Tag: 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.

Assessments 2021

Posted on . by Patrick Johnstone. Leave a comment.

Assessments are here. For those who own homes, this means a letter arrived in the mail telling you what the assessed value of your property was on July 1, 2019. It also tells you what the assessed value was over the previous three years. Some people are very upset to find their property has gone up in value, which means their property taxes are going up. Others are very upset that their assessed value has gone down, and their investment is losing value. At least, that is what I glean from Social Media, but maybe I need to get out more.

I have written before about the relationship between property assessment and property taxes, and about how the assessment process works, so this will be a bit of an update/summary of those posts. A bit of redundancy, but with new numbers.

First off, your assessment does impact your property taxes, but not as directly as you may think. The City has not passed a 2021 budget, so I do not yet know what the 2021 Property Tax rates will be, but in our last discussions, we seemed to be settling towards something like a 4.9% increase over 2020. I will round that up to 5.0% for the purposes of this discussion as long as we can all agree that is speculative and the numbers may change between now and when you get the bill.

That 5% means the amount of revenue the City will receive in property taxes from existing taxpayers will go up 5%, but it does not mean the cheque you write in July will necessarily be 5% higher than the one you wrote in 2020. First off, it only impacts the portion of property taxes that the City gets to keep. Last year, your residential Property Tax Bill looked like this:

So 58% of your property tax goes to the City, 35% to the provincial government through the School Tax, and about 7% to other agencies regulated by the provincial government. Everything else I talk about below here relates only to that to-the-City portion of the tax bill. To find out how the School Tax is set or how the BC Assessment Authority spends it’s 1%, you need to go to someone else’s blog. All this to say if the City put your municipal property taxes up by 5%, the amount of money you pay only goes up about 2.9% (that is, 5% of 58%).

If you look at your Property Assessment letter, you will note that the average change in property values in the City of New Westminster was a 3% increase. Because the City calculates its property tax rate based on this average value, a 5% increase will be based on this value. If your house went up in value by the average, then a 5% tax increase means the municipal portion of your property tax bill will go up 5%. The relationship between these two numbers is linear, so to calculate your potential increase, subtract the average value increase from your own value increase, and add the 5% increase the City is proposing:

My assessment (1940 SFD on a 5,300sqft lot in the Brow) actually went down by 11% since last year. So my Municipal taxes would go down by (-11)-(3)+5=  –9%.

My friend in Sapperton (1920 SFD on a 4,000sqft lot) saw her assessment go up by 20% over last year, so her Municipal taxes would go up by (20)-(3)+5= 22%.  Yikes.

Assessment is a dark science, and every year there are weird local effects of property values in one neighbourhood going up or down relative to others, and it is not always clear what the causes of these changes are. A recent example is the Heritage Conservation Area in Queens Park which was either going to cause housing prices to go through the roof and make the neighbourhood forever inaccessible to young families, or was going to crater the value of the houses dooming young families to inescapable debt, again depending on which Social Media account you followed. The reality is, it had little perceptible effect when compared to similar properties in Glenbrook North or the West End over the last 5 years. The market is bigger than one neighbourhood.

Properties actually sell “above assessed value” or “below assessed value”, a metric that is often used as an indicator of a market trend, since assessments are always at least 6 months old. However, it is important to remember that, in aggregate, things just don’t shift as much as they do in one-off conditions. If the person up your street who spent $50,000 on a new kitchen sells their house, they are likely to get more than the neighbour who has a black mold farm in the basement, even though both houses may look the same from the outside. Assessments are approximations of how the “typical” or median house of the size, age, and lot dimensions in your neighbourhood should be valued, not an evaluation of your wainscoting. Individual results may vary.

If you think your increase or decrease this year is unfair, there is a process to appeal your assessment, but you can’t dawdle. Local governments have to know the official assessed values by April so we can set our tax rates and get those cheery bills into the mail, so the Assessment Authority has to provide official numbers by the end of March. Therefore you only have until February 1st to file an appeal, but if you think you might want to do so, you should contact BC Assessment immediately and get the details about what you need in order to make that appeal. The important part is that the onus is on you to provide evidence that the appeal is wrong, not vice versa.

Police budget

Posted on . by Patrick Johnstone. Leave a comment.

Last week we had a Council workshop on the budget. After a couple of previous workshops, and backed up by a pile of reports on different aspects of both the Capital and Operating plans for 2021 and beyond, staff brought us a presentation with an outline of the budget they would like to bring to Council for approval. The basic asks from staff were: do you have the info you need to make this decision, and are there any significant changes you need to see before we ask you to vote on this in a subsequent meeting?

The answers were basically yes and yes.

But I’m not going to go over the budget material again here today. It has shifted a bit since I wrote these Blog posts on the Capital, Utilities, and Operational budget, and there may be some minor adjusting yet, and when the final documents get to Council for approval, I will come back to report on that.

The one part coming out of those discussions that garnered a lot of attention was a motion to freeze the Police operational budget at 2020 levels. In short, the Police budget in 2020 was $31.6 Million and the requested budget for 2021 was $33.3 Million, an increase of $1.73 Million, or about 5.5%. As I have written about in earlier discussions of the Operational budget, some of this is a baked in increase due to inflation and annual wage increases, some of it is “enhancements”, which are new costs related to new programs or changes in how the department operates. It is also a little more complicated because some of these costs (about $650K) are anticipated to be offset by new non-property-tax revenue, as some of the activities the Police Department does are revenue-generating.

The requested “enhancements” for 2021 were pretty modest, $90,000 for a new Temporary Full Time position to hire someone to coordinate the Diversity Equity, Inclusion, and Anti-Racism (“DIEAR”) plan that arose from the recent Police Board Motion on these issues, and $44,000 to pay for increased PPE and Naloxone, which apparently used to be funded by the provincial government, but is no longer. In Council’s discussion of these enhancements, it was questioned whether the DIEAR work should be under the Police budget or the City’s HR budget (as the City is undergoing similar work and the two streams really need to be aligned). No-one opposed the spending on Naloxone, though I may lament that the Province should not be downloading this cost on to local governments.

Again, it is worth reviewing again what I wrote about in the summer. The Police Act makes a clear distinction between the roles of City Council and the Police Board. Council is not meant to oversee the operations of police, but are required to approve a budget for police. The budget is first put together by the Police Board (well, in reality, put together by the police department and approved by the Police Board, much like how City staff put together the City budget and ask Council to approve it) then brought to Council to be included in our budget. As a Council, we have essentially no say in how the Police spend the budget they are provided. Though there is some reporting every year of operational details from Police, and we do have occasional (maybe once a year?) Council-Police Board meetings, from a numbers point of view this is the level of detail that City Council gets when asked to approve a police budget:

We also go through the requests for additions to the Capital budget. The police service Capital budget request for 2021 was this, which mostly represents replacement of heavily used equipment as it approaches end-of-life:

The discussion at Council about these requests was mostly around when the best time to shift the types and number of vehicles we purchase in order to achieve our larger Climate Action goals. Police fleets as they exist are a real trouble spot for de-carbonizing our vehicle operations, as electric or even plug-in Hybrid vehicles essentially don’t exist in North American police fleets (Google low-emissions Police vehicles, and the majority of hits are from the UK, for some strange reason that is taking me way off track here…). In the end, Council voted to support all of the $1.3M in Police Capital requests, so the rest of the conversation here is the about operational budget.

During budget deliberations over the last few weeks, there has been more scrutiny of the Police Budget than I remember in previous years. Of course, this is in context of the larger conversation around North America about policing, about the impacts our model of policing disproportionally has on Black and (in Canada especially) Indigenous people and on populations made vulnerable by the overlapping crises of a poisoned drug supply, a failing mental health system, and increasing economic disparity as we endure a fourth decade of this grand neo-liberalism experiment. I hear the calls for change, and the questioning if the Police are the right organization to be at the front line addressing these crises in our community. The center of those discussions was the idea of shifting resources from policing to other ways to address the community impacts of these crises.

When the motion came forward to freeze the NWPD operation budget at 2020 levels, the motion did not come out of “Left Field”, but was a natural extension of the conversation the community (not just in New Westminster) has been having over the last year, and was written in the undercurrent of our budget deliberations over the last month. During the spirited Council debate on the issue, I was compelled by the strength of the arguments for making this move at this time, and I thank my Council colleagues for that (As always, I don’t want to speak on their behalf, you can watch the video yourself is you want to follow the tenor of the conversations).

If we agree (and I do) that we need a different model to address the impacts of addiction, mental health, and poverty in our community, that the status quo needs to change, then this is one of the few places where we, as a City Council, can force that change. So much of the increases in City budgets in recent years has been finding other ways to help with these problems in our community, even when those things are outside of our jurisdiction – we are spending the money because someone has to. We are helping provide community-based health care in our support of the Umbrella Co-op, we are helping reduce homelessness in supporting the Rent Bank, we are helping reduce the impact of the poisoned drug supply with funding of Naloxone for our fire department and in working with Fraser Health to establish safe consumption sites in the City. So much of the emphasis of our COVID response was in assuring the most vulnerable in our community have access to the supports they need – because we know they are going to feel the impacts of COVID the most. Emergency shelter, food security, seniors outreach, access to washrooms and hygene for unhoused people, the list goes on. As do the demands. This is what we need to fund to be a just and safe community for all.

So when asked “what are you going to do instead”, those are the beginning of the answers. We also need to be holding the new Provincial Government’s feet to the fire about the downloading aspects of expecting local governments to fund these things, and we need to keep pushing for the legislative changes needed to help the most vulnerable in our community. They are moving in the right direction, but it simply isn’t fast enough, and it is not clear to me that they are really committed to spending the money that needs to be spent.

This is hard. This is not a decision made lightly, or for unthoughtful reasons. It is also difficult to have conversations about these issues because so much of the public rhetoric about policing and police reform is polarized and lacking in both civics and civility. But I’m hopeful we can have a respectful and productive conversation between Council, the Police Board, and the Province about where we go from here. The idea that New Westminster could go from having an truly innovative police service (and we do) to having a transformational approach to policing, to even be a “pilot city” for new approaches at a time when the Province is talking about changes to the Police Act, is an opportunity I think we should embrace.

Budget 2021 – part 3

Posted on . by Patrick Johnstone. Leave a comment.

We had another budget workshop last week, and I’m sorry I’m so late getting to writing about it, but the usual level of chaos in my life was amped up a bit by too many meetings this week, including a chance to Fan-Boy on the two best “City beat” reporters in BC.

In the November 23rd workshop, Council took a first review of the Operating Budget. This is the money we spend day to day in the operations of the City. Not the buildings and equipment we use, but the staff in those buildings and the fuel for that equipment. And this is the budget that relates directly to the tax rate calculation for next year. One of the complicating factors in how we assess “the budget” is that we really have more than one. I have already talked about the Capital Budget and I already talked about Utilities, so I am going to ignore both of those as much as I can and talk just about Operations here.

The math form the 2020 budget looks like this:

So about 70% of our revenue in the general Operations Fund (aside from utility rates) comes from your property taxes. We also make money selling services (like concession stand hot dogs, swimming fees, and parking), a bit from senior government grants, more from “contributions” (casino money, etc.), and “Other” (which includes license fees, permitting fees, fines, interest on savings, an such). You can see the departmental breakdown of where the money is spent (in this case, shown without utility spending), and the breakdown of what we spend the money on (about 50% paying people, 35% buying stuff, 15% on financial stuff like amortization and interest).

2020 was (no surprise) a challenging year. Revenues fell short by almost $4 Million in sales of services (recreation fees, Anvil events, parking), an equal amount in lost Casino revenue, and about $1 million in other revenues. We also had significant operation savings, especially in staff costs related to not having to hire auxiliary staff to provide those suspended services like recreation classes, reduced training costs and suspensions of hiring at the peak of the Pandemic. We also had some unexpected costs related to the Pier Park fire and operating the Emergency Operations Centre for Pandemic response. The emergency Pandemic support money provided by the Province and Federal Government definitely helped and it looks like we are going to be in ok financial shape at the end of the year. We got through.

That said, we are not home and dry. To quote Ford Prefect, “We could not even be said to be home and vigorously toweling ourselves off.” The Pandemic is still here, and is still impacting our function and our finances. This makes modelling for 2021 difficult. We don’t know when revenues will come back, and certainly expenses are going to come back faster. We have to make some assumptions, and have to be conservative about those to keep ourselves from getting into financial trouble. We are assuming that $5 million of casino revenues are not coming back next year, that recreation programs and other sales of service will still be curtailed to the tune of $1.8M, and that we will be spending $550,000 on COVID response programs.

Once we set that as a baseline, we can project the “fixed” cost increases in the City related to already negotiated annual salary increases and inflation, which will be about $2.1 Million above 2020, and that our Capital Program as currently envisioned (mostly, that we break ground on the CGP replacement) will cause about $1.6 Million in debt financing costs. Staff have identified about $1 Million in operational efficiencies or savings, and have identified $3 Million in potential budget “enhancements” (new stuff we could do, or new staff we may need to meet the strategic goals set out be Council). Put that together, you end up with about a 6.3% tax increase in 2021. Yes, Council asked for  lot of stuff over the last year.

If we don’t want the tax increase to be that big, we need to cut some stuff from the budget, which is what most of the conversation from this point forward will be about. We spent some of the workshop discussion various “enhancements” and hearing reports from staff about their departmental operations and pressures that would either support or not those “enhancements”. When we get back together on December 7th, staff will have hopefully worked through those comments and come back with a draft budget that we can then start adjusting.

So all that to say, there is a *lot* of information in the public reports about the budget you can read here, and lots of it was related in the public meeting the video of which you can see here, and we have some work to do.

Budget 2021 – part 2

Posted on . by Patrick Johnstone. 3 Comments.

I wrote a bit about last week’s Council Workshop on the Capital Budget a few days ago, complete with some ugly pies. This post I am going to write about the second half of that presentation – the draft utility budgets for 2021.

As I have mentioned before, the City has more than one budget. The General Fund is all of the stuff we do to provide general City services, from parks and recreation to police and fire services to fixing potholes and supporting arts. The General Fund has a few funding sources including senior government contributions and fees related to permits or parking or fitness classes, but the bulk of it comes from property taxes. In that sense, it is the big fund that Council has close-to-unlimited authority to spend on providing a suite of services.

The Utility Funds are different, and are accounted differently. Outside of occasional senior government grant programs, all of what you pay for water, sewer, or solid waste, goes directly to paying to provide those services. No property tax is used to pay for providing those services, and paying for those services does not offset property taxes. (I am purposely putting our Electrical Utility aside, because it is unique in New West, as I’ve talked about before).

Utility rates are going up faster than property taxes. This is not because of Council largesse or pet projects, but because the cost of delivering these services is going up. To be more accurate, the cost for delivering these services *sustainably* is going up. More on that below.

I did some posts a couple of years ago that used a type of flow diagram to show what happens to the money you spend on your water, sewer, and solid waste bills. The numbers have gotten a little larger, but the proportions have stayed about the same, so the diagrams are still useful even if I don’t have the time or energy to update them right now.

Keep in mind that like all of our budgeting, the law tells us to create a 5-year budget plan. We update this plan every year, so even though we are currently looking to approve 2021-2025 budgets, we are really only approving the 2021 rate increases. The future rate increases are projected in order to inform our planning, but the rate increases in 2022 and beyond are really up to the discretion of future Councils. With that in mind, here is where we see the budgets going.

Water
We foresee collecting just under $15 Million in water fees this year, compared to $13.7M in last year’s budget. That is about a 10% increase. Part of that will come from selling more water (the City is growing), and the rest from a 7% increase in water rates. Here’s where the money is projected to go:

Water is the money we pay Metro Vancouver for the water in the pipes. Operations is the cost of running the utility day to day (staff, materials, power, water quality testing, etc.). Capital is the cost of replacing or building new pipes, valves, meters, hydrants, and all the hard parts that keep water flowing. Transfers are the exchange of money between the Water Utility and the General budget of the City. The “City” buys water from the Utility to run city hall, arenas, the pools, watering flowers, etc. At the same time, the Water Utility uses City equipment and personnel to do some of their work – from billing to road crews, and because the Utility by law must be separate from the General fund, these transfers must be accounted for. Every year, the Utility uses a little more City services than it collects from us in water charges. Finally, Reserves are the money the Utility puts aside in a reserve fund for a variety of purposes, which I will talk about below.

Sewers
We foresee collecting just over $24 Million in sewer fees this year, compared to about $22.5 Million in 2020. That is about a 7% increase. We are also projecting to collect another $3.6 Million in DCC money and capital grants (I talk about how that works here). That will predominantly come from a 7% increase in sewer rates. Here is where we expect that money to go:

With the same categories as water above (instead of paying for water, we are charged by volume by Metro Vancouver for the treatment of our waste water), you can see it is a little different. We are budgeting for a much bigger capital expenditure in 2021 for sewers, and we are actually going to dip a bit into our reserves to pay for that – which is why I put the blue box with the arrow above the line there to show the offset of costs from dipping into reserves.

Solid Waste
We foresee collecting $3.74M in users fees this year, compared to $3.35 Million last year (we also collect other revenue of a little under a million dollars in this utility) the utility rate increase works out to about 12%. Here’s where the money is projected to go:

You can see the solid waste utility works different that water and sewer. Though the per-tonne “tipping cost” of depositing waste at Metro Vancouver and private facilities is significant and going up, there is much more operational and transfer costs than other utilities. This is because of the nature of the work – we have collection trucks running 5 days a week that need crews and fuel. Also unique here is the fact we are running with a deficit in our reserves for solid waste, which will hopefully turn around by 2022, and this is not unrelated to why the rates are increasing so much.

I want to wrap this up by talking about our reserves. This is the money that each of these utilities have “in the bank” (well, Solid Waste has a deficit in the bank, but follow me here). We often talk about the main reason our utility rates are going up is because the cost of operating them is going up, but that is only partly true. We are also raising rates to build up our reserves.

The reason we have reserves is because they work like a buffer on the system. If we have an unexpected cost like extensive emergency repairs, a catastrophic loss, or have an opportunity to get a big matching fund grant from senior government that requires we are able to pay our half, a healthy reserve gives us that flexibility. Healthy reserves make our utilities *sustainable*. Currently, our reserves are in the order of 2-3% of the value of our assets. With increased awareness of the infrastructure gap so many communities are suffering, the current best practice is to keep reserves between 5% and 10% of the asset value. For this reason, we are continuing to build reserves in each of our Utility funds with an aim to get to that level.

This was a conversation we had in the workshop, and part of our finance staff’s work plan is to do a thorough analysis of our reserves situation as the City’s Asset Management plan is updated.

Overall, a typical household in New West can expect to see their annual utility rates for water, sewer, and solid waste go up by $132 next year, or about $11 more dollars a month.