Tag: Budgets

Budget 2024 – Enhancements

Posted on . by Patrick Johnstone. Leave a comment.

The 2024-2028 5 year Financial Plan was formally adopted by Council on March 11. This is the last step of the annual budget process for Council, though Staff have a lot of work to do yet in submitting documents to the province and getting those tax notices out.

I have written about different parts of the budget here: Operations, Capital, and Utilities. But the news story on the budget usually get boiled down to one number, the annual tax increase. This year’s number is higher than we are used to (though not anything near a “record” increase, as offered a few times by those who dabble in misinformation) at 7.7%. This puts us firmly in the middle of regional tax increases announced so far, which range from 4.5% in Burnaby to 10% in Langley, though the final number in Surrey has yet to be announced, but will likely exceed Langley’s.

The reasons for these higher increases everywhere are essentially the same – inflation and wage increases related to new collective agreements across the region with CUPE, Police and Fire unions, themselves being pressured upward to match regional inflation and housing costs. The biggest differences within the region are related to varying levels of service enhancements, from Surrey needing to invest in a new Police service to New Westminster needing to staff up a new $114M recreation centre. So this post I’m going to break down the increase in New West, hopefully answering a bit of what are you buying for your extra $300 this year (if you own a $1.6M house), or extra $125 if you live in the “typical” $640,000 apartment.

Again, the best way for you to dig into these numbers, if you are so inclined is to go to the January 22 Council workshop where we discussed this after giving staff some direction during the December 11 workshop, where staff proposed a 6.8% tax increase, and Council brought requests for enhancements that pushed this up by almost 1%.

“Enhancements” is one of those jargon words we use in municipal budgeting, and to talk about it is to talk about how staff approach annual budgeting. The first step is to look at everything we did last year, and hang a baseline on that. They then go through and find “efficiencies” (things we don’t need to do anymore, or cost us less to do now than they used to), and inflation/salary increases and calculate a new baseline based on those. They then look at the many, many things that Council or the Public has asked them to do beyond what they did last year. These are “enhancements” – things we didn’t do last year, but the community has asked us to offer or we need to do now because of functional or legislative changes. Staff determine what they can practically deliver, and propose what enhancements Council might consider for the coming year. Depending on the city, these are offered as service level measures, or a job positions for the people expected to deliver the job. In New West we generally do the latter, and there are strengths and weaknesses of each approach, but I’ve already gone too far down this rabbit hole.

A reasonable question I hear often is “with all these new buildings, how come my taxes still go up?” If we compare the revenue side of the 2024 Operational Budget to 2023 (the numbers are in thousands):

we see that we are planning to collect 8.7% more tax revenue than last year, or an extra $9 million. The 7.7% tax increase provides about 89%, or $8 million of this, while little more than 11% or $1 million in new tax revenue will come from charging taxes to property that didn’t exist last year – directly from growth. But remember a large portion of those other revenue sources are from things new growth pays for: building permit revenue, amenity charges and such. Look at the Sale of Services line, which is anticipated to go up by $4.4 million. Part of this is the opening of TACC, but also through increased service delivery across the City we draw more revenue from more people.

These two lines combine for ~$13 million in increased revenue. This aligns (not perfectly, but there are complicated reasons for this) with the “Proposed to Fund from Tax and Other Revenue” column at the end of the table that provides the long list of enhancements proposed for 2024 that you can see starting on page 53 of this report. This table (with a bunch of caveats) is the detailed answer to “what you are buying with the 2024 tax (and sale of service) increase?” So I am going to break the $13 million from that table down to categories to give an order-of-magnitude answer. There are lots of ways to break these down, and much overlap between each, so here come the pies.First off, two-thirds of this increase is fixed cost increases, increased costs to deliver the same services we provided in the previous year and things that we are legally or contractually obligated to pay for. About 21% are “discretionary” increases recommended by staff, things we are not legally committed to, but are required to keep service commitments we made to the community. The last 12% are things Council has directed to staff that we want to see happen in the upcoming year. Each of those three can be broken down further:

On the fixed increases, the largest part of the pie is $7.2 million in annual salary increases and increases related to the new collective agreements signed with our CUPE, Fire, and Police unions. This big piece of the biggest pie represents more than half the cost increase this year. The “new staff” section here is mostly new Emergency Management Office and Fire Prevention staff required due to new provincial regulations. The biggest fixed cost increases outside of this are an extra half a million for eCOMM (the service that provides 911 service and emergency dispatch for the region) and a big increase in insurance rates (something many in the community will recognize in their own lives).

The “discretionary” increases are dominated by the opening of təməsew̓txʷ Aquatic and Community Centre, which speaks a lot about how discretionary much of this actually is. These are the costs (above and beyond what it cost to run the Canada Games Pool and Centennial Community Centre) related to opening a much larger building with many more programs. I divided it up here into annual increased staff cost (about a dozen new people between regular and auxiliary) and stuff cost (increased supply, utility, equipment, and such cost). In theory, we could open the new pool without staffing and equipping it up fully, but that is probably not a good idea. There are also two new firefighters, a new HR staff position in Police, some increased Parks staff to run programs and care for trees, and some Admin folks in HR, IT, Finance, along with a new Director position to support our re-organization of Community Services into its own department.

The Council-driven increases are things Council directed to be added to the base budget, mostly in that December workshop. Most of this is in Public Safety, with increased Fire Department staff and new staff for front-line Police to address backfill (that is, we are not increasing the compliment of sworn officers, we are hiring more to provide better coverage for vacancies, sick and parental leave, etc.). Our new Code of Conduct requires budget for an Ethics commissioner, we are augmenting some staff positions to support youth and seniors programming, and the Massey Theatre utility costs are higher than anticipated.

So overall, 54% of the increase this year is related directly to salary inflation, which was high last year (~5%) because new collective agreements included backpay to the expiration of the previous agreement a year before. The other 46% of the increase this year can be broken down like this, which is probably the simplest answer to that first question “What did I but with my tax increase this year?” if you don’t want to read that multi-page spreadsheet I linked to above.

Budget 2024 – Capital Plan

Posted on . by Patrick Johnstone. Leave a comment.

The fun part of the annual budget is the capital budget, because this is the part that pays for the things that we need to have a functional and fun city.

Like the rest of the budget, our Capital Plan spending is estimated out over 5 years. We have a plan for the amount we will spend in 2024, and a plan for the entire 2024-2028 period. There is a bit of flexibility built into this, and it is necessarily front-loaded. This is because staff cannot start the procurement process for capital goods and works until it is approved by Council, but commonly the time period between getting the approval, going to procurement, buying or building the thing, and paying the invoice takes more than one year. This means that every year a large number of things planned for year 1 actually get done in year 2, or maybe year 3, so the budget line item “carries over” to those years.

Here is the briefest breakdown of our 2024-2028 capital plan (the full plan, in all its 3 page 133-line spreadsheet form can be seen starting on page 212 of this report. The longer plan, in its 33-page 433-line spreadsheet glory can be seen in this council report from January):

Note we are currently putting the final touches on təməsew̓txʷ Aquatic and Community Centre, the single biggest capital investment the City has ever made, and it is not represented in these numbers. We still plan to spend up to $152 Million on buildings, roads, pipes, and equipment this year. We will almost certainly spend less, due to the “carry over” effect described above. In my pervious post I wrote about the utility investments (sewer separation, accelerated water upgrades, advanced meter infrastructure for electrical, etc.), so I will use this space to talk about some of the highlights from the General Fund.

Massey Theatre ($19 million)
When the Massey Theatre was no longer part of the School District’s plans for a new NWSS, there was no way they could justify taking money from education programs to cover its ongoing operation and upkeep costs, so decided it had to be demolished. Driven by community demand, the City Council at the time decided to take on the theatre and protect it for future generations. At the time, an engineer report suggested it would cost $18 Million to bring the theatre up to a condition where it will last generations. Those costs are now coming due. The City is currently investing in essential repairs and upgrades to keep the building safe and address some envelope issues, and to do some internal upgrades to improve accessibility and functionality. This is not the end of the work, but the beginning.

Pavement Management ($4.15 M in 2024, $19.4 million over 5 years)
Roads are expensive to maintain. When I was first elected to Council in 2014, we spent about $2.5 Million on “pavement management”. Even this was an improvement over the $1.5 Million we spent only 5 years before. This amount has ramped up significantly over the last few years, and we are now looking at $4 Million a year on average. Note, we have not added to the number of roads, nor is there a significant increase the number of cars (though cars have gotten heavier). This increase is partly due to inflation, and partly due to us ramping up our work to get caught up and improve the overall condition. Yes, we are doing a lot of different things in the City, but rest assured New Westminster is spending more than ever before on fixing the potholes.

Sidewalks ($690K in 2024, $4.95M over 5 years)
Between replacement of sidewalks and our enhanced new sidewalk program to fill gaps and make accessibility improvements, we are investing almost $5 million in sidewalks in this plan. This does not include the $1.4 million in pedestrian crossing improvements or special projects like the $2.2 million improvements to the McInnes Overpass.

Rail crossing Upgrades ($3.6 Million)
We have money in the budget for the upgrades that will lead to whistle cessation, with Sapperton being the priority area and safety improvements in Queensborough.

Street Light improvements ($2.4 million in 2024, $4.6 million over 5 years)
Street lights are an important part of building a safe active transportation system. As we upgrade and move to LED technology, the operational cost will go down, but a significant investment is needed to upgrade aging standards, especially in the Massey Victory Height neighbourhood.

Artificial Turf Fields ($3.2 million)
Yes, we are building a new artificial turf field, once we do the Parks and Recreation Comprehensive Plan and work with community to determine the best location. We are also replacing the end-of-life turf at the Queens Park all-weather field.

QP Farm upgrades ($500k)
This project will see amendment of existing structures to facilitate new year-round community programs including retrofit of the long narrow building with new plumbing and electrical, and both gazebo structures, new picnic tables, small huts, a new wetland area and drainage infrastructure, food trees, pollinator meadow, and more. The result will be a refreshed public space for education programs around food systems, youth programming, and fun space for kids. There might even be a mushroom wall included.

Trees ($1.2 million in 2024, $2.9 million over 5 years)
We are planting a lot of trees in New West as part of our Urban Forest Management Strategy, and have been successful at getting millions of dollars from senior governments to support this program. This means more street trees, with a new emphasis on Queensborough, and a few big projects like the front lawn of City Hall.

These highlights only make up 20% of our capital plan, there is a lot there in supporting affordable housing, IT upgrades, measures to implement our community and corporate climate plans, equipment upgrades for Fire and Rescue, and boring things like backhoes and sand spreaders and roof repairs. These are investments in the things that keep a city operating.

Budget 2024 – Utilities

Posted on . by Patrick Johnstone. Leave a comment.

This is the second in a series of posts about the 2024 Budget. I wrote recently about the general operating fund, and now am diving in to the utility funds.

The City of New Westminster has four utility funds. The financing of utilities are regulated by the Province and Public Service Accounting Board standards. As such, the money you pay in utility fees for your water, sewer, trash, and electricity are not “taxes” that feed general revenues, but can only be used to finance and run the utility. They must be accounted separately than general operational funds of the City and general taxation.

The Electrical Utility makes us different than other municipalities in the Lower Mainland (though there are municipal electrical utilities in Nelson, Kelowna, and a few other small communities in BC). That utility also has the unique feature that it pays a dividend to the City (it makes a profit), and because it is generally counted along with other utilities in comparisons between New West and other cities, it is also the source of some tired misinformation about our comparative taxes. But I’m tired of beating that drum.

All of our utilities have one thing in common – much of their budget is a result of costs passed down to us by larger entities. Water, sewer, and solid waste utilities pay Metro Vancouver to supply us clean water, treat our dirty water, and manage disposal of our wastes. The balance of the costs are operations of the utility (we need people to run and maintain the systems, test water, process payments, etc.) and capital costs (we need to build and replace pipes and pumps and vehicles). As such, the budgets are easiest to understand through a Lawrence Livermore style flow chart. So I’ll draw some of those, and talk about them.

The way these work is the vertical bars are (approximately) to scale, on the left are our sources of income and on the right are where that money ends up getting spent. Green are revenue sources, blue are operational expenses, pink are transfers internal to the city, and orange is interactions with our Reserves and the things we build through our Capital Budget. Each utility has a reserve, we put “surplus” every year into the reserve, and take money out of reserves to pay for and build things like pipes and pumps and trucks to keep the place running. Note all numbers here are rounded, and in the 000’s, and please recognize this is a bit of a simplification done to try to make the big systems more understandable. (I’d love to hear feedback about how this presentation works for you!)

Sewer Utility

Our main source of revenue is utility rates, though we also take in DCCs and other contributions to support our capital plan. Of the ~$31 million we take in, about 45% goes directly to Metro Vancouver to pay for the treatment of wastewater. This cost has gone up 14% in the last year, and is the primary driver behind our utility rates going up 8% this year. As you can see, the operational cost for us to run the utility (salaries, contractors, supplies) only equal about 10% of our revenues, so there is not a lot of cost savings to be found there.

We are planning for a $12.5 million surplus in 2024, which will all go into our Sewer Reserve, as will the $5.2 million we got from developers and senior government grants to support our capital program, which adds $17.7 million to the reserve. However, we are planning to spend $19.6 million on new infrastructure (pipes and pumps) and vehicles, which means we are planning to draw our reserves down by $1.8m, or about 5%.

Water UtilityAgain, our main source of revenue is utility rates, and the DCC/contribution part is much smaller in water this year. That has mostly to do with the timing of capital projects and our success at getting senior government grants for sewer work more than water work. Of the $18.5 million we take in, about 44% goes directly to Metro Vancouver to pay for the water. We spend less than 10% of our budget on operations, though with internal charges (the money other city departments charge the water utility for services), this cost is a bit higher than in sewers.

Our surplus in 2024 will be about $7.2 million, but we are planning to spend just over $12 million in new infrastructure and capital equipment in the utility in 2024. This means we will be drawing down the reserve by about $4.5 million, which represents about 20% of the reserve value. This is more than ideal, but with major sewer work being advanced by Metro Vancouver in Sapperton and West End, it is a good idea for us to do water upgrades at the same time, so you only have to tear the roads up once. Having a healthy reserve permits us to advance this work without borrowing money. I am asked often what the City is doing to find efficiencies and save money, this is a good example of one thing we are doing in the water utility – spending a bit now to save more money later. Our 5-year plan sees us getting back to 2023 reserve levels in the water utility by 2026 or 2027, so eroding reserves in the short term isn’t a structural budget issue, but a strategy.

Solid Waste Garbage and recycling are bit different than the other utilities, as the level of service provided to different parts of the community (house vs. strata, home vs. business, etc.) varies quite a bit, and although disposal charges handed down (mostly from Metro Vancouver) for taking in our waste still eat up almost 40% of all of our revenues, there is a much larger operational cost to solid waste. We need staff to drive those trucks and fuel for the trucks, because you can’t put your trash in a pipeline.

We have been running low reserves in the Solid Waste utility for quite some time, and are looking to build them up through this 5-year financial plan. As the “capital” is mostly trucks and bins, there is a shorter lifecycle than the pipes Water and Sewer put in the ground, so our annual Capital spend is perhaps proportionally higher than in the other utilities. However, over all the budget for Solid Waste is much smaller than the other utilities.

ElectricalOur Electrical Utility has a few unique aspects, but it functions like the other utilities we have. The electricity we purchase at wholesale from BC Hydro costs us just over half of our overall revenues, and the cost of day-to-day running of the utility costs about another 17% (or a little over $11 million). This leaves us with about a third of income that goes into our Capital Reserves or directly to the City as transfers. The transfer number here is large because it includes the dividend the City takes every year from electrical utility operational surplus and puts it in the general operational fund. This amounts to about $6 million that the City uses to offset property taxes in providing services that we otherwise wouldn’t be able to deliver.

The utility is spending a *lot* right now on a major capital upgrades. We just built a $30 Million substation in Queensborough, and are now rolling out Advanced Metering Infrastructure, which means 60,000+ new digital electrical meters and the hardware and software to integrate them into our IT network. This is a big, generational investment, and as a result we are drawing down reserves that were intentionally built up a bit to help support this work. Our 5-year Capital Plan has us building these reserves back up to the ~$37 million level by 2028, but at the same time, we are budgeting for a cumulative spend of more than $150 million in upgrading our critical electrical grid over the next 5 years. It’s a good time to be selling electricity, but it is also a challenging time to keep up with the demand for more service.

Summary
There is not a lot of change in these budgets compared to recent years, except maybe some increased capital expenditure. The annual increases are essentially the same as the last 5 or so years (sewer increase a bit higher this year, solid waste and water increases a bit smaller, both way lower than Port Coquitlam’s increases this year, but its not a competition!), and the budget drivers really don’t change – Metro Rates are going up to support their aggressive capital investments, and we pass that on. Compared to the region, our water and solid waste rates are about average (though it is hard to do apples-to-apples comparisons because all cities provide different services and rate schedules). Our sewer rates are still at the higher end regionally, because we still have a lot of older combined flow sewers. This has the double whammy of us sending more water to the plant than we should, and requiring higher capital investment to replace and upgrade those systems. Fortunately, we have been pretty successful at getting senior government grants to help offset some of those costs.

Which brings us into the discussion about the Capital Budget, which I will dive into next post.

Budget 2024 – General Operations

Posted on . by Patrick Johnstone. Leave a comment.

It’s Budget time. The City is currently approving its annual budget, which is more accurately and bureaucratically called the 2024-2028 Five Year Financial Plan Bylaw. There is a lot that goes into a budget like this, and a lot to look at, so I’m going to spend a bit of time writing about it, and hopefully opening up the details so you can understand what you are buying when you write those Property Tax and utilities cheques. I’m going to start with breaking down the various part of the budget.

To understand how we budget, you need to understand the difference between the Operational part of the budget, and the Capital part. You also need to understand the difference between General funds and Utility funds.

The Operational part is the day-to-day running of the city and the programs we offer. On the expense side this is mostly paying staff to do the work, but also includes the cost of consumables we go through as part of operations, like gas we buy to run the police cars, paper we buy to feed the photocopy machines, and things like insurance and bank charges. The money going into this part of the budget mostly comes from property taxes, but also includes grants from senior government, sales of services, and other revenue sources. This is the part of the budget people most people pay most attention to, because this is the one that results in that all-encompassing narrative around the “annual percentage tax increase”.

The Capital part is the money we are investing in the things we need to run a city: buildings, roads, sewers and pipes, a vehicle fleet and computers. We have a five-year capital plan that we periodically adjust so staff can plan out purchases and schedule construction. Every year, we take surplus money out of our operational funds and transfer it to reserves that are then, in turn, applied to pay for the things in our Capital Plan. We can also (within some regulated limits), borrow money to pay for these capital investments.

The General fund is how we budget for the general operation of City services that are funded mostly through property taxes. This is how we pay for parks and recreation services, Police and Fire services, running City Hall and the Library, bylaws operations, planning and much of our engineering services.

Separate from this are Utility funds. In New Westminster we have four separate Utilities: water, sewers and drainage, solid waste, and electrical. All of these rely on utility charges for their revenue, and are completely separate from property taxes. We spend utility money on the utility, and it isn’t mixed with “general revenue”, with two exceptions. First, there are transfers from the Utility funds to the General fund related to staff working on utility files (“internal recoveries”), and transfers the other way, because the City has to pay for its own use of utilities (“internal charges”) out of the general fund. The second exception is the annual dividend paid to the general fund from the Electrical Utility.

Here is how the General Operating fund breaks down for 2024:

On the left is “money in”, on the right is “money out”. The things “below the line” like Amortization or our Tangible Capital Assets and Internal Charges (the money our utilities charge to our General Fund account for utility services the city receives) are separated out because they aren’t really money in-out of the City, but money moving between accounts or accounting categories in the City. The biggest of these is the $23.5 million surplus which is transferred to reserves so it can pay for the Capital part of the budget, which I’ll write about later.

Some people like pie, so here are two pie diagrams: where our revenue comes from, where our expenses are allocated:

This diagram shows how some of the narratives we would like to use around our budget are not exactly accurate. Ideas like “15% of your tax dollars go to Parks” belie the idea that your residential property taxes are only 40% of our revenue. And as all of these expense items are total spending of a department, they ignore that many of these departments recover a lot of revenue through their operations through fees or other sources. The Police category is a specifically difficult item, because the NWPD pay for a lot of things (IT support, Finance staff, fleet operations) out of their budget that other departments like Planning don’t – those are captured under Corporate Services for every department that is “in City Hall”. Still , if you want to know how money in the City is spent, the pies are a start, as long as you are comfortable with all of the caveats.

Next post, I’ll write about the Utilities budgets.

Council – April 17, 2023

Posted on . by Patrick Johnstone. Leave a comment.

We had a special Council meeting on Monday, where the only item on the agenda was giving three readings to the Budget Bylaw – approval of the 5-year financial plan. We had an Opportunity to be Heard before the Bylaw was read.

This type of Opportunity to be Heard is just that, and opportunity for members of the public to tell us what they think. It’s not really a time for debate with the public, so two-way dialogue is not encouraged. Council has a pile of data in front of it, people are able to provide their ideas on that pile of data, Council makes a decision based on those inputs.

It is important to note this is not the only input the public provide to the budget. We have had on-line engagement for a while, and we have received emails and delegations in previous meetings regarding different aspects of the budget. We have had a fulsome discussion in workshops and in Council, and I appreciate the many voices I have heard in delegations, in emails, and in the many community events over the last few months. Even on my Mayor’s walk last week, residents were telling me what they see as priorities for the community.

I also appreciate the work Council have done to get themselves up to speed on the state of the City’s finances, and their active participation in the workshops we have done coinciding with budget preparation and development of a new strategic plan. Having 4 new Council Members and a new Mayor put an extra burden on staff to assure we had the information we needed to make these decisions, and impacted our timelines. It is great we can sum this work up and start working on the plan ahead.

Following my comments on the evening, there are three big parts of the budget I spoke to, and maybe I’ll follow up with a blog post with more numbers and graphs and such (when I find time), but for now I want to hit on these three points at a high level.

The first is the unprecedented Capital budget we are looking at. This means investing in a spectacular new aquatic and recreation centre, replacing 50 year old facilities with the most modern aquatic facility in the Lower Mainland, and the most efficient one ever built in Canada. We are doubling our recreation capacity, our fitness areas, and much more flexible aquatic space to support everything from Aquafit to competitive swimming to finally having the kind of fun all-ages pool young parents in our community have been longing for, all with Carbon-free energy systems and a building accessible to all. We are also investing in the Arts by making a generational commitment to save and restore the Massey Theatre not just for big shows, but a place where people can learn new skills, can rehearse, and can perform. At the same time, we are leveraging senior government supports to undertake a massive revamping of the critical infrastructure that makes our City resilient – electrical substations and modern metering technology, $11Million in water system upgrades, more than $20 Million in sewer separation program. Even the $1.5 Million we are spending on tree planting and maintenance – we are making the generational investments that our growing city needs. They are not inexpensive projects, or easy projects, but they are building a stronger city. This is what people have asked us for.

The second is how this budget addresses our real operational needs. We heard people worried about livability downtown, and are investing in the Livability Strategy that will address the most pressing concerns for residents and businesses, while we partner with the province and outside agencies to reduce the suffering resulting from overlapping housing, addiction, and mental health crises. Our community partners (the Downtown BIA, the non-profit support providers, the residents downtown) deserve to be supported by the City, and our front line staff need the resources to provide this support. This budget provides it. We are also investing in staff positions to accelerate permitting process, to help with our long-term HR needs and employee resiliency, and to support our emergency response capabilities at a time when the climate emergency is knocking on our door. These investments will let new homes get built faster, will mean more resilient emergency response, will improve the customer service experience at City Hall.

The third part is the aspect of sound fiscal management. We are making these important investments at a time of economic uncertainty. With less stable interest rates and inflation, we, as managers of the public purse, need to not think only about the needs of the day, but about the long-term needs of the community. Balancing the need to invest with debt tolerance and the need to maintain healthy reserves has never been as important as now. We cannot burden the next generation – the young families moving to New West in record numbers and the kids they are raising here – with bad fiscal decisions now, nor can we burden them by not investing in Climate resiliency.

One motion brought to the table proposed cutting $1 Million from our projected surplus to reduce the tax increase by 1%. Problem is, there is no projected surplus due to our major capital investment, so this $1 Million would be added to our debt (something one of the delegates who came to speak to council specifically warned us against) or erode our capital reserves (something our CFO has been warning us about for four months of council discussions). That is exactly the kind of kicking-the-can-down-the-road thinking that created the infrastructure deficit we are currently trying to address. Fortunately, Council did not support this change.

We have new revenue sources like the Low Carbon Fuel Credits, and have further revenue opportunities though District Energy and the trend towards increased electrification, but at the same time are not immune to the same inflationary pressures businesses and residents in our community are feeling. On the optimistic side, we have Provincial and Federal governments ready to invest in the kinds of things that we are trying to build here: Climate resiliency, livability and affordability, housing and childcare, active transportation, and urban forest. We need to be ready with the shovel-ready projects to get access to those senior government funds, and the 5-year capital plan gets us there.

So I supported the budget as proposed, as did the majority of council, and look forward to getting to work building the community New Westminster elected us to build.

Budget Amendment

Posted on . by Patrick Johnstone. 5 Comments.

Last meeting we approved a provisional budget. After several months of work by Council and much, much more by staff, a 5-year financial plan was presented that included Capital and Operational budgets for both the General Fund and the Utility Funds. The next step is for staff to forge these into Bylaws that can be read and adopted by Council – a process that needs to be completed by the end of April by regulation. But first Council has to approve the 5-year plan in principle.

In a move that is no longer surprising, an Amendment motion was proposed late in the discussion that sought to derail much of this work. Not in a way that allowed staff or Council to meaningfully deliberate the changes proposed, but in a way that appeared to be (and I’m not saying this was intent, I’m saying this is how it appeared to me, recognizing one cannot really know what is in another’s mind) more of an attempt to score talking points. And I’ll detail why I got that impression, but first, I want to talk about the Amendment.

The Amendment that arrived in front of Council at almost literally the 11th hour is a list of 12 different shifts in line items, projects, and plans in the City, with little rhyme or reason. All were framed as initiatives to reduce the burden on property taxpayers by reducing the proposed 6.4% tax increase. I cannot bury this key point, so I’ll underline it:

*Not a single item in this list, if approved, would have any effect on the proposed 6.4% tax increase. Not one.*

It is also worth emphasizing that many of the items sought to undermine years of work by different departments based on long-standing strategic plans and sometimes years of community engagement, advisory committee work, and partnerships in the community. This is not good governance.

So beyond the headlines, here’s some detail:

The biggest line item was “Eliminate $46,337,399 in funding allocated for the District Energy Project in Sapperton”, and this is emblematic of the entire Amendment.

The District Energy Utility (“DEU”) is a project the City has been working on for some time, similar to successful projects in Vancouver and Richmond. It is still conceptual, because it needs several things to come together for it to be successful, some of them outside of the control of the City (like pace of residential development and global energy prices). The City has been carefully evaluating market conditions, and has been building partnerships and raising external funding to support the financial modelling and design work. When the business case is right, when the known risks are managed, we need to be ready to move.

As we have received external funding support in anticipation of these factors coming together, we have a line item in our Capital budget to support the capital cost of building the DEU. That is the number that appears above. Cutting this from the budget means the DEU doesn’t go forward, now or ever. It seems to me good governance would include a deeper conversation about that (including with our funding partners) before we throw away years of work by striking a red line through it during budget deliberations.

Perhaps the more important aspect of this is that the DEU will not be funded by property taxes.  The “U” stands for “Utility”, and it will be operated as such. The people who will pay for the DEU are the customers of the DEU – the people and businesses of the new buildings that hook up to the DEU and receive the benefit of resilient, carbon-free, and affordable space- and water-heating provided from sewer heat recovery. The entire point of the DEU is that the capital cost (somewhere around $50 Million now, it may be more or less depending on how it is built and when) will be covered by rates paid by customers, supported by some external grants and value gained in the carbon credit market.

Cutting this out of the budget now and spiking the project on a whim will do nothing to change property tax rates, now or in the future.

There is also a line item here that suggests we “Eliminate $15,321,089 in funds earmarked for the installation of advanced ‘smart’ meters”, effectively ending the Advanced Meter Infrastructure (AMI) project.

Again, this is a capital project paid through Electrical Utility rates, so it will not impact Property Tax rates, but that is not the most baffling part. The City has already invested in the IT work to support integration of digital meters, and we have already signed the contract to purchase 40,000 next-generation electrical meters. Taking away the Capital budget for their installation and integration now is a strange request, as we already own the meters. They would become very expensive doorstops.

But let’s talk about the Advanced Meter initiative, and why we are doing it, because not all of you have the benefit of lengthy onboarding that the Councillor moving this Amendment had access to, or serve on the Electrical Commission like the Councillor who seconded the Motion does.

The City’s electrical meters are old and overdue for replacement. The mechanical meter technology we rely on is harder and harder to get inspected and certified by the regulators, because of their age. They are becoming less reliable, and repairs are challenging. At the same time, Utility customers have been asking the Electrical Utility for more information about energy use, more consistent billing, and even more innovative rate structures to support EV integration, building electrification, and conservation. We can do none of these things relying on 1950’s technology meters. Even if you don’t think digital meters are a good thing, and don’t value those benefits, I don’t think throwing away the investment already made in new meters and keeping the failing older technology in place provides any benefit at all to utility ratepayers.

There are other items in this list that are out of left field like cutting $2M from the BridgeNet capital plan (another thing not paid for by property tax payers, but by service users and ISP partners, who maybe we should talk to before we toss away our development plan?) to a random cut of almost $5 Million in the Capital budget to make long-needed improvements to the sidewalks and commercial streets through the Great Streets program. Some other line items point to familiar grievances like the Queens Park Farm upgrades (not sure why a motion to not update the farm area after two years of consultation and design work that failed earlier in the day during workshop ended up back here only hours later to fail again?) or adding a few hundred thousand dollars to the whistle cessation line item (when staff have repeatedly made clear it’s not lack of money that is preventing faster implementation of whistle cessation).

It is important to note that none of the numbers in this laundry list have been verified, nor has there been any analysis of the impacts of these cuts on existing programs, on long-term strategic plans, or on the people and businesses of New Westminster. No public consultation, no business analysis. Just randm numbers on a sheet of paper.

This is why several Councillors, surprised and confused by the suggestions, fell to using language like slapdash, knee-jerk, and crazy when referring to the content of the Amendment, and why Council, in its wisdom, voted this down.

There is another conversation to have here about intent, and that is harder. Especially when one sees the first proposed change: “Establish a $1 budget for the City’s rebranding for the rebranding process aimed at eliminating the Royal City moniker”. We didn’t debate this in Council, but it is not difficult to infer intent here. But I am going to hold off on talking about that for now, because I don’t want that necessarily-political discussion to distract from the cold facts above about why the Amendment was misdirected, misinformed, and unsupportable.

on reserves

Posted on . by Patrick Johnstone. Leave a comment.

The discussions about municipal budgets are ongoing across the region, As it is budget time, and as the Province has decided to flip $1 Billion to local governments right in the middle of that budget period, which will lead to some interesting conversions in every muncipal hall. Some Councils will see it as a windfall to be spent on new things, some will use it for political cover for questionable decisions, some will prudently invest, others will go full populist. A real Marshmallow Test for local government.

Among the stories, this one popped out to me. PoCo is getting a reputation for artfully blending populism with prudent investment, but the bigger question about balancing reserves is something that every city neeeds to grapple with. The McElroy story caused me to dig deeper into reserve levels across the region, so I can test my preconceived notions about New Westminster’s relative financial health. As always, I want to preface this by saying it is not a competition, as every municipality has its own pressures, its own priorities and its own way to serve their populace. In comparing ourselves to our regional cohort, I want to get a sense of where we are doing better or worse to inform our priority setting while approving a budget.

I am once again leaning on the BC Government Local Government Financial Statistics, which are reported in a more-or-less consistent way every year. This is not my data, but the data provided by law to the Province by local governments every year. When it comes to Financial Assets, Reserves, and Tangible Capital Assets, all data is pulled form Schedules 301, 302, 404, and 503. Got a problem with the numbers? Take it up there.

Every City reports Financial Assets (the money in their savings and chequing accounts) and their financial liabilities (their mortgages and loans). The difference between them is reported as “net financial reserves”, which is the number McElroy was pointing to in that story above. These are the reported numbers for the 17 major Municipalities in Greater Vancouver (sorry, Belcarra) in the most recent reporting year, which is the end of 2021:

But perhaps a better way to look at it is to subtract the liabilities form the assets, so you can compare the Net Reserves:

Some things are not surprising: Vancouver has the most money, and the most debt. Burnaby has the highest net neserves, and Richmond and Coquitlam are both doing really well if money-in-the-bank is your preferred measure. Indeed, PoCo has the lowest net, with New West a little below the middle, but there is a trend following population, as you might expect, with smaller Munis over on the right, larger towards the left. So let’s calculate the net reserves per capita using 2021 Census data:

Burnaby still way up there (with $7,700 in net reserves per resident), and New Westminster shifting further over to the right (with $972 per resident). PoCo in this measure is not the lowest, but is pretty closely clustered with Surrey and the Township of Langley at under $500 per resident.

This is interesting, but does not really reflect the purpose of reserves. Part of it is to demonstrate financial health to make it easier to borrow money, but part of it is also to have sufficient cash on hand to address unexpected future costs. Mostly those costs are related to capital replacement, so it is more useful to compare your reserves to the value of your capital assets. This is the value of the roads, buildings, pipes, computers, vehicles and all of the “stuff” your City owns and operates. Schedule 503 provides these numbers as reported by the City every year. This chart shows the reserves as a percentage of the net book value of our tangible capital assets:

There needs to be a big caveat here. Though a fundamental measure of your reserves vs the value of your capital assets is a measure of financial resiliency (our finance staff have suggested 10% of the asset value is a good minimum benchmark), the denominator of the equation needs to be viewed with a certain skepticism. This is because local governments have not historically been very good at evaluating the true value of their capital assets, and that might take me down the rabbit hole of talking about asset management, which is probably another blog post on its own.

Just to create a sense of comparison, here are the net reserves per capita and relative to tangible capital assets, plotted as a scatter. Somewhere in here is a trend. I added the green dot to show the “average” for the region:

Finally, part of the conversation about reserves is the direction they are moving. Are we building them, or are we depleting them? Luckily the province provides data going back a few years in their Schedules 404. To compare across cities of varying size, I indexed the reserves value based on their 2012 value so we can see the decade-long trend. Problem is, a couple of Municipalities (Vancouver and West Van) had negative reserves in 2012, which makes it hard to compare this way, so I removed them from the data set. Suffice to say, their increase over the last decade has been proportionally much higher than all others (they would be well off the top of this chart). But for the rest of us, you can see most Munis are in building phases, and only one has fewer reseves than a decade ago:

The comparison over a decade is valuable, because reserves serve another function – they are where a City stores some money for big capital investments, like a recreation centre or a new City Hall. And when a City borrows to build a new capital asset, that downward pressure on net reserves is felt for several years. New West has been growing reserves in the last couple of years in recognition that təməsew̓txʷ and it’s $114 Million investment will have this impact on our net.

So, comparatively? New West has lower-than-average reserves by most measures, has been building them, but has a big capital investment that will put downward pressure on these reserves in the years ahead. That should inform some of our thinking about future investments in the City and our ability to make expensive promises.

Bad Data. Again.

Posted on . by Patrick Johnstone. 1 Comment.

The Fraser Institute are up to their old tricks: shabby data gathering resulting in inaccurate results. I’ve demonstrated this before, and even sent them a letter outlining the big mistake they made last time they did this (not coincidentally four years ago, just before the last municipal election), and they have blithely made the same mistake again. So here I am to correct the record. Again.

The Record shingled this story into my social media feeds, and it speaks to this report prepared by the Fraser Institute. The report attempts to compare “spending per capita” and “revenue per capita” across the 17 largest municipalities in Greater Vancouver. I’ve said before, this is not a competition, but on the face of it, this isn’t the worst way to look at whether residents in various municipalities are getting value for their tax dollar. There are a few problems with over-simplification (I’ll talk about those further down), but as a first pass it is an interesting easy-to digest media byte.

The problem is, New Westminster, unlike any of the other 16 municipalities listed, has an electrical utility, and the data used by the FI rolls that Electrical Utility into the overall revenue and spending amount. Residents of every other city pay for electricity, but it is not included in these comparisons. This is not an insignificant difference. New West Electric pulls almost $50 Million in revenue ($622 per capita), and spends more than $40M ($505 per capita) every year.

So, much like I did last time, we can adjust for this significant factor, and shift the FI charts to reflect an apples-to-apples comparison. You see New West, when fairly compared, does not have the second highest spending in the region, but is tied with North Van City for 8th place, firmly in the middle of the pack:

Table from Fraser Institute report, modified to show how New West compares when the $40.6M in annual Electrical Utility spending is removed, allowing a true apples-to-apples comparison with other municipalities that do not have an electrical utility.

And when fairly compared, New West does not have the second highest per capita revenue in the region, but instead tenth, slightly below the regional average:

Table from Fraser Institute report, modified to show how New West compares when the $50 M in annual Electrical Utility revenue is removed, allowing a true apples-to-apples comparison with other municipalities that do not have an electrical utility.

The FI also conflates all revenue sources. This is problematic, because they vary greatly across the region. Municipalities have different fees for services and different ways of managing utilities. Also, as this is a data snapshot for only one year, factors like one-time senior government grants or sale of properties in any given year can really juice the numbers and make apples-to-apples difficult. When fans of FI reports talk about City spending, they are usually worried about taxes, so it is fortunate that the same government database from which the FI draws their numbers breaks down the revenue sources. It is easy to separate out Property Tax revenues from the pile, and compare on a per-capita basis. When you do that, you see New Westminster is one of the (and I totally buried the lede here) lowest-taxed municipalities on a per capita basis in the Lower Mainland:

Comparison of Revenue from Taxation across the lower mainland. Population Estimates same as used in Fraser Institute report cited above, taxation data source is BC Government Schedule 401_2019, column D “Total Own Purpose Taxation and Grants in Lieu”. available here: https://www2.gov.bc.ca/gov/content/governments/local-governments/facts-framework/statistics/statistics

And in case you are interested, here is that data in tabular form:

Now onto the detail part for those still interested.

I find the lack of adjustment for the electrical utility fascinating, not only because I pointed it out to them last time, but also because they do make and adjustment for the West Vancouver Blue bus system – a single-municipality expense and revenue stream. If you compare the FI data to the government database, you find West Van expenses are actually higher (by $417 per capita for spending and $910 per capita for revenue) than the FI report. They make that adjustment for West Van blue bus, but not for New West Electrical. This seems inconsistent.

Looking at the government database also demonstrates the problem with using snapshot data for one year. Line items in spending like “loss on disposition of assets” sound technocratic, but it is writing off value of assets either destroyed or sold off, and it varies across the region year by year as you might imagine. Add to this annual amortization adjustment, and cities with lots of physical assets (like Vancouver) and those that have invested recently in important infrastructure are disproportionately cast as spendthrifts. On the revenue side, one-time grants for big projects may be counted in this year data, but not reflect overall revenue generation ability. In 2019, Coquitlam sold $60 Million in assets – more than every other municipality combined – but that is not an annual (or sustainable) trend and does not reflect any long-term economic comparison between Coquitlam and any other municipality.

So the comparison is sloppy. And as much as I would like to counter some critics with the table that shows New Westminster spending growth over my time on Council as one of the lowest in the region (and, notably, much lower than the 18% cumulative inflation of the 10 years ), the way the FI presents data is so poorly explained that I don’t even feel good using it to tell a story that makes New West look like the kind of fiscally responsible municipality the FI would allege to support:

Table copied directly from the Fraser Institute report cited above. The only thing I added was the red arrow.

I just want the FI to do be fair, and the local and regional media to do a little bit of preliminary analysis before they credulously print their press release. After years of this kind of sloppy work the FI deserve to be treated with more scrutiny.

Budget 2022

Posted on . by Patrick Johnstone. Leave a comment.

One of the changes we have made in the City in recent years is moving the budgeting period up a little, meaning we are able to get the 5-year Financial Plan bylaw through Council in January, where we used to do it a little later in the spring. The true deadline for us to get this work done is the annual financial reporting deadline to the province that comes in May, but it is better practice for us to do this work earlier in the year so that staff can more easily develop annual work plans around an approved budget, which will hopefully lead to some efficiencies and make it easier to get things done in City Hall.

Council gave first readings to the 5-year financial plan last meeting, which means the budget is, effectively, passed. The headline (4.4% tax increase) has already been told, but I promised to write a bit more the Budget and how we got there. The 2022 budget part of the 5-Year Financial Plan looks like this:

On the revenue side, we are anticipating an overall 8.9% increase in revenues over the 2021 budget, with the increase in property tax revenue at 4.4% (after all, only about 37% of the City’s revenue comes from property taxes). As has been much discussed, New West is unique in having an electrical utility, so that $50+ Million in annual revenue always makes it look like our revenue per capita or per household is higher than other cities in the lower mainland, when we are usually about average after adjusting for the Electrical revenues, but that’s a topic for another blog post.

On the expenses side, this is where the City is spending that money. 2022 Expenses are about 4.8% higher than last year:

The biggest change this year in our General Fund (the part property taxes go toward) is to insurance rates. As always, we are subject to inflation on everything we buy, and inflation was high this year for the things cities like to buy, from fuel to lumber (our “basket of goods” is quite a bit different than the CPI). So a tax increase equaling 2.7% (out of the total 4.4%) is a combination of negotiated wage increases in the 2% range and inflationary increases in the cost of the business of running a City. On top of that, the same global insurance market situation that has caused your Condo and/or house insurance to skyrocket is also impacting the City. We will be paying $1.5 Million more on insurance in 2022 than 2021, which adds another 1.6% to the tax increase on that line item alone. We had a few service enhancements adding up to the equivalent of about another 0.8% increase, but saved some money in not operating the CGP and staff found some other savings in internal functions, meaning we effectively offset most of that 0.8% with savings.

On the utility side, we are seeing a continued trend toward increases higher than CPI, driven by increases in regional utility service costs and our need to keep the local assets maintained. I wrote about how our Utility funds work with some flow charts to show where the money goes a few years ago here, and though the numbers have gone up a bit, the effect is the same. Notably, both in the Water and Sewer we are a little ahead in both capital spending and building up our reserves than we were back when I drew those diagrams, so the financial health of the utilities is improving faster than expected, which I hope translates to a moderation in rate increases in the years ahead.

With $262M in Revenues and $216M in Expenses, we end up with a budgeted $46M increase in financial equity. But it would be premature to call that profit, because diligent readers will remember my constantly talking about our aggressive Capital Plan, which requires us to be converting that equity into capital assets, better translated as “building stuff”. The big number to note in the reconciliation of assets part of the table is the $170M in Capital expenses. it bears repeating that this is the big year for a couple of capital projects. We are budgeting $54M in 2022 towards the təməsew̓txʷ Aquatic Centre, almost $43M in upgrades to the electrical grid (including a new substation in Q’boro and replacing all of our meters), $7M in road rehab and $6M in new mobility lanes. If you want details on everything, look at the tables of planned capital expenses starting on page 64 of this report (warning – it’s a big download). It’s all there. More graphically, the $170M 2022 budgeted capital pan looks like this (with the black square representing $1M):

So, the City may plan to put $46M into reserves this year, but we also plant to take $76M out of reserves to pay for about half of that capital plan. This is based on a strategy that balances between drawing from reserves (“spending our savings”), borrowing against the asset value with long-term debt (“securing a mortgage”), and getting others to pay for it (grants form senior governments, money from developers through DCCs, etc.). I’ve written about how municipalities approach this balance in this older blog post. In practice, the balance looks like this:

So to wrap up, the City of New West is once again somewhere in the middle in the region as far as tax rate increases, has weathered the economic uncertainty of the pandemic, and is moving ahead aggressively with some long-awaited capital improvements.

Police Budget redux

Posted on . by Patrick Johnstone. 3 Comments.

We had a full Council meeting on Monday, with several important topics on the agenda, But I am really busy his week, and I want to write about this one first and separately, because it seems to have caught a little media attention, and wouldn’t hurt from a more detailed discussion.

Before I start, I want to do one of my regular reminders that this blog is, as always, my personal opinion, and not official City communications. There are a spectrum of opinions on Council about this, and we have had a few split votes, so I don’t want anyone to think I am providing an official position of council, or that I am speaking for my Council colleagues. I respect where my colleagues are coming from here, this is a difficult topic, and will try really hard to avoid putting word in their mouths. There is a video available if you want to hear the full discussion.

New Westminster Municipal Police Board letter dated January 25, 2021 regarding New Westminster Police Department 2021 Budget
The Police Board has replied to Council’s previous request that they review their enhancement requests and revise the budget increase requested for 2021. They have replied with the assertion that the requested 2.9% increase is inflationary and does not support increasing police services, but maintains the status quo as far as service levels. That is an unfortunate turn of phrase, because the entire point of this discussion is that status quo needs to be challenged, but I don’t want to get mired in pedantry.

I’ve written previously in this post and this post about the jurisdictional challenges here. In short, Council has no authority to direct how police do their work, or even how they allocate their budget, that is the job of the Police Board. Council are required by law to approve a budget. If we do not approve the one offered by the Police Board, then the Minister of Public Safety is asked to adjudicate. In the past when Councils have not agreed with Police Board requests, the Minister has always sided with the Police Board. We know where this was going.

I had honestly hoped that the Police Board would come back to us with an adjusted budget, or a more detailed explanation of where their specific budget pressures are. They did not really do that. They did make it clear, however, that this was the budget they were offering. It did not include all of the enhancements (which is the term we use in municipal budgeting for “things we want to do/pay for this year that we didn’t do/pay for last year”) they were originally looking for when the budget process began, but it similarly did not represent an increase in service levels. It effectively equaled an inflation adjustment over last year. It is hard for me to challenge this, as one of the uncertainties I feel on Council is that the scale and nature of the Police budget is not as transparent to us or the voting public as most the rest of the City budget. This is by design of the Police Act, and it is troubling.

For those so interested, there is more information about the budget available in the Police Board agenda, which you can read here: (the “package” is the agenda with the attached reports and police budget tables).

If you read the correspondence between the Police Board and Council here, it seems we agree on a few principles. The Police Board acknowledges that aspects of the services they currently provide may be better provided by a non-policing model, and if you draw a Venn diagram of how this overlaps with “Police Reform”, it certainly wouldn’t be a circle. However, The Police Board strongly feels that until those alternative delivery models are in place, they cannot responsibly suspend, or in any way reduce, the current delivery model. This puts us in a chicken-and-egg quandary, as there is currently no one with the jurisdiction, resources, and willingness to bring those delivery models into place. So it could seem we are stuck.

Ultimately, change is going to require the Police Board to resource some review of their internal operations. It is going to require Local Governments to identify how their residents want services delivered, and potentially to see what services the Local Government can deliver and fund though alternative models. Mostly, it is going to require the Provincial Government to reform the Police Act, and to resource the Health Authorities, the Ministry of Mental Health and Addictions, and potentially other agencies to deliver their resources differently. This is going to take coordination, and cooperation.

The good news is that everyone is signaling that they want to do this. The New West Police Board has sent us some more details about their plan to begin addressing this process. It isn’t perfect, but it is clear in its intent. The Provincial Government has also begun to work on a Police Act reform consultation, and the City of New Westminster has made it clear to them that we want in at the ground floor on those discussions – we are the right City to be in the center of this, with our own Police Force, a very proactive group of community service agencies, and all partners willing to see change.

So, to get back to the decision before Council, the options now were to approve the budget presented by the Police Board or not. There is no mandate for negotiation. As much as I want to push for systemic changes that the Board is alluding to, that Council and the public have asked for, and that may arise from the provincial Police Act review, I am not sure these ends are served by the Police Board spending the next few months engaging in a Provincial Government appeal process to get their budget approved. This feels like time wasted when it seems certain the Province will deliver the budget the Police Board requests. There may be a message to be sent by forcing the Public Safety Minister to issue that order, but I think we have other pathways to send that message, including two new MLAs who are in a caucus with that Minister and are itching to represent New Westminster in Victoria.

So I voted to support the budget as proposed, and supported Councillor McEvoy’s follow-up motion to call on the Police Board to be more proactive in engaging with Council and the Community in the work we all agree needs to be done. I hope we can use our time more effectively rowing in the same direction, and I expect the Police Board to be accountable to the community they serve for the commitments they have made to the community along with asking for this maintaining budget.