5-Year Financial Plan

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Topics covered:
Municipal Budget Considerations
Council Priority Setting
Clearwater’s 2016 Budget Summary
Let’s Talk Business
Clearwater Put in Context
Getting Involved
Ways to Learn about the Budget
Appendix A – Sample Expenditures

Municipal Budget Considerations

The Community Charter requires that local governments approve a Five Year Financial Plan bylaw annually, prior to the adoption of the annual property tax bylaw.  The Financial Plan is also commonly referred to as “The Budget”.

The Five Year Financial Plan requires striking a balance between the need to continue increasing capital spending, maintaining service levels and keeping operating costs in check. Sound fiscal choices must be made that reflect community priorities and the ability to pay.

The District of Clearwater incorporates an overall long term financial sustainability principle into the development of the financial plan. The foundation of this principle is to:

  1. ensure adequate funding for services and infrastructure
  2. access diversified sources of revenue
  3. manage expenditures; contain costs; be efficient
  4. provide for contingencies; manage business risk; operate prudently
  5. maintain reserves for the future
  6. use debt strategically

 The Financial Plan:

    • focuses on sustaining reserves
    • continues Council’s policy of infrastructure sustainability
    • supports Council’s “Strategic Priorities”

Property Taxes are a means for people to accomplish together what they cannot do individually. Paved roads, street lights, cemetery, protective services, parks & recreation – these and many more services are the result of collective action. User fees encompass water treatment and distribution as well as sewer treatment.

The annual budget is an important process that Council engages in every year. This is where they operationalize their priorities; it is policy into action. The process of the annual budget review is legislated to be held in meetings, with opportunity for the public to provide comments at a public budget presentation (Files).

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In addition to levying taxes for their own purposes, municipalities also levy taxes for other public authorities. Each year, the District of Clearwater levies and collects the property taxes, then remits the revenue to the appropriate public authority such as the Thompson Nicola Regional District, School Taxes, Hospital District, etc.  The above pie chart shows what percentage of the total taxes collected is collected for both the District and for other taxing bodies.

Council Priority Setting

 Municipal Councils’ generally have three main choices at budget time, none of which are easy:

  1. Increase taxes to maintain an existing level of service, and/or add further services;
  2. Maintain or reduce the existing tax rates and/or reduce services;
  3. Find other sources of revenue and/or find operational efficiencies.

Just like your household and businesses, operational costs for the District increase every year. Hydro, postage/shipping, insurance, permits and licenses, contractors wages, and equipment – these are all costs we cannot control.  Delivery of many of the services have little room for adjustment. Municipal infrastructure such as roads must be maintained and cemetery services are essential.

This means that a Cost of Living Adjustment (COLA) to the taxes is required to maintain the same level of service. Council aims to provide good stewardship of District funds while striking a balance between keeping costs affordable, maintaining existing services and providing new services. Good fiscal stewardship involves ensuring a balanced budget each year, that there are sufficient funds budgeted for the delivery of services and contingencies for unexpected expenses, and that reserves are built and maintained for infrastructure replacement.

Money put in reserve for future capital expenditures demonstrates good fiscal management and preparedness.  However, local government is also held to a principle of temporal fiscal equivalence, which states that payments should be matched to the time when benefits are received (in other words, financing through borrowing).  In the first instance, you pay so that your children can benefit. In the second, the user of a service both pays and benefits. In reality, most capital projects will be paid for by some combination of reserve funding, grant funding and borrowed monies.

Clearwater’s 2016 Budget Summary

“Roughly half of all municipal revenue in the Province of British Columbia (Province) is collected through property taxation” (B.C. Ministry of Community, Sport & Cultural Development, 2012, p. 1).

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Grant revenue is dependent on successful grant applications – projects can be significantly delayed if applications are unsuccessful. Grants are also increasingly dependent on supporting documentation such as Feasibility Studies, Needs and Demand Studies, Cost of Services Studies, and so on; the process and cost of getting those in place can take years. Finally, grants typically require varying degrees of leveraging funding from the District to contribute to the project.

The District maintains three budgets for functions inside of the overall budget: General, Water, and Sewer (Water and Sewer are funded by user fees and parcel taxes, while the General budget is paid for by property taxes).

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Expenses under the general budget cover several categories, shown in the above pie chart. Appendix A – Sample Expenditures A provides a list of sample expenditures. It is not a comprehensive list of all of the departments or expenses, and is intended simply to provide an understanding of what is involved in each department.

Let’s Talk Business

Clearwater has a commercial tax ratio of 3.5:1. What does that mean? Commercial properties pay (relative to property values) 3.5 times as much in property taxes as residential properties do. The reasons for this are as follows:
“Generally, business enterprises and commercial property owners are thought to have a greater ability to pay than individuals [i.e., Class 1 owners] for three reasons:

  1. they use the property to generate income;
  2. they can, in general, pass on costs to customers; and,
  3. they can deduct expenses from taxable income” (Union of BC Municipalities [UBCM] 2011, p. 5).

Clearwater Put in Context

“Relative to income, municipal expenditures are, in today’s era, as low as they were in the 1950s” (McMillan & Dahlby, 2014, p.1).

“BC has relatively low municipal (and overall) residential property taxes, compared to other Canadian jurisdictions” (Expert Panel on B.C.’s Business Tax Competitiveness, 2012, p. 52).

“Statistics collected by the Ministry of Community, Sport and Cultural Development confirm that operating expenditures by municipalities across British Columbia have been increasing consistently in recent years, even when adjusted for population growth and inflation.  The explanation for this trend is not that spending is “out of control”. The explanation, instead, relates to the need and demand for services. Put simply, local government expenditures have increased in recent years in response to the demands and needs of communities for important local services. Expenditure increases can also be attributed, in part, to the rising cost of key service inputs, and to service and regulatory initiatives taken by senior governments that result in additional responsibilities and net costs being downloaded onto municipal governments” (UBCM, 2011, p. 1).

“Recently municipal costs have been growing …. In many cases, these costs are driven by decisions that are outside the direct control of a municipality and require some form of collaborative action with other governments” (Expert Panel on B.C.’s Business Tax Competitiveness, 2012, p.52).

Getting Involved

It is your right to make Council aware of your priorities, whether you value more parks, or reserves for infrastructure, or an age-friendly community, or low taxes.

Lower property taxes generally shift more responsibility onto volunteer organizations to deliver the services that government will need to cut (with a reduction in taxes) or cannot deliver as a result of insufficient revenue.

Lower taxes also have an impact on spending on the environment. Municipalities in B.C. are legislated to develop and implement plans and actions to reduce carbon emissions and other strategies to protect the environment. Without transfers from other levels of government, the responsibility of paying for these initiatives lies with property taxes. Initiatives to protect the environment are often one of the few areas that local governments feel they can cut.

It is your responsibility to attend budget meetings, learn about the process, understand the issues and the challenges, and let your Council know

Ways to Learn about the Budget

  1. The Financial Plan (Files) provides detailed information on the District of Clearwater budget.
  2. View the latest Five Year Financial Plan Open House Presentation (Files) and attend this year’s upcoming open house.
  3. View Financial Statements and Bylaws on the District of Clearwater’s website, or contact us for a copy.
  4. Contact the District via email, phone, or in person with any questions you might have regarding the budget.

Appendix A – Sample Expenditures

General Government:
Legislative Services (Council)
Administration
Elections
Human Resources
Finance

Facilities:
-Dutch Lake Community Center
-Old Municipal Hall

Protective Services:
Bylaw Enforcement
Building Inspection
Dykes
Emergency Services

Roads & Public Works:
Road Maintenance (Contracted)
Street Lighting
Noxious Weeds
Street Signs

Transit Services:
Regular Weekday Service
Handi Dart Service
Valley Connector
Clearwater Loop

Planning & Development:
Approving Officer
Planning Services:
-Processing rezoning and development variance permit applications
-Long range municipal planning

Economic Development:
Business and investment recruitment and retention for Clearwater & Area
Age Friendly Initiatives
Sports Coordinator
Projects: Website, Business Listing Brochure

Parks:
Parks Maintenance
Capostinsky Ball Park maintenance and repairs
Capital Projects such as the splash park

The North Thompson Sportsplex is a shared service with the TNRD and is home to hockey, figure skating and curling.

Files

TypeDrawer/FileDate ModifiedSize

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2012-2016 Five Year Financial Plan Bylaw No 85, 2012 9:08 am 04/27/20161.6M

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2013-2017 Five Year Financial Plan Bylaw No 105, 2013 9:08 am 04/27/2016278.5k

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2014-2018 Five Year Financial Plan Bylaw No 119, 2014 9:05 am 04/27/2016345.1k

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2015-2019 Five Year Financial Plan Bylaw No 140, 2015 9:04 am 04/27/20163.6M

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2016-2020 Five Year Financial Plan Bylaw No 153, 2016 2:40 pm 06/01/20164.6M

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2017-2021 Five Year Financial Plan 10:27 am 02/03/2017289.3k