The City of North Vancouver has throughout the years been known for its financially conservative administrations. We have always had large cash deposits in the bank, and large tracts of land in what has often been referred to as the City’s “Land Bank”.
In the last 15 years we have sold off many of our City owned land reserves and even more of those reserves are in plan to be sold in the near term.
The City approved a fiscal 2014 ten-year budget plan, which proposes to appropriate and spend $208.9m over the plan period, years 2014 – 2023.
The City’s finance department currently estimates income for the capital plan expenditures for the 2014 – 2023 periods at only $190.1m. The plan budget identifies a shortfall of $18.8m over the ten-year period.
The $190.1m of plan monies includes all interest income from long-term investments, and assumes these investments will generate an annualized return forecast by the City’s finance department at a rate of 4%. During questioning, the City’s then head of Finance, Ms. Isabel Gordon, told council on November 25th 2013 that the 4.0% income rate from investments was reasonable as the historical rate of return from the City’s investment portfolio was 4.23%. At a subsequent council meeting on December 16th 2013, Ms. Gordon told council that the City’s blended rate of return was now only 2.1%, as the City could no longer find reinvestment opportunities at or near the portfolio’s expiring rates.
With an $18.8m budget shortfall based on an investment income rate of 4.0%, it is reasonable to assume that the reduced 2.1% return rate identified less than a month after budget plan approval was given by council will enlarge the funding gap even further.
The City has now approved plans to appropriate for spending $94.8m of the $208.9m capital monies, to be spent in calendar year 2014 alone. This budget approval means that the City is on track to commit and / or spend 45.38% of all known and available income over the next 10-years, in year one (2014) of the ten-year plan. (http://www.cnv.org/attach/2013%2011%2025%20FCProjectPlan.pdf). See Council Video Feed:
Further, the City has passed a motion compelling staff to have a “shovel ready” project design for Harry Jerome, ready for Council’s review before the District has completed reconstruction of the William Griffin facility(http://www.cnv.org/~/media/DE3A082A13494998AE10F104146B733E.pdf ) as located at agenda item 9, approved November 25th 2013. The Harry Jerome capital requirements are estimated to be as high as $90.0 million. There is currently only $8.0m set aside in the capital plan for the Harry Jerome reconstruction project.
No allowance for funding the forced replacement of the Lions Gate Waste-Water Treatment Plant (“WWTP”) has been determined. The City and Metro are in talks with the Province and the Federal Government, but the Mayor reports the deal is a long way from settled. Mayor Mussatto told council on December 2nd 2013 that he anticipates the funding agreement will be struck on the basis of 1/3 Federal funding, 1/3 Provincial funding, and 1/3 Metro/municipal funding. See Council Video Feed:
The recent federal funding program under which the WWTP is now anticipated to proceed may limit the Federal portion to 25%, compelling larger Provincial, Regional (Metro) and North Shore municipal funding requirements.
In response to written questions served on the City at the 1st of four Town Hall meetings (held March 6th 2014), the City’s Director of Community Development, Mr. Gary Penway provided the following explanation on the anticipated cost of the new WWTP to each North Shore resident:
Question. 25. How will the capital costs of the WWTP be borne?
- ” From a municipal perspective there is an expectation that senior government funding will be forthcoming to help fund the Capital cost. The municipal share of the remainder will be split approximately 35% (North Shore Sewerage Area – DNV, WV, CNV by population) and 65% Regional.”
Using these assumptions, if the cost of the new WWTP facility is contained at only $750.0 million, and this value is shared evenly with both the federal and provincial governments in accordance with Mayor Mussatto’s statements in Council chambers, contrary to the terms of the new Federal funding model, it will leave approximately $250.0 million to be funded at the regional and local government levels. The three North Shore municipalities will be liable to pay 35%, or approximately $87.4 million in direct costs.
City taxpayer via sewerage rates would represent and be liable for exactly 30% of that debt, or $26.2 million dollars.
The City is now proposing to spend as much as $30.0m of public monies to fund “Disney-North”, the new “ShipYards” and Lower Lonsdale (“LoLo”) restaurant district proposal developed by US consultant Roger Brooks International. See Roger Brook presentation video feed: (http://www.cnv.org/CentralWaterfrontVisionWorkshop). See also the Roger Brooks International Power Point Presentation made February 18th 2014: (http://www.cnv.org/~/media/City%20of%20North%20Vancouver/Documents/City%20Waterfront/Central%20Waterfront%20Area%20Vision%20Workshop%20Powerpoint%20Presentation.ashx).
The City’s water, sewerage and refuse (“WS&R”) disposal rates have increased by 9.0% in 2014 versus 2013, and are scheduled to escalate a further 9.0% per year each year for the next 10 years. These service charge increases will double the household cost of water, sewerage and refuse over the next 10 years, from their current levels of approximately $650 to $1,300 annually. These WS&R collection tariff rate increases do not include the adjustments necessary to fund the City’s taxpayer obligation to the new WWTP facility. See Council Video Feed :
Council is now openly discussing the possibility of borrowing $30m – $50m, to use in conjunction with City cash reserves of $42.0m-ish un allocated savings, for the purpose of rebuilding Harry Jerome. While not yet disclosed, presumably the $30.0m in capital for “Disney-North” will also come from borrowed monies.
The effects of the Harry Jerome and Disney North projects alone could mean that as early as this year, the City could go from having money in the bank, to having or being on track for a debt of $80.0m plus, which would equate to a debt of $1,566 for each man, woman and child resident in the City of North Vancouver. These potentially new obligations will not even consider the debt obligations resulting to each taxpayer from the new WWTP facility. All these obligations will be in addition to the annual municipal tax burden already borne by City taxpayers, which is anticipated to rise dramatically over the coming years due to the City’s ongoing forays into social program spending, much of which properly falls within the provincial governments mandate, as was recently highlighted by councillor Guy Haywood in his January 20, 2013 report to council: (http://www.cnv.org/attach/2014%2001%2020%20item%2013Memo-RGH.pdf).
In addition to all these known financial obligations, the City is now toying with the idea of operating and/or funding private busing, both in the form of rubber tire trolly buses up and down Lonsdale, as well as a private busing initiative betweem HarbourSide and the Quay. The Harbour Side funding comes as a set-off against the Concert Properties amenity contribution otherwise payable as a result of the density bonusing allowed by the City, contrary to the current zoning limits over the Harbour Side lands. These initiatives will place the City in direct competition with Trans-Link and could begin a dramatic paradigm shift. Trans-Link has no funding model, and is currently experiencing service and project cut-backs and delays. Imagine how easy it may become for them to chart a new course when they discover the City of North Van is prepared to operate and pay for its own private busing initiatives, in direct competition with the Trans-Link transit system. This doesn’ t even consider the Transit union obligations and rights which may be affected by these initiatives.
IT IS MY POSITION THAT the City should restrict all capital spending in relation to all discretionary projects until it can be determined how much money the Harry Jerome rebuild or replacement project is going to require, and until the WWTP funding model can be determined and disclosed to the public. Accordingly:
1. I am committed to establishing and funding BIA’s throughout the City, I would oppose a BIA model which would add any additional tax burden to the City’s business community; and
2. I will support some aspects of the new Disney North proposal of Roger Brooks, but only where the funding and financial risks associated with the venture are privately borne, and to this end I will support an RFP process to construct, pay-for by way of private (not public) monies, and operate the ShipYard amenities as proposed by Roger Brooks International; and
3. City taxpayers have seen their municipal tax burden increase every year at rates which vastly exceed any income growth they have realized over the same period. Accordingly, I will seek to find ways to cut the municipal tax burden by shrinking the size and operating cost of City Hall. However, while I support this objective, I pledge to maintain the current level of service and municipal outside staff, ensuring the quality of City supplied services is not in any way diminished; and
4. I will support a new WWTP facility design and funding model which seeks to reduce the costs to be borne by residents of the City and both Districts. As the financial model selected may be outside the City’s ability to control or influence, I pledge to make regular disclosure to all Council members and residents as to these issues and options as they become better known; and
5. I will not commit to replace Harry Jerome in its current form until a funding model can be developed which will support the projects cost without a further tax burden on City residents. As a result, the solution may compel the City to pursue a public private partnership (“P3”) or in the alternative, a legacy donation funding program, in conjunction with federal and/or provincial infrastructure grants, and/or project modifications where in a staged approach to refurbishment versus outright replacement is possible and provides an acceptable solution; and
6. I will seek to establish a replacement lender for Lonsdale Energy Corporation (“LEC”) in the person of the Municipal Finance Authority (“MFA”). I would seek to place the current $12.0m in approved LEC loans with the MFA. In so doing I would attempt to acquire terms for LEC not dissimilar in nature to the existing terms applicable to the $2.0m MFA loan to LEC which results in an interest grant valued at 17% of the total loan value; and
7. I would seek to increase infrastructure cooperation with the District in relation to the management and operation of water, sewerage and refuse disposal systems, without outside job loses for either municipal organization; and
8. I would pursue revenue generation models, not designed to employ more or larger user fees upon City residents, but rather which specifically pursues better utilization of City owned assets and departments. I would support using those increased income streams to offset the need for future tax increases, and to fund projects and operations in a way intended to reduce the City’s financial burden upon taxpayer funding sources.
When I find myself in a position to effect these changes, the policies and principals set out above will guide my decisions.