The 2024-2028 5 year Financial Plan was formally adopted by Council on March 11. This is the last step of the annual budget process for Council, though Staff have a lot of work to do yet in submitting documents to the province and getting those tax notices out.

I have written about different parts of the budget here: Operations, Capital, and Utilities. But the news story on the budget usually get boiled down to one number, the annual tax increase. This year’s number is higher than we are used to (though not anything near a “record” increase, as offered a few times by those who dabble in misinformation) at 7.7%. This puts us firmly in the middle of regional tax increases announced so far, which range from 4.5% in Burnaby to 10% in Langley, though the final number in Surrey has yet to be announced, but will likely exceed Langley’s.

The reasons for these higher increases everywhere are essentially the same – inflation and wage increases related to new collective agreements across the region with CUPE, Police and Fire unions, themselves being pressured upward to match regional inflation and housing costs. The biggest differences within the region are related to varying levels of service enhancements, from Surrey needing to invest in a new Police service to New Westminster needing to staff up a new $114M recreation centre. So this post I’m going to break down the increase in New West, hopefully answering a bit of what are you buying for your extra $300 this year (if you own a $1.6M house), or extra $125 if you live in the “typical” $640,000 apartment.

Again, the best way for you to dig into these numbers, if you are so inclined is to go to the January 22 Council workshop where we discussed this after giving staff some direction during the December 11 workshop, where staff proposed a 6.8% tax increase, and Council brought requests for enhancements that pushed this up by almost 1%.

“Enhancements” is one of those jargon words we use in municipal budgeting, and to talk about it is to talk about how staff approach annual budgeting. The first step is to look at everything we did last year, and hang a baseline on that. They then go through and find “efficiencies” (things we don’t need to do anymore, or cost us less to do now than they used to), and inflation/salary increases and calculate a new baseline based on those. They then look at the many, many things that Council or the Public has asked them to do beyond what they did last year. These are “enhancements” – things we didn’t do last year, but the community has asked us to offer or we need to do now because of functional or legislative changes. Staff determine what they can practically deliver, and propose what enhancements Council might consider for the coming year. Depending on the city, these are offered as service level measures, or a job positions for the people expected to deliver the job. In New West we generally do the latter, and there are strengths and weaknesses of each approach, but I’ve already gone too far down this rabbit hole.

A reasonable question I hear often is “with all these new buildings, how come my taxes still go up?” If we compare the revenue side of the 2024 Operational Budget to 2023 (the numbers are in thousands):

we see that we are planning to collect 8.7% more tax revenue than last year, or an extra $9 million. The 7.7% tax increase provides about 89%, or $8 million of this, while little more than 11% or $1 million in new tax revenue will come from charging taxes to property that didn’t exist last year – directly from growth. But remember a large portion of those other revenue sources are from things new growth pays for: building permit revenue, amenity charges and such. Look at the Sale of Services line, which is anticipated to go up by $4.4 million. Part of this is the opening of TACC, but also through increased service delivery across the City we draw more revenue from more people.

These two lines combine for ~$13 million in increased revenue. This aligns (not perfectly, but there are complicated reasons for this) with the “Proposed to Fund from Tax and Other Revenue” column at the end of the table that provides the long list of enhancements proposed for 2024 that you can see starting on page 53 of this report. This table (with a bunch of caveats) is the detailed answer to “what you are buying with the 2024 tax (and sale of service) increase?” So I am going to break the $13 million from that table down to categories to give an order-of-magnitude answer. There are lots of ways to break these down, and much overlap between each, so here come the pies.First off, two-thirds of this increase is fixed cost increases, increased costs to deliver the same services we provided in the previous year and things that we are legally or contractually obligated to pay for. About 21% are “discretionary” increases recommended by staff, things we are not legally committed to, but are required to keep service commitments we made to the community. The last 12% are things Council has directed to staff that we want to see happen in the upcoming year. Each of those three can be broken down further:

On the fixed increases, the largest part of the pie is $7.2 million in annual salary increases and increases related to the new collective agreements signed with our CUPE, Fire, and Police unions. This big piece of the biggest pie represents more than half the cost increase this year. The “new staff” section here is mostly new Emergency Management Office and Fire Prevention staff required due to new provincial regulations. The biggest fixed cost increases outside of this are an extra half a million for eCOMM (the service that provides 911 service and emergency dispatch for the region) and a big increase in insurance rates (something many in the community will recognize in their own lives).

The “discretionary” increases are dominated by the opening of təməsew̓txʷ Aquatic and Community Centre, which speaks a lot about how discretionary much of this actually is. These are the costs (above and beyond what it cost to run the Canada Games Pool and Centennial Community Centre) related to opening a much larger building with many more programs. I divided it up here into annual increased staff cost (about a dozen new people between regular and auxiliary) and stuff cost (increased supply, utility, equipment, and such cost). In theory, we could open the new pool without staffing and equipping it up fully, but that is probably not a good idea. There are also two new firefighters, a new HR staff position in Police, some increased Parks staff to run programs and care for trees, and some Admin folks in HR, IT, Finance, along with a new Director position to support our re-organization of Community Services into its own department.

The Council-driven increases are things Council directed to be added to the base budget, mostly in that December workshop. Most of this is in Public Safety, with increased Fire Department staff and new staff for front-line Police to address backfill (that is, we are not increasing the compliment of sworn officers, we are hiring more to provide better coverage for vacancies, sick and parental leave, etc.). Our new Code of Conduct requires budget for an Ethics commissioner, we are augmenting some staff positions to support youth and seniors programming, and the Massey Theatre utility costs are higher than anticipated.

So overall, 54% of the increase this year is related directly to salary inflation, which was high last year (~5%) because new collective agreements included backpay to the expiration of the previous agreement a year before. The other 46% of the increase this year can be broken down like this, which is probably the simplest answer to that first question “What did I but with my tax increase this year?” if you don’t want to read that multi-page spreadsheet I linked to above.

The fun part of the annual budget is the capital budget, because this is the part that pays for the things that we need to have a functional and fun city.

Like the rest of the budget, our Capital Plan spending is estimated out over 5 years. We have a plan for the amount we will spend in 2024, and a plan for the entire 2024-2028 period. There is a bit of flexibility built into this, and it is necessarily front-loaded. This is because staff cannot start the procurement process for capital goods and works until it is approved by Council, but commonly the time period between getting the approval, going to procurement, buying or building the thing, and paying the invoice takes more than one year. This means that every year a large number of things planned for year 1 actually get done in year 2, or maybe year 3, so the budget line item “carries over” to those years.

Here is the briefest breakdown of our 2024-2028 capital plan (the full plan, in all its 3 page 133-line spreadsheet form can be seen starting on page 212 of this report. The longer plan, in its 33-page 433-line spreadsheet glory can be seen in this council report from January):

Note we are currently putting the final touches on təməsew̓txʷ Aquatic and Community Centre, the single biggest capital investment the City has ever made, and it is not represented in these numbers. We still plan to spend up to $152 Million on buildings, roads, pipes, and equipment this year. We will almost certainly spend less, due to the “carry over” effect described above. In my pervious post I wrote about the utility investments (sewer separation, accelerated water upgrades, advanced meter infrastructure for electrical, etc.), so I will use this space to talk about some of the highlights from the General Fund.

Massey Theatre ($19 million)
When the Massey Theatre was no longer part of the School District’s plans for a new NWSS, there was no way they could justify taking money from education programs to cover its ongoing operation and upkeep costs, so decided it had to be demolished. Driven by community demand, the City Council at the time decided to take on the theatre and protect it for future generations. At the time, an engineer report suggested it would cost $18 Million to bring the theatre up to a condition where it will last generations. Those costs are now coming due. The City is currently investing in essential repairs and upgrades to keep the building safe and address some envelope issues, and to do some internal upgrades to improve accessibility and functionality. This is not the end of the work, but the beginning.

Pavement Management ($4.15 M in 2024, $19.4 million over 5 years)
Roads are expensive to maintain. When I was first elected to Council in 2014, we spent about $2.5 Million on “pavement management”. Even this was an improvement over the $1.5 Million we spent only 5 years before. This amount has ramped up significantly over the last few years, and we are now looking at $4 Million a year on average. Note, we have not added to the number of roads, nor is there a significant increase the number of cars (though cars have gotten heavier). This increase is partly due to inflation, and partly due to us ramping up our work to get caught up and improve the overall condition. Yes, we are doing a lot of different things in the City, but rest assured New Westminster is spending more than ever before on fixing the potholes.

Sidewalks ($690K in 2024, $4.95M over 5 years)
Between replacement of sidewalks and our enhanced new sidewalk program to fill gaps and make accessibility improvements, we are investing almost $5 million in sidewalks in this plan. This does not include the $1.4 million in pedestrian crossing improvements or special projects like the $2.2 million improvements to the McInnes Overpass.

Rail crossing Upgrades ($3.6 Million)
We have money in the budget for the upgrades that will lead to whistle cessation, with Sapperton being the priority area and safety improvements in Queensborough.

Street Light improvements ($2.4 million in 2024, $4.6 million over 5 years)
Street lights are an important part of building a safe active transportation system. As we upgrade and move to LED technology, the operational cost will go down, but a significant investment is needed to upgrade aging standards, especially in the Massey Victory Height neighbourhood.

Artificial Turf Fields ($3.2 million)
Yes, we are building a new artificial turf field, once we do the Parks and Recreation Comprehensive Plan and work with community to determine the best location. We are also replacing the end-of-life turf at the Queens Park all-weather field.

QP Farm upgrades ($500k)
This project will see amendment of existing structures to facilitate new year-round community programs including retrofit of the long narrow building with new plumbing and electrical, and both gazebo structures, new picnic tables, small huts, a new wetland area and drainage infrastructure, food trees, pollinator meadow, and more. The result will be a refreshed public space for education programs around food systems, youth programming, and fun space for kids. There might even be a mushroom wall included.

Trees ($1.2 million in 2024, $2.9 million over 5 years)
We are planting a lot of trees in New West as part of our Urban Forest Management Strategy, and have been successful at getting millions of dollars from senior governments to support this program. This means more street trees, with a new emphasis on Queensborough, and a few big projects like the front lawn of City Hall.

These highlights only make up 20% of our capital plan, there is a lot there in supporting affordable housing, IT upgrades, measures to implement our community and corporate climate plans, equipment upgrades for Fire and Rescue, and boring things like backhoes and sand spreaders and roof repairs. These are investments in the things that keep a city operating.

This is the second in a series of posts about the 2024 Budget. I wrote recently about the general operating fund, and now am diving in to the utility funds.

The City of New Westminster has four utility funds. The financing of utilities are regulated by the Province and Public Service Accounting Board standards. As such, the money you pay in utility fees for your water, sewer, trash, and electricity are not “taxes” that feed general revenues, but can only be used to finance and run the utility. They must be accounted separately than general operational funds of the City and general taxation.

The Electrical Utility makes us different than other municipalities in the Lower Mainland (though there are municipal electrical utilities in Nelson, Kelowna, and a few other small communities in BC). That utility also has the unique feature that it pays a dividend to the City (it makes a profit), and because it is generally counted along with other utilities in comparisons between New West and other cities, it is also the source of some tired misinformation about our comparative taxes. But I’m tired of beating that drum.

All of our utilities have one thing in common – much of their budget is a result of costs passed down to us by larger entities. Water, sewer, and solid waste utilities pay Metro Vancouver to supply us clean water, treat our dirty water, and manage disposal of our wastes. The balance of the costs are operations of the utility (we need people to run and maintain the systems, test water, process payments, etc.) and capital costs (we need to build and replace pipes and pumps and vehicles). As such, the budgets are easiest to understand through a Lawrence Livermore style flow chart. So I’ll draw some of those, and talk about them.

The way these work is the vertical bars are (approximately) to scale, on the left are our sources of income and on the right are where that money ends up getting spent. Green are revenue sources, blue are operational expenses, pink are transfers internal to the city, and orange is interactions with our Reserves and the things we build through our Capital Budget. Each utility has a reserve, we put “surplus” every year into the reserve, and take money out of reserves to pay for and build things like pipes and pumps and trucks to keep the place running. Note all numbers here are rounded, and in the 000’s, and please recognize this is a bit of a simplification done to try to make the big systems more understandable. (I’d love to hear feedback about how this presentation works for you!)

Sewer Utility

Our main source of revenue is utility rates, though we also take in DCCs and other contributions to support our capital plan. Of the ~$31 million we take in, about 45% goes directly to Metro Vancouver to pay for the treatment of wastewater. This cost has gone up 14% in the last year, and is the primary driver behind our utility rates going up 8% this year. As you can see, the operational cost for us to run the utility (salaries, contractors, supplies) only equal about 10% of our revenues, so there is not a lot of cost savings to be found there.

We are planning for a $12.5 million surplus in 2024, which will all go into our Sewer Reserve, as will the $5.2 million we got from developers and senior government grants to support our capital program, which adds $17.7 million to the reserve. However, we are planning to spend $19.6 million on new infrastructure (pipes and pumps) and vehicles, which means we are planning to draw our reserves down by $1.8m, or about 5%.

Water UtilityAgain, our main source of revenue is utility rates, and the DCC/contribution part is much smaller in water this year. That has mostly to do with the timing of capital projects and our success at getting senior government grants for sewer work more than water work. Of the $18.5 million we take in, about 44% goes directly to Metro Vancouver to pay for the water. We spend less than 10% of our budget on operations, though with internal charges (the money other city departments charge the water utility for services), this cost is a bit higher than in sewers.

Our surplus in 2024 will be about $7.2 million, but we are planning to spend just over $12 million in new infrastructure and capital equipment in the utility in 2024. This means we will be drawing down the reserve by about $4.5 million, which represents about 20% of the reserve value. This is more than ideal, but with major sewer work being advanced by Metro Vancouver in Sapperton and West End, it is a good idea for us to do water upgrades at the same time, so you only have to tear the roads up once. Having a healthy reserve permits us to advance this work without borrowing money. I am asked often what the City is doing to find efficiencies and save money, this is a good example of one thing we are doing in the water utility – spending a bit now to save more money later. Our 5-year plan sees us getting back to 2023 reserve levels in the water utility by 2026 or 2027, so eroding reserves in the short term isn’t a structural budget issue, but a strategy.

Solid Waste Garbage and recycling are bit different than the other utilities, as the level of service provided to different parts of the community (house vs. strata, home vs. business, etc.) varies quite a bit, and although disposal charges handed down (mostly from Metro Vancouver) for taking in our waste still eat up almost 40% of all of our revenues, there is a much larger operational cost to solid waste. We need staff to drive those trucks and fuel for the trucks, because you can’t put your trash in a pipeline.

We have been running low reserves in the Solid Waste utility for quite some time, and are looking to build them up through this 5-year financial plan. As the “capital” is mostly trucks and bins, there is a shorter lifecycle than the pipes Water and Sewer put in the ground, so our annual Capital spend is perhaps proportionally higher than in the other utilities. However, over all the budget for Solid Waste is much smaller than the other utilities.

ElectricalOur Electrical Utility has a few unique aspects, but it functions like the other utilities we have. The electricity we purchase at wholesale from BC Hydro costs us just over half of our overall revenues, and the cost of day-to-day running of the utility costs about another 17% (or a little over $11 million). This leaves us with about a third of income that goes into our Capital Reserves or directly to the City as transfers. The transfer number here is large because it includes the dividend the City takes every year from electrical utility operational surplus and puts it in the general operational fund. This amounts to about $6 million that the City uses to offset property taxes in providing services that we otherwise wouldn’t be able to deliver.

The utility is spending a *lot* right now on a major capital upgrades. We just built a $30 Million substation in Queensborough, and are now rolling out Advanced Metering Infrastructure, which means 60,000+ new digital electrical meters and the hardware and software to integrate them into our IT network. This is a big, generational investment, and as a result we are drawing down reserves that were intentionally built up a bit to help support this work. Our 5-year Capital Plan has us building these reserves back up to the ~$37 million level by 2028, but at the same time, we are budgeting for a cumulative spend of more than $150 million in upgrading our critical electrical grid over the next 5 years. It’s a good time to be selling electricity, but it is also a challenging time to keep up with the demand for more service.

Summary
There is not a lot of change in these budgets compared to recent years, except maybe some increased capital expenditure. The annual increases are essentially the same as the last 5 or so years (sewer increase a bit higher this year, solid waste and water increases a bit smaller, both way lower than Port Coquitlam’s increases this year, but its not a competition!), and the budget drivers really don’t change – Metro Rates are going up to support their aggressive capital investments, and we pass that on. Compared to the region, our water and solid waste rates are about average (though it is hard to do apples-to-apples comparisons because all cities provide different services and rate schedules). Our sewer rates are still at the higher end regionally, because we still have a lot of older combined flow sewers. This has the double whammy of us sending more water to the plant than we should, and requiring higher capital investment to replace and upgrade those systems. Fortunately, we have been pretty successful at getting senior government grants to help offset some of those costs.

Which brings us into the discussion about the Capital Budget, which I will dive into next post.