BUDGET – EXPENSES
- Population growth: requires more assets in the form of equipment, facilities, materials, supplies, and infrastructure, and more staff resources using those assets to deliver the services.
- Increased activity: increasingly, there are more people of all ages active in the community.
- Population diversity: means looking at a wider scope of services than traditionally provided.
- The capital cost of one fire engine – $1,400,000
- The cost to fuel all city vehicles for one year – $500,000
- The cost of one first class constable – $148,700
- The cost for insurance (property, vehicle, liability) – $836,000
- The cost to install one pedestrian-controlled traffic signal – $292,000
- The cost of one block of sidewalk (one side) – $123,750
- The cost to repave one km of road (2 lanes) – $642,000
- employee salaries and wages
- supplies, material, and equipment
- property, liability, and vehicle insurance
- maintaining vehicles, landscaping, sewer/water pipes
- Land sales can be a finite funding source as the City uses up its land inventory. However, the City has established a Heritage Reserve Fund to leverage the sale of existing lands to purchase new lands.
- Developers only fund the asset initially, as part of a development proposal. They do not typically fund the replacement of the asset when it is at the end of its useful life; and
- Government grants are not as prevalent as in the past. They are also in high demand as cities across the province and country face infrastructure funding deficits and compete for scarce funding.
What’s driving the budget?
All city councils today face challenges to broaden and increase levels of services. The level, scope, and breadth of the services requested by taxpayers are the main budget cost drivers. These include:
How does the City fund services?
The Community Charter gives the City the authority to levy taxes, user fees, and other revenues to generate enough revenues for funding the provision of services and community improvement programs.
Running a city is not cheap. Each year, Council debates long and hard on how much to raise taxes and user fees to cover increases in service costs. Taxation and utility user fees make up approximately 80% of our total revenues. Therefore, these property charges are an important annual Council consideration.
There is also a cost associated with not providing a service. For example, if the City did not provide easy and accessible garbage collection, garbage could become scattered around our city, becoming an eye-sore to the community and presenting costly health hazards. Lack of service, or low service, needs to be carefully considered as well.
What does it cost to run the City?
In 2022, the City’s net operating expenses (after non-tax revenues) are proposed at $48, 523,000. That’s the amount of tax we would need to collect to balance the budget.
Why does it cost so much to run the City?
When looking at the cost comparisons, keep in mind that unlike most service providers, many City services are open 24/7/365, ready to respond to you in all kinds of weather conditions and emergencies. This level of response does not come without costs over and above the average entity. Here are some sample costs of running your city:
Where do my property charges (all taxes, fees, and utilities) go?
The City has two types of budget expenses: operating and capital.
Our operating budget covers spending related to the day-to-day operations of departments. These daily expenses help to keep our streets and homes safe, and help to ensure that we have clean water running through the taps, sewage flowing to treatment facilities, garbage and recycling trucks out on their routes, and recreational and cultural facilities open for the public.
Typical examples of operating expenses are:
The City must be able to deliver ongoing programs and services. Although some assets are idle at times, the City must have the capacity and resources to respond in emergency situations and accommodate peak user times to protect citizens, businesses, and City assets.
The City’s capital budget funds larger projects of a longer-term nature, mostly related to maintaining, upgrading, and replacing the City’s infrastructure and facilities. It’s important to make long-term plans for scheduled maintenance and replacement of these valuable, tangible capital assets (TCAs) to ensure they are in place to deliver life-sustaining and life-enhancing services.
We currently invest approximately $9.4 million per year in TCAs. These funds come from a variety of sources; historically, funding sources have included land sales, development levies, and government grants. However:
Why a five-year plan?
You may be wondering how the City can operate well into the current year without having an adopted budget until as late as May. That is because each year we adopt a Five-Year Plan, and therefore have five years of budget approval under which to operate if necessary. The City simply operates under the Five-Year Plan it adopted the previous year until Council adopts the new plan.
Why do labour costs increase?
Municipalities employ a wide variety of skilled workers, mostly certified professionals or tradespeople covered under collective bargaining agreements. It is critical that the City recruit and retain highly-skilled workers to deliver a variety of services, including many that have an impact on life safety. The professional nature of the workforce, along with the union environment, is not comparable to the labour costs of businesses operating with mostly unskilled or uncertified workers in non-union environments. In addition, some municipal wage agreements can be regional in nature, often aligned with what has been negotiated in other parts of the region, and are not within the control of Port Moody Council.
What is the Asset Renewal Levy?
The City levies a charge for replacing and upgrading its infrastructure, amenities, and facilities (called tangible capital assets or TCAs on the Financial Statement’s Balance Sheet). You’ll see this charge on your tax bill as an Asset Renewal Levy. This strategy recognizes that traditional sources of capital funding like land sales, government grants, and developer levies are not reliable sources of funding, and that a steady and sustainable source of capital funding needs to be built into the tax base to provide a portion of that declining capital funding. Many municipalities do not levy this charge, choosing to keep taxes lower. However, all cities face a shortfall in capital financing (reported in the media as the National Infrastructure Deficit), and will need to address it sooner or later. Port Moody has chosen to be proactive in this regard. The Asset Renewal Levy has added tax increases in Port Moody that other jurisdictions may not have included yet. The amount of tax dollars raised through this levy for 2022 will be 4 million.
BUDGET – REVENUE
- Explore other revenues
- Implement sensitive revenues (e.g. casinos, pay parking)
- Leverage developer contributions (e.g. density bonuses, community amenity contributions)
- Leverage assets (e.g. land leases, profit sharing from businesses on City land)
- Increase user fees (i.e. reduce or eliminate subsidies)
- Special levies (e.g. debt)
- Economies of scale
- Alternative service providers (e.g. contract out)
- Partnerships (e.g. public/private partnerships called P3s)
- Service level expectations
- Service adjustments
- Services and service levels in neighbouring cities
- Sustainable service
- Shared services (e.g. dog control)
Why can’t the City use reserves to lower taxes?
City revenues are accumulated from land sales, development levies, and our operating surpluses. We then set these aside in reserve accounts to fund a number of capital, operating, and emergency costs.
The City has used its reserves over the last number of years to renovate and replace aging infrastructure.
While we do have adequate reserves, the majority are already designated and unavailable for discretionary spending.
When assessing our financial health, in addition to looking at cash, reserves, and liabilities, we must consider the condition of our tangible capital assets: our buildings, equipment, and infrastructure. The condition of these assets also dictates future funding requirements.
How can the City control the tax increase
Essentially, cities have three ways to control a tax increase:
1. Generate non-tax revenues
Revenue opportunities are limited by the Community Charter, and may require capital investments.
Other cities use these types of revenues to fund capital and operating needs.
Share revenues from increased densities with developers, or require developers to provide amenity contributions as part of development.
The City has leased land instead of selling it (e.g. Inlet Centre Residences), and negotiated revenue sharing agreements (e.g. Boathouse Restaurant) on City land to generate revenue. Council has recently approved the installation of two digital billboards on City property. The City has a 25-year revenue sharing agreement with Pattison Outdoor Advertising for two locations – at the City-owned former landfill site on the Barnet Highway, and at the intersection of Barnet Highway and Ioco Road. The two digital billboards were installed in early 2021, generating a new revenue stream for the year.
Most programs are subsidized to some extent. With subsidies, higher taxed properties support lower taxed properties, based on a wealth (not income) redistribution model. We could reduce or eliminate subsidies from taxation. This strategy needs careful consideration as it could impact the ability of some individuals and families to participate in City services.
Special levies can address specific needs, and be discontinued once the initiative is complete or funding met.
2. Control expenditures
The City pools its volumes with other cities in a regional purchasing consortium to leverage volume buying power.
The City uses value instead of cost alone when considering purchases as cost alone may result in higher maintenance, shorter useful life, or poor service.
Some services can be contracted out successfully, but we need to keep others in house to avoid compromising service. Critical public services (e.g. water, sewer) should not be run on the bottom line.
Partnerships transfer or broaden the financial risk to other entities that are more financially able to absorb costs/losses.
3. Adjust services or service levels
Residents are used to a certain level of service and usually want it maintained.
Which services does the City adjust? This is an ongoing debate. Not everyone will agree on the same level for every service.
Our residents generally expect the same services and service levels available in neighbouring communities.
What is a reasonable or sustainable level of service? What level do you actually need versus the level that you want? These are ongoing Council debates during the annual budget deliberations.
As an example, the City currently pays the City of Coquitlam for dog compounding services. Are there other services we could share?
How does development impact the budget?
As the city grows and more residents move into new developments, the new developments are taxed accordingly. However, while the developments generate additional revenues from tax and user fees, they also bring a demand for more services. It is important that the new development tax revenues closely offset the increased demand/cost for more services (i.e. growth pays for growth). If they don’t, tax increases or service adjustments are needed to accommodate the new growth. Community amenity contributions are often negotiated with developers to provide new facilities and assets needed to continue delivering services.
How are my taxes calculated?
Taxes are calculated by multiplying the assessed value of your property (determined by BC Assessment) by the current tax rate (set by the City) for your property class. In 2022, a Port Moody homeowner with an average-priced home ($1,200,000 in 2022) will see a $150 tax increase. Your tax increase will be higher if the assessed value of your home has increased more than the average assessed value, which increased by 22% in 2022.
When you review the charges on your Port Moody Property Tax Notice, keep in mind that not all the charges are within the City’s control (we’re responsible for levying the charges in the yellow box). The provincial government and other regional and provincial agencies also levy property taxes and fees – the City collects those taxes and fees on behalf of the other agencies. The pie chart in our Budget Breakdown shows what the 2022 tax split looks like based on the 2021 levies for other agencies and an average household assessed at $1,200,000.
Who determines the value of my property?
BC Assessment determines the assessed value of every property in BC (not city council). The value is a market value based on recent sales of similar homes in your area. For more information, visit www.bcassessment.ca.
If the value of my property increases, does the City automatically get extra tax revenue?
No. The same amount of tax revenue is still needed to balance the budget, regardless of changes to assessed values. When assessed values change, the tax rate is adjusted to generate the same amount of tax to pay for the approved services. Council determines the tax increase, not BC Assessment.
Why is my property tax increase more than the tax increase approved by City Council?
The approved tax increase is based on the average assessed value increase in the City. Individual properties could see their tax rise more if their assessed value increased more than the average, and vice versa.
Watch a short video on how the tax calculation process works.
Why isn’t the tax increase the same as the consumer price index (CPI)?
Raising taxes by the CPI is often suggested, and while it sounds reasonable, keep in mind that the CPI does not reflect the City’s spending needs and patterns. The CPI is an indication of the rising costs of the goods and services, such as food, housing, furniture, clothing/footwear, and fuel, bought by the average household. While the City purchases some of these items, municipalities are essentially in the construction business, building and maintaining roads, infrastructure, facilities, parks, sidewalks, and bridges. This means the direct or indirect costs of building materials like steel, cement, pavement, and lumber have a bigger impact on the City’s budget. We need to remember that the construction price index can be quite different from the consumer price index.