Updated to Dec. 2019
Is your municipality wealthy, broke or somewhere in between?
Accumulated surplus of local governments $4.29 billion
Grab an extra large cup of steaming double-double and a plain-speaking accountant to discover how wisely CRD directors and your council are spending money.
Taxpayers should be able to look their representatives straight in the eye and ask, ‘Does the CRD really need 6.2 per cent in 2020?’ or ‘Is my council really that hard pressed for more cash?’
Trouble is it’s difficult for mortals to figure out if their local government is broke, wealthy, or somewhere in-between. In Greater Victoria, it’s vastly more complicated given 13 municipalities, three electoral districts, and one CRD for only 413,000 residents.
At the end of the day, most ratepayers want good value for their tax dollar and quality services, with something left over to allow them to pay for other life essentials.
But, good luck understanding the multiple measures of a municipalities’ financial position (the provincial ‘Guide to Local Government Financial Statements’ is heavy reading). So, our focus was only the ‘accumulated surplus’ (wealth) and ‘financial assets’ (cash, investments, receivables, etc).
There are lessons to be learned even if you’re not a CEO of a Fortune 500 company.
The accumulated surplus is a key indicator of the financial resources available to a local government to provide future services to its citizens and meet its financial commitments. It’s the total amount of assets, both financial and non-financial, less any liabilities of the local government. It consists of cash and assets such as land, vehicle fleets, buildings, underground infrastructure, roads and sidewalks.
Keep in mind figures are as of Dec. 31, 2018, and complicated by the fact that not all municipalities report exactly the same way.
The 13 municipalities in the capital region have an accumulated surplus of $3.11 billion as of year end 2018, up $164 million from 2017.
On top of that, there’s the CRD, which includes the Capital Region Housing Corporation. It holds an accumulated surplus of $1.176 billion by year end 2018, up $129 million from 2017.
Much of the cash surplus in municipalities went back into reserves to pay for future capital projects such as fire halls, swimming pools and sewers.
Note, the financial statements do not account for any infrastructure deficit in a municipality, and that’s huge in older municipalities like Oak Bay, Saanich, Esquimalt, and Victoria. Hundreds of millions are needed to update roads, buildings, and sewers.
How much cash, or items that can be converted to cash if need be, does everyone have hanging around?
Between operating and capital funds, plus water, sewer and other statutory reserves, there is almost $894 million in total financial assets in the municipalities at year end 2018, up substantially by $109 million. Financial assets include, cash, investments, receivables, and so on.
The CRD increased its cash reserves in 2018 to almost $455 million from about $421 million. The largest capital project in the region would account for much of this – the latest estimate for the sewer treatment project is $775 million – and the CRD manages the finances on behalf of participating municipalities.
The most notable takeaway is that municipalities are racking up bigger and bigger surpluses for capital projects so debt can be minimized.
There’s a longstanding political culture of frugality in B.C. communities, according to Frank Leonard, a former Saanich mayor. He’s also the chair of the Municipal Finance Authority of B.C. which lends money to local government at preferred rates.
“British Columbia is a very small-c conservative, pay-as-you-go approach,” he told the CBC, adding that such a strategy helps a municipality’s credit rating.
We’ve learned that each sovereign jurisdiction has different needs, different priorities, delivers different bundles of services, and uses slightly different accounting systems.
While not broke (yes that can happen), it seems the Capital region municipalities fall in-between wealthy and broke, and pay bills dutifully. Arguably, some are getting wealthier, but with increasing population and huge infrastructure deficits, needs are growing.
Taxpayers are very dependent on financial officers – hopefully with the help of a financially literate council – to represent their financial interests.
Of note, through the provincial Community Charter legislation, expenditures, liabilities and investments are regulated. For example, debt servicing costs in municipalities cannot exceed 25 per cent of revenue.
But, weary taxpayers can’t help but think there are cost savings with so much replication and so little consolidation of services across 13 jurisdictions.
In the end, the complexity and confusion in our local government is a purposeful outcome of a deliberately dysfunctional 54-year-old governance structure. Neither major provincial political parties cares to modernize it.
READ MORE:
Guide to Local Government Financial Statements, 2012, Government of B.C.
https://www2.gov.bc.ca/gov/content/governments/local-governments/finance/financial-reporting/financial-statements-annual-reports
Summary of Statement of Financial Position as at Dec. 31, 2017 and 2018, CRD municipalities and CRD, Government of B.C.
2018 CRD Statement of Financial Information.
https://www.crd.bc.ca/docs/default-source/finance-pdf/budget-2018/2018-sofi.pdf?sfvrsn=2019cbca_4