VICTORIA REGION DEBT CLOCK
Updated to Jan. 5, 2017
Editor’s Note: The actual amount of debt at the CRD and the 13 municipalities is less than originally figured – more than $500-million, but it’s a number set to escalate during the next few years. BC is likely the only jurisdiction in Canada and the US where municipalities must go through a regional government to the Municipal Finance Authority in order to borrow, says Diana Lokken of the CRD. (While convoluted, the advantage is municipalities large and small borrow money cheaper for the taxpayer). Bizarre as it may seem, any debt shows up on the financial statements of the 13 municipalities plus the entire amount on the CRD financial statements, so as a result our original estimate was inadvertently inflated.
Should we be worried about municipal debt escalating? :
Regional taxpayers already owe more than half a billion dollars
Few of us love to talk about debt – that dreaded four-letter word – in our capital region of 378,000. There’s property taxes, utility bills, assets, operating costs and so on, but usually debt is little understood nor does it catch the public eye until it becomes unmanageable.
The Community Charter, the legislation governing municipal jurisdictions in BC, requires that an audited annual report must be prepared and made available to the public before June 30th each year. Reports providing information on the jurisdiction’s financial position, services and operations of the 13 municipalities, the Capital Regional District which includes the Capital Regional Housing Corp., and the Capital Regional Hospital District (CRHD) were recently released.
While some argue local debt is still manageable, the scale of accumulated debt has now caught public attention. Cumulative municipal debt in the Victoria region including the CRD, CRHD and the 13 municipalities as of Dec. 31, 2015 is an estimated $527-million.
Bottom line is that as of end 2015 the correct outstanding debt is $377,241,427 which included the CRD, the 13 municipalities, and the Capital Regional Housing Corporation. On top of that, the Capital Region Hospital District had a debt of $150,910,000.
Stay Tuned: Any additional debt taken on regionally in 2016 as part of its $104-million capital budget will be available for viewing by the public in mid 2017. The estimates also do not reflect any additional debt taken on in 2017 as part of the current capital budget request of $132.7-million, for the planned sewer treatment program, the 911 unified call answer service, the E and N Rail Trail Humpback Connector, a landfill gas-utilization facility, and affordable housing.
Context is important here as there are limitations to the raw numbers: The debts reflect the total liabilities and consolidated debt of the various jurisdiction including long-term debt for the year-end 2015. It does not reflect the wealth, assets, or ability of the jurisdiction to manage that debt. It does not reflect any population loss or tax base growth in a municipality (Four regional municipalities, including Saanich, actually saw their populations slightly decrease from 2011-15). Typically, larger jurisdictions can assume more debt, and smaller jurisdictions less, and debt repayment can be stretched to decades.
Most of the debt in the region has been assumed by Langford ($51.7-million), Saanich ($84.7-million), and the City of Victoria ($135.7-million).
Now we come to the parts that worry many taxpayers.
City of Victoria taxpayers will soon start taking on debt to pay for its share of the new $105-million bridge. The municipalities of Colwood, Oak Bay, Saanich, Victoria, Esquimalt, View Royal, Langford will start taking on their share of a $1-billion plus debt for sewage treatment system.
In both mega projects – of major concern with the sewer treatment project – the municipal governments will pay for cost overruns if the projects don’t come in on budget.
To date, about $70-million has been spent on the sewer treatment project with little progress on the project to date. The CRD Capital Expenditure Plan Bylaw projects expenditures to total $931,721,250 on sewer-related projects from 2016-20 (Bylaw No – 4082). That’s also nearly a billion dollars.
Of note, annual operating costs are unknown and undiscussed in the case of the $1-billion plus sewer treatment project. However, any high operating costs have the potential to dramatically impact the finances of the seven jurisdictions involved in the project.
Granted, a half billion dollars in accumulated debt is a revealing (but imperfect) measure of municipal debt obligations. But keep in mind, the cost of carrying debt is also at historical lows, and interest rates will not be a bargain forever.
The bottom line: With regional debt and taxes set to balloon dramatically, the questions are critical, ‘How much will our debt load increase?’, ‘Which regional services can be integrated to save precious tax dollars?,‘ and ‘Can the debt be managed without burying the taxpayer?’
The Victoria regional debt clock is now ticking louder.
CRD Financial Statements, 2005, 2010, 2015.
BC Stats, Regional and sub regional population estimates 2011-15,Table 3.
Annual Financial Statements Dec. 31, 2015, all 13 regional municipalities.
Capital Regional Hospital District, Financial Statement, Dec. 31, 2015.
CRD Capital Expenditure Plan Bylaw No – 4082, 2016-20.
WHY A DEBT CLOCK? The debt side of the accounting ledger is the side that few love not to talk about in our capital region of about 370,000. There’s taxes, expenses, bills, assets, operating costs and so on – but generally debt is little understood or catching the public eye until it becomes unmanageable. City of Victoria taxpayers will soon start taking on debt to pay for its new $100-million plus bridge, and various local jurisdictions will start taking on its share of a $1-billion plus bill for a new sewage treatment system. Regional debt is about to escalate dramatically, the question is, ‘How much and can we manage the debt without hammering the taxpayer?’
WHAT ARE THE CONCERNS? In both mega projects now underway, the municipal governments will pay for cost overruns if the projects don’t come in on budget. In both mega projects – of major concern with the sewer treatment project – the municipal governments will pay for cost overruns if the projects doesn’t come in on budget. To date, about $70-million has been spent on the sewer treatment project with little progress on the project to date.
Annual operating costs are unknown and undiscussed in the case of the $1-billion sewer treatment project. However, high operating costs have the potential to dramatically impact the finances of the seven jurisdictions involved in the project.
DEBT TO END OF 2015: The Community Charter, the legislation governing municipal jurisdictions in BC, requires that an annual report must be prepared and made available to the public before June 30th each year. The report includes information on the jurisdiction’s financial position, services and operations of the 13 municipalities, the Capital Regional District and the Capital Regional Hospital Board.
SHARED DEBT: Each municipality services short and long-term debt to pay for its municipal debt, plus collects taxes to service the debts accumulated by the CRD and the Capital Regional Hospital Board.
LIMITATIONS: Context is important: The figures below only reflect the total liabilities and consolidated debt of the jurisdiction including long-term debt for the year-end 2015. It does not reflect the wealth, assets, or ability of the jurisdiction to manage that debt. It does not reflect any population or tax base growth or loss that might occur in a municipality. Typically, of course, larger jurisdictions can assume more debt, and smaller jurisdictions less.
INTEREST ON DEBT: Currently the cost of carrying debt is at historical lows, but will not be that way forever. Much of the long and short term debt regionally is financed through the Municipal Finance Authority of British Columbia (MFA), created in 1970 to contribute to the financial well-being of local governments throughout BC. The MFA pools the borrowing and investment needs of BC communities through a collective structure and is able to provide a range of low cost and flexible financial services equally, regardless of the size of the community. The MFA is independent from the province and operates under the governance of a board made up of members appointed from the various regional districts.
DEBT UNDERESTIMATED: The figures below are dated to the end of 2015 and so underestimate the accumulated debt. Again, the figures do not reflect the portion of debt City of Victoria taxpayers will be taking on for a new $100-million plus bridge, nor the various jurisdictions that will be cost sharing a $1-billion plus sewage treatment system. The CRD Capital Expenditure Plan Bylaw projects expenditures to total $931,721,250 from 2016-20 (Bylaw No – 4082).
1. CRD – $377,241,427
This consolidated debt includes operating and capital expenditures and consists of the CRD’s and Capital Region Housing Authority’s (CRHA) budgets. CRHA is a wholly-owned subsidiary and manages 1,286 low and moderate income housing units in 45 buildings across seven municipalities. This figure also includes the debt obligations of all 13 municipalities (and each individual debt obligations also shows up on the financial statements of each of the 13 municipalities).
Source; 2015 CRD Financial Statement
2. Capital Regional Hospital District – $150,907,349
Source: 2015 CRD Annual Report, Page 48. CRHD is a partner of CRD but prepares a separate set of financials.
Breakdown of Municipal Debt Obligations as of Dec. 31, 2015
City of Victoria – $135,723,841
Source: 2015 City of Victoria Annual Report, Page 48.
District of Saanich – $84,684,108
Source: 2015 District of Saanich Annual Report, Page 59.
District of Highlands – $766,928
Source: 2015 District of Highlands Annual Report, Page 33.
Town of Esquimalt – $20,688,030
Source: DRAFT 2015 Annual Report, Page 30.
City of Langford – $51,658,694
Source: 2015 Consolidated Financial Statements, Page 6
City of Colwood – $24,304,628
Source: 2015 Annual Report, Page 44
District of Metchosin – $2,240,016
Source: Statement of Financial Information 2015
Town of View Royal – $19,710,099
Source: 2015 Consolidated Financial Statements, Page 39.
District of Sooke – $15,248,676
Source: 2015 Statement of Financial Information, Page 9.
District of North Saanich – $14,686,829
2015 Financial Statements, Page 24.
Town of Sidney – $7,490,628
Source: 2015 Consolidated Financial Statements, Page 40.
District of Central Saanich – $19,998,331
Source: 2015 Annual Report, Page 101.
District of Oak Bay – $16,903,202
Source: 2015 Financial Statements, Page 28.