a follow-up

In my last post, I tried to give some data on how policing works in BC and New Westminster, and I tried to do so without opining, recognizing that my own biases and opinions probably sneak in all over everything I write.

There was one asterisked statement in that post I wanted to follow up on, because it relied on a more detailed reading of the Police Act, and that post was long enough without this extra 1,000-word digression. However, in the day or two since I started sketching out that previous post, there has been much news, including the Mayor of Vancouver saying he really can’t do much about policing costs, some in the chattering class suggesting that was artless dodging, and the Solicitor General and Premier saying the Police Act is due for an update. All of the sudden, that asterisked point became the center of debate, so I will try to unpack a bit here.

Again, by means of caveat: I am not a lawyer or specialist in interpreting legal documents. I am not on the Police Board, so operating under the Police Act is not part of my day-to-day. I may get details wrong here, and please correct me if I do.

The Police Act says that a municipality over 5,000 residents must pay for policing. At first blush, that means City Council is responsible for approving the Police Budget (both operational and their capital requests) as part of their annual budget work, and we do that. However, that is not the entire story.

Section 15 of the Police Act says:

…a municipality …must bear the expenses necessary to generally maintain law and order in the municipality and must provide, in accordance with this Act, the regulations and the director’s standards, policing and law enforcement in the municipality with a police force or police department of sufficient numbers to adequately enforce municipal bylaws, the criminal law and the laws of British Columbia, and to maintain law and order in the municipality, adequate accommodation, equipment and supplies for the operations of and use by the police force or police department

This makes clear that the Provincial Government has ultimate authority to determine the level to which police are funded in BC. Section 17 of the Act follows up by saying the Director of Police Services (a Provincial Government employee appointed by the Solicitor General, see Section 39 of the Police Act) must notify the City they are in breach and direct them to fix it. If they fail to do so, the Solicitor General can fix it, and send the municipality the bill.

Section 26 also puts policing costs at the foot of the Police Board:

Subject to a collective agreement as defined in the Labour Relations Code, the chief constable and every constable and employee of a municipal police department must be employees of the municipal police board, provided with the accommodation, equipment and supplies the municipal police board considers necessary for his or her duties and functions, and paid the remuneration the municipal police board determines.

Then Section 27 lays out the slightly-convoluted response if the Council refuses to pay for something the Police Board asks. The Board or Council may appeal to the Director (that Provincial government employee), who determines “whether the item or amount should be included in the budget”, and reports back, cc’ing the Solicitor General. If ordered so, the Council must include the item in its budget, or be in violation of the Police Act. Naturally, a lot rides on that should above, but ultimately, the Solicitor General holds all the cards in this dispute.

The grey ares in the middle of all this is the determination of what “sufficient numbers” and “adequate” are in the sections above. How does one measure if the level of service planned by the Police Board and funded by the Council is sufficient? Or more to the point, how would one know when it is insufficient?

This brings us to Regulations, which are pieces of Legislation that exist under Acts. Again, not a lawyer here, but Acts are high level documents enacted by the Legislature that set out general principles and duties, establishing the will of the Government. Regulations are subordinate to and empowered by Acts, but include a lot of the fuzzy details that often need adjustment without opening up the entire big Act. A probably-wrong but simplified example: an Act would say “driving above a speed limit is illegal”, where the subordinate Regulation would say “Speed limits on urban roads is 50km/h unless otherwise designated”.

In Section 74, the Police Act gives the “Lieutenant Governor in Council” (a fancy way to say, the government of the day) the power to create Regulations on various aspects of the Act, including:

prescribing the minimum salary or other remuneration and allowances to be paid to members of police forces, police departments, designated policing units or designated law enforcement units” and “prescribing the minimum number of members of police forces, police departments and designated policing units that are to be employed on a basis of population, area or property assessment, on any combination of them, or on another basis

To the best of my knowledge, these regulations do not actually exist (a list of regulations that do exist under the Police Act is available here). Police staff numbers and police remuneration are determined by the Board, the latter approved by the Council, and Regulations just don’t come into it. There is, however, a legal ability for the provincial government to create such regulations if needed to clarify the funding required for “adequate” policing. Short those regulations, if a dispute occurred and persisted, it would likely end up in the Courts and a judge would decide, though my (unskilled) reading of the Act suggests it would be the Police Board whose opinion carries the most weight.

In in my time on Council in New Westminster, there has never been a significant conflict between the Board and Council on the budget. Council has, on several occasions, reviewed budget augmentation requests made by the Police as part of our annual budgeting process and sent some back for review. This type of negotiation has always resulted in agreed-upon operational budget and Capital requests, much like in other departments in the City from Engineering to Parks.

Yes, a Municipal Council could push back hard against a Police budget and significantly reduce it. Yes, the Police Board could appeal to the provincial government if they feel this reduction would not allow them to discharge their duty under the Police Act to “enforce municipal bylaws, the criminal law and the laws of British Columbia; maintain law and order in the municipality; and prevent crime”. Then the ball would firmly be in the provincial government’s court to determine the path forward – accept that Council’s reductions or order the Council to pay. No doubt, Politics would ensue.

Where we are at

When I see voices being raised here in New Westminster and across North America to call attention to inequity society, most prominently the unjust policing of Black and Indigenous people, I struggle to find the place where my words are important. For the most part, they aren’t. As I have spent my life being a tacit beneficiary of this injustice, my lived experience is not something anyone needs to hear from right now. There are better voices to listen to now on this topic. For now, my admittedly inadequate response is to say I am listening, and I am having conversations with people in the community to better understand what kind of concrete actions I can take in my elected role or support others doing to start addressing the systemic change we need to see. I appreciate the correspondence (even the form letters!) I have received, and am struggling to be timely in my replies, but I’m working on it.

I have often tried to use this blog to unpack arcane bits of municipal government. Maybe my usefulness here is in outlining the lay of the land. Not as call for action, an excuse for a lack of action, or a retort against calls for radical change, but more to inform and empower those who would want to call on government to take concrete actions, and those who have concerns about those calls. I think data can help ideas find better traction in local government, in provincial government, and in police forces. So the following is intentionally short on opinion, but I hope this provides local context to the conversations happening across North America right now.


New Westminster has a Municipal police force. Where many communities in British Columbia contract out local policing to the RCMP, here in New Westminster the police are independent. The legislation that empowers them to act as a law enforcement body is the provincial Police Act, which requires that a Municipality provide policing, whether through a stand-alone police force or contracting the RCMP. It also requires that a non-RCMP municipality establishes a Police Board to oversee that policing.

The New Westminster Police Board is (as regulated by the Police Act) chaired by the Mayor of the City, and one of the positions on the Police board can be appointed by the City Council (city councilors are strictly forbidden from serving on the Police Board). The five other members of the Board are appointed by the provincial government via the Solicitor General’s office. So there is a little bit of overlap of jurisdictions, but it is clear the Police do not answer to City Council, for good separation-of-powers reasons. The Police Board oversees (but doesn’t direct) operations, provides guidance on strategic planning, and even hires the Chief constable. These Board members are, notably, unpaid volunteers, and tenure is limited to two three-year terms.

In requiring a municipal government to provide policing, the Police Act requires that a City Council approve a policing budget. Without digging too deep into the current rhetoric, only the provincial government (through the Police Act) or the Police Board can reform the police; while only the City Council can defund them*. Of course, more complicated responses to the complex issues raised by the current public discourse would rely on some sort of concerted action between all three bodies. In short, the systems are structured such that fundamental changes to the status quo will be hard to make, and it is challenging to think about where to start. But that is the challenge before us.

*within certain limits. See my follow-up blog post


I do want to talk about funding – because the part that is (mostly) under City Council control, and it is something that has become fodder for much of the recent discussion about policing in local government circles.

The intrepid CBC Local Government reporter and data geek Justin McElroy put some data together here comparing “protective services” spending across BC municipalities. As he notes, comparing across municipalities is difficult because not all are as transparent about how their spending is broken down. The one definitive source is the BC Government stats collected annually, but they report “protective services” as one category which lumps together Police and Fire. Looking at the 2018 data (the most recent available on-line), on average 25% of local government spending is on Protective Services. New Westminster is a little lower than that average at 23%.

(source: Schedule 402 2018)

This proportion varies widely across the province for many reasons. Victoria has high protective service costs at least partly because it is a small municipality in the middle of a large metro area with some special policing costs related to being the Provincial Capital. Salmo has a small volunteer fire department and limited policing provided by the RCMP, so their protective services costs are really low. There are also great variations on the denominator side of the equation, as different Municipalities have different utility costs and other levels of service in non-protective services. So, all that to say direct comparisons are complicated.

I can talk with a little more certainty about New Westminster’s spending on police services. If you look at our most recent on-line financial reporting here, you can check the 2020 Budget column to see what we plan to spend this fiscal year:

This is cut from page 19 of the pdf in the link above. This is the “Operational” part of the budget, which pays for day-to-day expenses like salaries, gas for police cars, electricity and paper clips. Utilities like sewers and electric are handled separately in the same report because the sources of those funds are different. In 2020 the City budgets to spend $136M on non-utility operations, and $31.6M of that is police operations. It is fair and accurate to say that 23% of our non-utility operational spending in the 2020 budget is on Police operations.

There is a second budget category the City uses to account for its “Capital” expenses. This covers all of the tangible objects the City has to buy that have a useful life span (i.e. are not consumables) but need maintenance or periodic replacement, like buildings, cars, roads, ice plants for arenas and lawnmowers. On pages 25 and 26  of that linked pdf above are the details of what we plan for Capital spending for the 5 years covering 2020-2024. It totals up to a substantial $275M, but if you take all the lines that are for Police services, you see $427,600 for police building repairs & renovations, $828,600 on general equipment and $2,085,000 on police vehicle renewal and repair for a total of $3.3M, which totaled up works out to a little more than 1% of our 5-year capital budget. Savings on equipment is relatively easy, but that is a small proportion of the city budget.

Finally, it is timely to discuss how the local police services budget has changed in the City. The City doesn’t archive old financial plans on the website, and the Provincial stats lump all “protective services” together. However, I do have copies of all of the annual budgets I have been asked to approve since I joined City Council in 2014, and can project forward to 2024 using the current 5-year financial plan (which are projections that may change). Here is what the Police Services portion of the general operations budget looks like over that time. It has remained around 22%-23% of the budget over that time, but is increasing at a slightly higher rate than overall budget:

We can talk about reasons why the police budget has changed over the years, and yes I have opinions, but maybe I’ll leave that for future discussions I am sure we will be having.

Ask Pat: DCC, MFA, WTF?

This is not a real “Ask Pat”, but I was recently shown this Facebook Post, and I asked the author if I could answer it at length on my blog. I think it provides a good opportunity to open up a bit of how municipal financing works, from my decidedly non-expert-but-required-to-learn-enough-to-make-decisions viewpoint, and (in a roundabout way) asks what I think is a fundamental question about financing municipal infrastructure.

So here’s a question I’ve been pondering for a while about the housing crisis. I’m not sure exactly when the Local Government Act was amended to change the way municipalities generate revenues to cover the cost of infrastructure to support growth. The current method is called Development Cost Charges (DCC’s).

In conversations with a retired city controller I learned that up to the implementation of DCC’s cities would issue Municipal Bonds to generate the funds needed to cover these costs, build the infrastructure and then taxpayers would collectively pay for the costs through tax payments. In the early 70’s the Province created the Municipal Finance Authority to streamline this process so that hundreds of small communities didn’t have to be floating bonds to generate their infrastructure capital they now have expertise and experience at the MFA.

All this changed with the enactment of provisions in the Local Government Act for DCC’s which are essentially prepaid taxes paid to municipalities to cover the costs of roads, sewer and water installations and parks associated with the new development whether that’s an addition to your house or a 50 storey condo development.

OK so what? Well now the purchase price of that newly developed housing unit comes preloaded with tens of thousands of dollars of prepaid taxes. For arguments sake let’s use $50K as a nice round number, please bear with me for this illustration. So your purchase price includes this $50K, which by the way the developer probably has to finance plus any profit margin the developer might add and so additional costs, but lets work with $50K for now. At 5% mortgage interest that increases monthly payments by about $290 and adds over $37,000 in additional interest to the mortgage. With me so far? Now let’s add property transfer taxes and these days for a lot of people government mandated mortgage insurance as well.
So we’ve transitioned away from publically financed infrastructure growth to growth financed by individual families. What used to be money borrowed at preferential interest rates through government Bonds is now financed by homeowners through their local BANKS, the same ones that continue to report record quarterly profits year after year after year.

So what about the cities. Well since 2008 Canadian Municipalities collectively have managed to sock away over $100BILLION IN CASH while continuing to press Federal and Provincial Governments for cash to help them cover the costs of their suppossed infrastructure deficits. It seems to me that while its easy to blame ‘foreign investors and speculators’, at least some of this crisis needs to be laid at the feet of our governments at every level.

My first impression is that this discussion conflates a couple of things, and that is leading to a bit of confusion. Here is my understanding of the relationship between DCCs, Municipal Bonds, and the MFA.

The idea behind DCCs is to charge the capital cost of infrastructure expansion to the persons who benefit from that expansion. DCCs are charged when there is growth in residential density (a 3-story building becomes a tower, a house becomes a set of townhouses), and are meant to assure that a fair share of the cost of building bigger sewer pipes, bigger water pipes, buying new parks space, etc. is covered by the new population that fills that density. The City charges a DCC based on the square footage of the new density, and presumably the developer passes that cost onto the purchaser of the property, who is the ultimate beneficiary of the new infrastructure. In New West, we have DCC Bylaws for Transportation, Water Supply, Sanitary Sewer, Drainage, and Parks.

At current rates, a new 1,000 sq ft apartment in Downtown New Westminster would include about $5,140 in DCCs. That would be $1,120 for Transportation, $60 for drainage, $250 for water, $430 for sanitary sewers, and $3,290 for Parks. Note than a brand new 1,000 square foot apartment in New Westminster sells for something over $700,000. If you believe that the cost of new housing is directly correlated to the cost of building it, then DCCs can be said to raise the cost of any single unit by much less than 1%. Although they cumulatively do a lot to reduce the cost of infrastructure upgrades for current residents, I don’t think DCCs are a significant cause of the current housing affordability crisis.

It is important to note DCC money is not thrown into general revenue, but is put into specific reserve funds and earmarked for defined projects under the category for which they are collected. This is fundamental to the DCC regulation – they must be spent on improving infrastructure above and beyond what would have been spent if the density was not permitted.

For obvious reasons, DCC money is not spent the day it is collected. A City is a complicated thing, and we cannot upgrade a section of sewer on a whim. Instead, we need to plan out years, sometimes decades, in advance so that all parts of the system work together. When collected, DCC money mostly goes into a reserve fund and is drawn out when the works happen. Sometimes we can borrow against a reserve fund (if the sewer needs to be upgraded today, but a DCC has not been collected yet and we are confident it will be collected in the near future), but even that is a bit deeper than we need to go here.

DCCs also don’t pay for all infrastructure upgrades. Even if there was no density increase in a City, we would have to replace your water lines every 50 years or so, pave your road every 10 years or so, etc. That money comes from property taxes (in the case of roads and parks) or part of your water/sewer bill (in the case of the pipes). We collect a little more in your water bill than it costs us to run the water system, and set that aside into those same reserves to pay for maintenance and upgrades of the system when they are needed. Alternately, we can pay for the upgrades when they come up by borrowing money, and charge future users that cost (plus interest). As you will see, we do a little of both based on what makes the most financial sense at the time.

That is how we can have both $120 Million in our reserves and $65 Million in debt. I hate using household finances as a model for explaining municipal finance (they are two very different things), but this is similar to having money in an RESP account at the same time as holding mortgage debt: we do it for rational reasons related to how the financial and taxation systems are designed. We didn’t invent global capitalism, but we operate within it. If you have an alternative system that more fairly distributes capital, send me your e-mail and I’ll subscribe to your newsletter!

This does raise what I think is the fundamental question about how we finance public infrastructure. If we want to build, say, a new $100 Million recreation complex, do we save up enough money to pay for it before we build it, or do we build it on debt and pay it off over time? There are compromises to both.

In the first case, everyone pays today into a reserve fund until we hit the number that we need to build the complex. It will take several years, and for all that time, the taxpayers of the City will be paying into the fund but not receiving the benefit of those payments until some point in the future when the complex is completed (if they still live in the City at that time). Is that fair to them?

In the second case, the complex gets built first, and the people who have an opportunity to benefit from that complex pay taxes for it while it is being used. Of course, they have to pay a little more this way because the debt needs to be serviced over the period of time it takes to pay it off. Is that fiscally prudent?

(It sounds to me like you would prefer more of the latter in the case of financing infrastructure related to new growth, as it would result in the City borrowing more from the MFA or Municipal Bonds and spreading the cost evenly among all taxpayers, whereas the former puts more burden on the new home purchaser which they would, presumably, borrow from a bank to finance. Please correct me if I got your argument wrong.)

There are other factors that need to be considered, and this is why most local governments do some combination of both. It matters what interest rate a local gov’t can earn on its reserves vs. what interest they pay servicing the debt. In this low-interest era, we may choose differently than back in the high-interest 70s. These rates are also related to your financial status: a City with $100 Million in the bank can get a lower rate than a City with $100 Million in debt. There are also significant complications local governments have to go through to borrow beyond their 5-year financial plan. Add to this uncertainties like inflation of construction cost and other capital needs that may pop up in the same time period. The practicality is that we sometimes need debt, and we benefit from strong reserves. 

I don’t want to get into the discussion here about us going to senior governments with hats in hand asking for their help in funding public infrastructure (this blog post is already much too long). However, I can summarize by saying local governments are responsible for the maintenance and upkeep of about 60% of public infrastructure in Canada, and we directly receive about 8% of all tax revenues. Without help from senior governments, little of your public infrastructure would be sustainable. The Infrastructure Gap commonly measured across Canada to be more than a hundred billion dollars is measured above our existing reserves; but I digress.

The Municipal Finance Authority is, essentially, a Credit Union. Local Governments can borrow money from the MFA at rates better than we can get from commercial banks, and we can save our reserves with the MFA and receive a pretty good return. Most years, New West makes a little more in interest on our reserves than we spend in interest on our debt (though market fluctuations obviously impact this equation). As you note, the MFA structure has largely replaced Municipal Bonds issued by individual Local Governments. In essence, the MFA issues Bonds on behalf of all its member Local Governments. I am really not an expert on this part of finance, but I would assume that the reason we use the MFA instead of issuing our own Bonds is that the interest rates the MFA can offer (because they are a large, diverse organization) is much lower than we would have to pay to make the Bonds attractive in this razor-thin investment market.

But perhaps more to the point, the Bonds vs. MFA issue is something completely separate from the DCC discussion. DCCs are taxation – they generate revenue for a Local Government. Bonds are simply debt instruments; they are loans which we would have to generate revenue (taxes) to pay back. This takes us right back to the fundamental question that we have already asked – when should a government collect the money to pay for new infrastructure? Before it is built, or after? In reality, we do a little of both, and use the financial instruments available to us under the Local Government Act to hopefully strike a fair and responsible balance between the needs of today and the needs of tomorrow.