to 2007, these costs are best estimates.
FINANCIAL CONSIDERATIONS:
The
maintenance and support cost is proposed to be funded from the operating
account 400-400-5361 over the 3 year term of the Maintenance and Support
Agreement. The 2003 budget for
maintenance and support for TXM 2000 was increased over 2002 and is sufficient
to cover the cost of $53,100, which is an increase of $25,100 over the $28,000
paid in 2002.
The
development component cost of $271,460 for 2003 is proposed to be funded from Capital Account 49-6150-5247-005. The
“IT Capital Projects” account is used for technology projects that are
brought forward during the year and approved through a business case
process. Although a business case has
not been submitted for the remaining modules required for the TXM 2000 system,
the processes that will be automated by the new modules are essential to the
timely, accurate and efficient completion of tasks by the Town’s Tax
department, such as supplementary billings for commercial and industrial
properties. This will also result in more timely refunds for assessment appeals
and vacancy rebates.
The
2004 Capital and Operating budget proposal will include estimates for
maintenance/support and development for the TXM 2000 system.
BUSINESS UNITS CONSULTED AND AFFECTED:
Legal
Services Department and Information Technology Department.
ATTACHMENTS:
None.
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Barb Cribbett, Treasurer |
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Andy Taylor, Commissioner Corporate Services |
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Paul Wealleans, Director, Taxation |
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Q:\Finance and
Administration\Finance\SHARED\2003FinAdminCtteeReports\0363 Tax System (TXM
2000) Agreement.doc
