BC Municipal Spending Watch 2015

Transcription

1 Research November 4, 2015 BC Municipal Spending Watch th Edition: Trends in Operating Spending, Richard Truscott, Vice-president B.C. and Alberta Aaron Aerts, Economist A BC family of four could have saved, on average, $8,035 in municipal taxes over the past 10 years if municipal councils had kept their operating spending increases in line with the rate of inflation and population growth. Although the last few years have seen a modest slowdown in growth in municipal operating expenditures, it is overshadowed by the 49 per cent increase in overall inflation-adjusted operating spending that has occurred over the last ten years. This is nearly four times the rate of population growth over the same period, and represents $8.2 billion in cumulative excess spending. Increases in municipal fiscal expenditures at current rates are unsustainable. Introduction The BC Municipal Spending Watch analyzes the sustainability of municipal finances by ranking municipalities based on their operating costs and their rate of operating spending growth over the past 10 years. From 2003 to 2013 (the latest data available), BC s population grew by 13 per cent while inflation-adjusted municipal operating spending increased by 49 per cent more than three and a half times population growth (see Figure 1). Figure 1 BC Municipal Operating Spending Growth (Adjusted for Inflation) and Population Growth, % 50% 40% 30% 20% 10% Operating Spending Growth (Excluding Capital Expenditures and adjusted for inflation) Population Growth 49% 13% 0% Source: Ministry of Community, Sport and Cultural Development; BC Stats, Population Estimates; BC Stats, CPI.

2 2 Municipalities are unable to run a budget deficit, which means that any operating spending growth beyond population and inflation are likely paid for by raising taxes and/or fees on residents and businesses. Past research done by CFIB has shown that increases in taxes and fees are often transferred disproportionally to small businesses 1. Increasing the taxes and/or fees on small businesses has negative consequences for the entire province. According to government statistics, small businesses account for more than half of BC s private sector employment and a third of its economic output 2. Increasing the tax burden on small businesses makes it more difficult for them to operate, negatively impacting BC s economy. Thus, unsustainable increases in municipal spending are unfavourable for small businesses as well as for residents. Outline Section 1: Introduction (pg 1-2) Section 2: Key Findings (pg 3-6) Section 3: Municipal Revenue Trends, (pg 7-8) Section 4: Municipal Spending Trends, (pg 8-10) Section 5: Municipal Spending Trends by Region (pg 11-16) Section 6: Conclusions and Recommendations (pg 17) Section 7: Sources (pg 18) Section 8: Appendices (pg 19-26) This is why CFIB is advocating for sustainable spending practices from municipal governments. Small business owners have consistently expressed through CFIB surveys that increases in municipal spending should be kept to the rate of inflation and population growth 3. CFIB recommends that municipalities keep spending increases to this level. 1 Truscott, Richard and Aerts, Aaron B.C. Municipal Property Tax Gap Report. 2 Government of BC, 2015, Small Business Profile. 3 Armstrong, Matthew and Jones, Laura British Columbia Municipal Spending Watch.

3 3 Key Findings Highlights Only six out of 152 municipalities in BC have kept operating spending in line with inflation and population growth over the past 10 years. No large municipalities (population of 25,000 and over) made the list. In 2003, BC municipal operating spending per capita stood at $959. In 2013, that dollar amount increased to $1,260 per person when adjusted to inflation, representing a 31 per cent increase in operating spending per capita from In 2013, the average cost of local government per capita was highest in the region of Northern BC at $2,443 and lowest in Thompson Okanagan at $1,396. The region of Vancouver Coast & Mountains had, on average, the highest operating spending growth over the past 10 years of all regions examined at 55 per cent, after being adjusted for inflation. Coldstream is the best overall performer in BC, with a per capita spending of $607 and a growth of 4 per cent in real operating spending per capita over the last ten years (see Table 2). Stewart is the worst overall performer in BC owing to its high per capita spending ($5,018) and massive increase in real operating spending per capita (116 per cent - see Table 3). A Note on Municipal Rankings In this report, municipal performance is assessed by ranking municipalities against one another. The rank is calculated in such a way that it is evenly split between two different measures: a municipality s 2003 to 2013 spending increase and its 2013 perperson spending level, placing an equal importance on a municipality s long-term spending trend and its latest spending level. Both measures are important and distinct from one another. For example, a municipality may have had a low increase in its spending from 2003 to 2013 but at the same time it may have a high per-person operating cost. In this case, the municipality will be rewarded for its good long-term spending trend and penalized for its poor per-person spending level. In general, a municipality with a large, positive spending trend and a high current spending level will receive a poor rank and a municipality with a low spending level and low or negative trend will receive a good ranking. See Appendix 1 for a more detailed discussion of the report s methodology. the rate of inflation and population growth. BC s major centres, Vancouver and Victoria, increased their operating spending by 29 and 28 per cent respectively from 2003 to 2013, after adjusting for inflation and population growth (see Table 1). Together, it represents about $1.9 billion in excess spending over the past 10 years. Recent trends demonstrate a modest slowdown in operating spending growth in BC municipalities compared to previous years, although short and long term operating spending are still above

4 4 Largest Municipalities Campbell River is the best performing of BC s largest municipalities with a provincial rank of 9 (see Table 1). It has had the lowest growth in real operating spending per capita from 2003 to 2013 amongst the largest cities at 4 per cent. It also has a below average per capita spending level. Port Coquitlam, the second-best performing large municipality, is ranked 16 th overall and has the lowest per capita spending level among the largest cities at $1,176. Its real operating spending growth from 2003 to 2013 of 25 per cent is lower than the large city average. At the other end, West Vancouver is ranked worst amongst BC s largest municipalities with a provincial rank of 128. West Vancouver had the highest per capita operating spending of all large cities at $2,678 and experienced a 43 per cent increase in operating spending per capita between 2003 to Langford is the second worst performing large municipality with a rank of 126. This is owing to the fact that it has the highest real operating spending per capita growth of any major city between 2003 and 2013, a whopping 100 per cent 4. Best Ranked Municipalities Coldstream is the best ranked municipality in BC, up from seventh place last year (see Table 2). The municipality has a 2013 per capita operating spending of $607 and has increased its real operating spending per capita between 2003 to 2013 by four per cent. View Royal is the province s second best ranked municipality. The municipality has a relatively low operating expenditure per capita of $903. Even more noticeable is the fact that it has experienced a decline in real operating spending per capita between 2003 to 2013, decreasing 2 per cent. Parksville should also be commended for keeping their 2003 to 2013 per capita real operating spending growth below the level of inflation and population growth. Worst Ranked Municipalities Stewart is once again BC s worst overall spender (see Table 3). The municipality had one of the largest 2013 per capita spending levels of all BC municipalities at $5,018 per person and despite a population decline of 30 per cent over the last 10 years, real operating spending per capita grew by 116 per cent. (see Appendix 3). Whistler and the Northern Rockies (Fort Nelson) were ranked second and third worst, respectively. Whistler has the highest operating spending per capita in the province at $5,898 despite experiencing a lower than average 2003 to 2013 real operating spending growth of 35 per cent. However, Whistler is somewhat different than the average BC municipality. A significant portion of home-owners in Whistler maintain their official residence elsewhere, and thus are not counted in the number of permanent residents (population). Further, owing to the fact that Whistler has a sizeable tourist industry (over 2.5 million visitors annually), it provides a large amount of services to nonresidents. These two factors distort the per capita operating expenditures. 5 Another municipality of some concern is Lantzville. While having the lowest level of operating spending per capita in all of BC at $573, it also possesses the highest spending growth in BC over the past 10 years at 244 per cent, adjusted for inflation and population growth. If it continues to increase spending at this rate, it will quickly lose its advantage in per capita spending. 4 This large expenditure increase is largely due to the fact that transportation and transit expenditures increased from $6,3 million in 2012 to $23.5 million in CFIB reached out to Langford for comment but at the time of release of this report has not received feedback Whistler Stats & Facts

5 5 Table 1 How BC s Largest Municipalities Spend (population 25,000 and above) Listed from Best to Worst (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 152=Worst) Last Year Rank* (151 = Worst) Real Operating Capita Growth (%) 2013 Operating 1 Campbell River ,196 2 Port Coquitlam ,176 3 Surrey Chilliwack ,020 5 Port Moody ,393 6 Burnaby ,296 7 Coquitlam ,243 8 Richmond ,382 9 Mission , North Cowichan , Saanich , Maple Ridge , Langley City , Kelowna , Nanaimo , Prince George , Vernon , Delta , North Vancouver City , North Vancouver District , New Westminster , Kamloops , Vancouver , Victoria , Abbotsford , Langley District Mun , Penticton , Langford , West Vancouver** ,678 Average: 36 1,453 The overall rank assigned to each municipality is an equally-weighted combination of two indicators: (1) real operating spending per capita growth, or percentage growth in operating spending over the past 10 years, adjusted for inflation and population growth; and (2) 2013 operating spending per capita * Last year s ranking is not directly comparable to the rank in this year s report owing to a different base year being used. See appendix one for details. ** In this year s report, West Vancouver s transportation costs were re-added to the operating expenses. Previous reports excluded transportation costs as transportation costs increased in 2002 after the municipality took over the cost of running local bus service.

6 6 Table 2 BC s 10 Best Ranked Municipalities Listed from Best to Worst (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 152=Worst) Last Year Rank (151 = Worst) Real Operating Capita Growth (%) 2013 Operating 1 Coldstream View Royal Parksville ,053 4 Cumberland Fruitvale Lake Cowichan Port McNeill Highlands Campbell River , Metchosin The overall rank assigned to each municipality is an equally-weighted combination of two indicators: (1) real operating spending per capita growth, or percentage growth in operating spending over the past 10 years, adjusted for inflation and population growth; and (2) 2013 operating spending per capita Table 3 BC s 10 Worst Ranked Municipalities Listed from Worst to Best (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 152=Worst) Last Year Rank (151 = Worst) Real Operating Capita Growth (%) 2013 Operating 1 Granisle ,421 2 Silverton ,903 3 Masset ,907 4 Sayward ,856 5 Belcarra ,834 6 Hudson's Hope ,804 7 Lantzville 149 NA* Northern Rockies ,645 9 Whistler , Stewart ,018 The overall rank assigned to each municipality is an equally-weighted combination of two indicators: (1) real operating spending per capita growth, or percentage growth in operating spending over the past 10 years, adjusted for inflation and population growth; and (2) 2013 operating spending per capita *Lantzville is being ranked for the first time; previous reports did not rank Lantzville owing to the fact that its data only stretched back to 2003

7 7 Municipal Revenue Trends, In 2013, municipal revenue in BC totalled $8.4 billion 6. As shown in Figure 2, the majority of municipal revenues stem from property taxes (48 per cent). About one third of revenues are from the sale of services such as business licences. Other sources of revenues include government transfers (7 per cent), which refers to the transfer of funds from higher levels of government to lower levels of government, developer contributions (9 per cent), which are costs a developer needs to pay to connect a new community to municipal infrastructure, and investment income (2 per cent). Small business owners are particularly affected by taxes on business property because they are taxed at a much higher rate than residents, despite not consuming municipal services at the same rate 7. In 2014, BC businesses paid, on average, 2.6 times more on municipal property tax than on a residential property of equal value 8. Raising property taxes on businesses is a politically easier alternative than raising residential property taxes due to less potential for voter backlash. Real municipal revenues from government transfers increased by 112 per cent over the past 10 years (see Figure 3). While local governments argue that the large increases in municipal spending are due to government downloading, or the transfer of responsibility from provincial governments to municipal governments, it is clear from the charts that municipalities have been given much support from higher levels of government to administer the programs they have passed down. Another major source of municipal revenue that has increased dramatically over fifty per cent in the past 10 years is sales of services, which encompasses everything from parking fees to business licences. This is an easy way for local governments to raise revenues without causing too much criticism, but the effects of raised fees hurts small businesses tremendously. Figure 2 Sources of Municipal Revenue, 2013 Investment Developer Income, 2% Other, 3% Contributions, 9% Government Transfers, 7% Sales of Services, 31% Own Purpose Taxation, 48% Source: Ministry of Community, Sport, & Cultural Development Local Gov t Stats. Revenue. Sch401_2013; BC Stats, CPI. 6 Ministry of Community, Sport, & Cultural Development Local Government Statistics 7 MMK Consulting Inc., City of Vancouver Consumption of Tax-Supported Municipal Services, Volume 1 Main Report 8 Truscott, Richard and Aerts, Aaron BC Municipal Property Tax Gap

8 8 Figure 3 Growth of Revenue Sources, Adjusted for Inflation, % 112% 43% 53% 54% Own Purpose Taxation Sales of Services Government Transfers Developer Contributions Source: Ministry of Community, Sport, & Cultural Development Local Gov t Stats. Revenue. Sch401_ ; BC Stats, CPI. Total Revenue Municipal Spending Trends, Aggregate municipal operating spending in BC totalled $5.9 billion in Over 40 per cent of this was spent on general government and protective services (see Figure 4). A large portion of operating spending is dedicated to wages and benefits (e.g. 60 per cent in Vancouver 9 and 62 per cent in Victoria 10 ). Unfortunately, unlike provinces such as Alberta and Quebec where the provincial government collects, aggregates, and publishes data on municipal salaries and benefits as well as the number of employees a municipality has, the BC government does not require such information. This makes it more challenging to have an expense breakdown in order to figure out what exactly the money is being used for. It is CFIB s position that to increase accountability and transparency, the provincial government should begin requiring such information from municipalities. In a past study done by CFIB, it was found that there is a large disparity between municipal sector and private sector salaries, wages and benefits. CFIB s Wage Watch Report found that in BC, there was an average wage premium of 6.8 per cent for municipal sector workers, which balloons to 16.7 per cent when municipal sector benefits are included 11. The substantial wage gap between private and public employees is in large part due to the inability of municipalities to effectively negotiate reasonable compensation increases with labour unions. Unfortunately, the clout that the unions wield often forces municipalities into situation where they feel pressured into acquiescing to the unions demands. With roughly 60 per cent of most major cities budget going into labour costs, large increases in labour costs result in the municipality having to find ways to raise new revenue. This is in large part why municipal Own Purpose Taxation has risen 43 per cent and Sales of Services by 53 per cent in the past ten years (see Figure 3). This result is highlighted in the City of Vancouver budget outlook, where they note that each 1 per cent wage increase city-wide requires a property taxes to increase by 1.1 per cent to make up the increased 9 City of Vancouver, 2012 Annual Financial Report. 10 City of Victoria, 2012 Annual Report. 11 Canadian Federation of Independent Business Municipal Wage Watch

9 9 expenditures 12. Municipalities need to work together with the provincial and federal levels to find ways to increase their negotiating leverage when creating new collective bargaining agreements and not conitunally acquiesce to unsustainable and inequitable city worker wage increases. Figure 4 Allocation of Municipal Spending, 2013 General Government 15% 3% 13% Protective Services Solid Waste Mgmt and Recycling Health, Social Services and Housing 20% 29% Development Services Transportation and Transit Parks, Recreation and Culture 11% 3% 1% 5% Water and Sewer Services Other Services Source: Ministry of Community, Sport, & Cultural Development Local Gov t Stats, Expenditure. Sch402_2013. Figure 5 outlines the growth in spending by expenditure category. Solid waste management and recycling experienced the highest increase at 69 per cent over the past ten years even after adjusting for inflation (see Figure 5). With the exception of social services and other services, the inflationadjusted growth in all spending categories has exceeded BC s population growth over three-fold the 13 per cent population growth from 2003 to Vancouver Budget Outlook

10 10 Figure 5 Growth of Spending, by Expenditure Category, Adjusted for Inflation, Solid Waste Mgmt and Recycling 69% Water and Sewer Services Parks, Recreation and Culture General Government Development Services Transportation and Transit Protective Services 59% 56% 55% 55% 46% 45% Other Services -1% Health, Social Services and Housing -17% -50% 0% 50% 100% Source: Ministry of Community, Sport, & Cultural Development.. Local Gov t Stats, Expenditure. Sch402_; BC Stats, CPI. Municipal Spending Trends by Region Municipal Operating Spending Statistics This section examines British Columbia s municipal spending trends by the following geographic regions: Vancouver, Coast & Mountains Vancouver Island Thompson Okanagan Kootenay Rockies & Cariboo Chilcotin Coast Northern British Columbia These regions are the same defined geographic areas used by the Government of British Columbia. For balance, Kootenay Rockies and Cariboo Chilcotin Coast have been combined. Figure 7 compares real operating spending growth at the regional level to that of population growth over the last 10 years. Even when operating spending is adjusted to inflation, it still greatly outpaces population growth the pace by which it exceeded population growth can be seen above the bars. Northern BC had growth in real operating spending per capita over the 2003 to 2013 period despite the municipalities in the region experiencing a declining population, on average.

11 11 Figure 7 BC Regional Real Operating Spending Growth and Population Growth, % 4 x population growth 7 x population growth 9 x population growth 43 x population growth negative population growth 60% 50% 40% 55% 52% 47% 43% 41% 30% 20% 10% 0% -10% 13% Van. Coast & Mountains 7% 5% 1% -3% Van. Island Thomp-Oak Koot-Rock & Carib-Chil Northern BC Real Operating Spending Growth Population Growth Source: Ministry of Community, Sport, & Cultural Development.. Local Gov t Stats, Expenditure. Sch402_; BC Stats, Population Estimates ; BC Stats, CPI. Vancouver, Coast & Mountains Whistler and Hope are the worst performers in the region (see Table 4). Whistler has by far the highest operating spending per capita in the region at $5,898. As mentioned earlier, Whistler has some unique characteristics that make it hard to compare to the other municipalities. Hope experienced the region s largest growth in real operating spending per capita from 2003 to 2013 at 91 per cent. The third worst performing municipality in the region, West Vancouver has the region s second highest operating spending per capita at $2,195. BC s largest municipality, Vancouver s population has increased by 9 per cent since 2003 (see Appendix 4) while its real operating spending per capita has increased by 29 per cent. Vancouver s operating spending per capita of $1,782 was higher than the region s average. No municipality in the Vancouver, Coast & Mountains region was able to keep its operating spending to inflation and population levels during the past ten years. However, the municipalities within the region had, on average, the lowest real operating spending growth per capita from 2003 to 2013.

12 12 Table 4 Municipalities by Overall Provincial Rank, Vancouver, Coast & Mountains Listed from Best to Worst (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 152=Worst) Last Year Rank (151 = worst) Real Operating Capita Growth (%) 2013 Operating 1 Port Coquitlam ,176 2 Surrey Pemberton ,379 4 Chilliwack ,020 5 Port Moody ,393 6 Burnaby ,296 7 Gibsons ,318 8 White Rock ,350 9 Coquitlam , Richmond , Mission , Sechelt , Maple Ridge , Langley City , Powell River , Anmore Squamish , Bowen Island , Kent , Delta , North Vancouver City , North Vancouver District , New Westminster , Vancouver , Abbotsford , Lions Bay , Pitt Meadows , Langley District Mun , Harrison Hot Springs , West Vancouver , Hope , Whistler ,898 Regional Average 38 1,562 Vancouver Island The worst ranked municipality in the region is Lantzville. While the cost for the operations of the local government in Lantzville is low per capita ($573), real operating spending per capita growth skyrocketed by 244 per cent from 2003 to 2013, the largest increase in the region and in BC (see Table 5). The second worst ranked municipality in the region is Belcarra where municipal operating spending has reached $1,834 per capita, and had a 158 per cent increase in real operating spending per capita. While Tahsis improved its ranking, its per capita spending of $3,915 is the highest by a large margin in the region and is the fifth highest in B.C. Victoria ranked 93 rd in this year s report, up 12 spots since last year. Its real municipal operating spending per capita has increased by 28 per cent since 2003 and its operating spending per capita of $1,983 continues to be significantly higher than the regional average. View Royal and Parksville are the only municipalities in the region that have kept spending to inflation and population growth from 2003 to Due to relatively low average operating spending per capita of the best performing municipalities in the region, Vancouver Island holds 8 of the top 10 positions in the province.

13 13 Table 5 Municipalities by Overall Provincial Rank, Vancouver Island Listed from Best to Worst (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 152=Worst) Last Year Rank (151=worst) Real Operating Capita Growth (%) 2013 Operating 1 View Royal Parksville ,053 3 Cumberland Lake Cowichan Port McNeill Highlands Campbell River ,196 8 Metchosin Qualicum Beach , Duncan , Comox , Ladysmith , North Saanich , Port Alberni , Courtenay , Port Hardy , North Cowichan , Saanich , Colwood Nanaimo , Central Saanich , Sidney , Port Alice , Victoria , Gold River , Esquimalt , Oak Bay , Sooke Tofino , Ucluelet , Langford , Tahsis , Alert Bay , Belcarra , Lantzville 149 N/A* Regional Average 41 1,448 *Lantzville is being ranked for the first time; previous reports did not rank Lantzville owing to the fact that its data only stretched back to 2003 Thompson Okanagan Valemount is the worst performing municipality in the region (see Table 6). It has the region s highest operating spending per capita at $2,187. While Valemount s real operating spending per capita increased 57 per cent between 2003 and 2013, in recent years it has been making strides in getting expenditures under control. Valemount s 2013 per capita spending decreased by $785 compared to 2012, encouraging progress towards attaining sustainable operating spending. Sicamous is the second worst ranked municipality in the region. It has had the region s largest increase in spending from 2003 to 2013 at 82 per cent. As a whole, municipalities in Thompson Okanagan have, on average, the lowest local government operating cost per capita compared to the other four regions. The region of Thompson Okanagan should be lauded for being the leader in costs per capita, but there remains substantial room for improvement. For instance, no municipality in the Thompson Okanagan region was able to keep its spending in line with inflation and population growth, although Coldstream was able to keep its spending somewhat close to that benchmark.

14 14 Table 6 Municipalities by Overall Provincial Rank, Thompson Okanagan Listed from Best to Worst (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 152=Worst) Last Year Rank (151=worst) Real Operating Capita Growth (%) 2013 Operating 1 Coldstream Fruitvale Armstrong Keremeos ,024 5 Lake Country ,233 6 Salmon Arm ,189 7 Oliver ,069 8 Greenwood ,533 9 Chase , Midway , Ashcroft , Kelowna , Cache Creek , Spallumcheen Enderby , Vernon , Princeton , Kamloops , Peachland , Logan Lake , Osoyoos , Lumby , Penticton , Grand Forks , Merritt , Summerland , Sicamous , Valemount ,187 Regional Average 40 1,396 Kootenay Rockies & Cariboo Chilcotin Coast Silverton remained the worst ranked municipality in the region and one of the worst in the province (see Table 7). Along with having the third highest operating spending per capita in the region, Silverton has recorded a large 80 per cent increase in real operating spending per capita from 2003 to For another year, the second worst in the region was Wells, largely owing to the fact it holds the region s largest operating spending per capita at $3,352. However, it is important to note that both Silverton and Wells appear to have begun addressing their spending problems. Since the last report, their per capita spending decreased substantially - 17 per cent and 9 per cent respectively. Continued progress reducing per capita spending is needed to alleviate the recent build up in operational spending. 100 Mile House was the only municipalities in the region to keep spending in line with population and inflation growth over the past 10 years.

15 15 Table 7 Municipalities by Overall Provincial Rank, Kootenay Rockies & Cariboo Chilcotin Coast Listed from Best to Worst (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 151=Worst) Last Year Rank Real Operating Capita Growth (%) 2012 Operating 1 Kaslo , Mile House ,863 3 Montrose ,023 4 Rossland ,493 5 Quesnel ,833 6 Clinton ,631 7 Castlegar ,523 8 Creston ,432 9 Fernie , Salmo , Nakusp , Cranbrook , Warfield , Kimberley , Williams Lake , Trail , Elkford , Sparwood , Nelson , Radium Hot Springs , Golden , Invermere , Slocan , New Denver , Revelstoke , Lillooet , Wells , Silverton ,903 Regional Average 42 1,911 Northern British Columbia Stewart is the worst ranked municipality in the region and in BC again in this year s report. This municipality is also the region s worst culprit in terms of its 2013 operating spending per capita ($5,018) and has had a huge increase in real operating spending per capita growth from 2003 to 2013 (116 per cent). An encouraging sign did emerge between 2012 and 2013, as Stewart decreased operating spending per capita between 2012 and 2013 by 13 per cent; CFIB will continue to monitor progress in this municipality and hopes this trend continues. Northern Rockies is Northern BC s second worst performing municipality. It had the region s highest growth in operating spending per capita from 2003 to 2013 at 130 per cent and also has the region s fifth highest 2013 operating spending per capita at $3,645. On average, the local governments in Northern British Columbia have the highest operating cost per capita among the regions examined (see Table 9). It also has the highest real operating spending growth per capita from 2003 to Northern BC also stands out from the other regions as 18 out of 29 municipalities have undergone a population decrease from 2003 to 2013, yet most of these municipalities increased their spending over that period. Three municipalities in the region, Prince Rupert, Port Clements and Taylor, kept their operating spending growth well below the benchmark of population growth and inflation over the 2003 to 2013 period.

16 16 Table 8 Municipalities by Overall Provincial Rank, Northern British Columbia Listed from Best to Worst (by Overall Provincial Rank) Overall Provincial Rank (1=Best, 152=Worst) Last Year Rank (151=worst) Real Operating Capita Growth (%) 2013 Operating 1 Port Clements ,647 2 Prince Rupert ,148 3 Vanderhoof ,182 4 Fort St. James ,713 5 Terrace ,431 6 Houston ,518 7 Prince George ,550 8 New Hazelton ,899 9 Smithers , Mackenzie , Chetwynd , Telkwa* , Fort St. John , Burns Lake , Dawson Creek , Kitimat , Taylor , Fraser Lake , Tumbler Ridge , Hazelton , McBride , Pouce Coupe , Port Edward , Granisle , Masset , Sayward , Hudson's Hope , Northern Rockies , Stewart ,018 Regional Average 45 2,443 *Telkwa protective services includes provincial funds provided to fund Telkwa s Community Wildfire Protection Plan.

17 17 Conclusions and Recommendations Municipal operational spending is considered to be sustainable when it is at or below the rate of inflation and population growth 13. However, over the past 10 years most British Columbia municipalities have spent well in excess of sustainable levels. While the overall rate of spending growth continues to slow, only a minority of BC municipalities have demonstrated real restraint. Overspending by local governments leads to high taxation, putting pressure on local commerce and stifling job growth. For local governments the choice is clear: address overspending now or leave a greater burden for future governments to deal with down the road. CFIB believes there is still time for municipalities to adopt more sustainable spending practices before it is too late. Ultimately, it will require strong political leadership. CFIB recommendations: 1. Municipal operating spending increases should be limited to the rate of population growth and inflation. 2. Municipal governments should conduct reviews to identify core versus non-core services. 3. Municipal sector compensation should be aligned with the private sector. According to the latest CFIB research, British Columbia currently has a 16.7 per cent gap between these sectors when combining wages and benefits 14. CFIB recommends freezing public sector wages until private sector wages catch up and reach parity with those of the public sector. Municipalities should also increase negotiating leverage to control public sector wage increases and bring them more in line with private sector norms. 4. The transparency of reporting municipal financial data should be improved. While data is collected and reported on an annual basis by the BC Government, the quality and coverage of the data could use improvement. For example, the province should collect and publically report the data on the number of employees and the total amount spent on wages, salaries and benefits at the municipal level on a regular basis. This practice is already in place in Alberta 15 and Quebec 16. In order to better inform the public as to where their tax dollars are being spent, improving accountability in the process, employment and salary numbers should be broken down by function and included in the annual reports submitted to the province by municipal governments All municipalities should support the mandate of the recommendations of BC s new municipal Auditor General. CFIB is encouraged that the provincial government followed through on its commitment to create an independent Auditor General for Local Government (AGLG). However, the long-term success and effectiveness of this new office will rely on the cooperation of municipal governments. Therefore, we urge municipalities to commit to working constructively with the AGLG to reverse the unsustainable spending trends outlined in this report. 13 Based on CFIB survey data. Armstrong, Matthew and Jones, Laura British Columbia Municipal Spending Watch. 14 Canadian Federation of Independent Business Municipal Wage Watch 15 Government of Alberta, Ministry of Municipal Affairs Municipal Financial and Statistical Data. Financial Activities by Type/Object; General Statistics 16 Gouvernement du Québec, ministère des Affaires municipales et de l occupation du territoire, Rapport financier des organismes municipaux. Analyse de la rémunération 17 Armstrong, Matthew and Jones, Laura. British Columbia Municipal Spending Watch.

18 18 Sources Armstrong, Matthew and Jones, Laura. Canadian Federation of Independent Business British Columbia Municipal Spending Watch. Tourism Whistler, 2015, Stats & Facts. City of Vancouver, 2012 Annual Financial Report. City of Vancouver, Budget Outlook City of Victoria, 2012 Annual Report. e2.pdf Gouvernement du Québec, ministère des Affaires municipales et de l occupation du territoire, Rapport financier des organismes municipaux Government of Alberta, Ministry of Municipal Affairs. Municipal Financial and Statistical Data. Government of British Columbia British Columbia Municipal Police Unit Agreement pdf Government of British Columbia, BC Stats CPI BC, Vancouver, Victoria. Government of British Columbia, BC Stats Population of BC. Government of British Columbia, Ministry of Community, Sport and Cultural Development Provincial Guidance. Government of British Columbia, Ministry of Community, Sport, & Cultural Development Local Government Statistics. Government of British Columbia, Ministry of Jobs, Tourism and Skills Training Small Business Profile. Government of British Columbia, Ministry of Justice Police Resources in British Columbia, Truscott, Richard and Aerts, Aaron. Canadian Federation of Independent Business B.C. Municipal Property Tax Gaps: A 10-Year Perspective. Canadian Federation of Independent Business Municipal Wage Watch. MMK Consulting Inc City of Vancouver - Consumption of Tax-Supported Municipal Services, Volume 1 Main Report.

19 19 Appendix 1 Methodology The Municipal Spending Watch rankings are based on an equal weighting of growth in inflationadjusted operating spending per capita (2003 to 2013) and 2013 operating spending per capita 18. In order for the ranking system to be more intuitive, this year s report changes the ranking system so that the best performing municipality is given a rank of one. In previous editions of this report, the worst ranked municipality was given a rank of one. Capital expenditures, such as infrastructure building, are excluded from the report. This report only looks at local government operating spending. Policing costs have been included in this year s report (see Appendix 2). An implication of this inclusion is that this year s report is not comparable to previous editions of the BC Municipal Spending Watch, since policing costs were excluded in previous editions. In total, 152 municipalities are covered in this report. Barriere, Canal Flats, Clearwater, Sun Peaks, West Kelowna and Queen Charlotte were not included in this report since many of these municipalities are newly incorporated and do not have data stretching back to Zeballos has been excluded from this year s report as the municipality has a very small population that has decreased substantially since Lytton has also been excluded since, at the time this report was written, the municipality had not yet submitted their 2012 financial records to the BC Ministry of Community, Sport and Cultural Development for verification. Municipalities are divided into the following geographic regions: Vancouver, Coast & Mountains Vancouver Island Thompson-Okanagan Kootenay-Rockies & Cariboo-Chilcotin Coast Northern British Columbia This report analyzes BC municipal spending statistics from 2003 to 2013, the most recent year available. Unless otherwise stated, data on municipal revenues and expenditures have been obtained from the Ministry of Community, Sport and Cultural Development. Figures and tables on municipal spending represent CFIB calculations based on this data. New to this report, the year 2003 is used as the base year for comparing operating spending. This inevitably includes spending patterns during both economic upturns and economic downturns over the past 10 years. Municipal operating spending is calculated using total municipal expenditures, excluding capital spending. It is important to note that the rankings between this iteration of the report and previous versions are not directly comparable. This is a result of CFIB s methodology being altered in this and subsequent reports to look at a rolling ten year period (i.e., , 18 A standardized index is created for each indicator (between 1 and 100). A municipality with the highest real operating spending per capita growth is given a score of 1 while the municipality with the lowest real operating spending per capita growth is given a score of 100. All other municipalities are given a proportionate score within that range. The same exercise is applied to the indicator for the 2013 operating spending per capita.

20 20 etc) rather than in previous reports which used 2000 as the base year. Going forward, the comparison of rankings will be more meaningful. While last year s reports rankings are indicative of how the municipalities compared in 2012 relative to spending in 2000, the length of the time period shifting results in differences in the percentage change (which is a key part of how rankings are formed). Municipal population growth rates and provincial inflation growth rates are calculated based on BC Stats data from 2003 to The population figures have been updated from previous reports to obtain more recent estimates. All municipalities have been allocated the provincial inflation rate with the exception of those municipalities within the Greater Vancouver Region and the Capital Region, as separate inflation values exist for these two regions. To evaluate the degree of sustainable spending growth, CFIB considers population growth and inflation to be a reasonable benchmark for optimal spending increases based on survey responses from small business owners in BC 19. Appendix 2 A Note on Policing Costs Although excluded from past reports, policing costs started to be included in the 2014 report. The reason for the previous exclusion is that most BC municipalities do not have an independent police force but rather contract out to the RCMP. Due to this, municipalities have argued that they have little control over their policing costs since the federal government, not the municipality, negotiates policing wages. However, although municipalities that contract out to the RCMP may not have much control over their contracts, they do have control over the number of police officers they hire 20. CFIB sees this as a credible reason to include policing costs in these calculations. According to the BC Ministry of Justice, a municipality is responsible for its own police services once it reaches a population of 5, Before reaching a population of 5,000, municipalities are policed by the provincial RCMP. The province pays for 70 per cent of the associated costs while the federal government pays for the remaining 30 per cent. A portion (50 per cent) of the provincial component is recovered through a municipal Police Tax. Once a municipality has reached a population of 5,000, it has the choice of forming an independent department, contracting with an existing department or contracting with the provincial government for RCMP services. As of 2013, there are 75 BC municipalities that were given responsibility for providing their own police services, 12 which have chosen to be policed by an independent force (Vancouver, Victoria, Saanich, Central Saanich, Oak Bay, Delta, Abbotsford, New Westminster, West Vancouver, Nelson and Port Moody; Esquimalt shares services with Victoria). These 12 municipalities are responsible for 100 per cent of their policing costs and are governed by their own policing board. Of the remaining 63 municipalities that are policed by the RCMP, those with a population of 5,000-14,999 are responsible for 70 per cent of their policing costs. Municipalities with a population over 14,999 are responsible for 90 per cent. The federal government pays for the remaining portions. 19 Based on CFIB survey data. Armstrong, Matthew and Jones, Laura. British Columbia Municipal Spending Watch 20 Government of British Columbia British Columbia Municipal Police Unit Agreement 21 Government of British Columbia, Ministry of Justice Police Resources in British Columbia, 2013

21 21 Appendix Overall Provincial Rank (1=Best, 152=Worst) Overall Provincial Rank (1=Best, 152=worst) Last Yr. Rank Real Operating Capita Growth (%) 2013 Operating Change in Municipal Capita from (%) Real Operating Spending Growth (%) Population Growth (%) Coldstream View Royal Parksville , Cumberland Fruitvale Lake Cowichan Port McNeill Highlands Campbell River , Metchosin Armstrong Port Clements , Kaslo , Keremeos , Qualicum Beach , Port Coquitlam , Lake Country , Duncan , Comox , Mile House , Surrey Pemberton , Salmon Arm , Chilliwack , Oliver , Port Moody , Burnaby , Ladysmith , North Saanich , Gibsons , White Rock , Greenwood , Port Alberni , Coquitlam , Courtenay , Richmond , Mission , Prince Rupert , Sechelt , Chase , Port Hardy , North Cowichan , Saanich , Colwood Vanderhoof , Midway , Maple Ridge , Langley City , Fort St. James , Montrose , Ashcroft , Rossland , Quesnel , Kelowna , Powell River , Terrace , Clinton , Nanaimo , Anmore

22 22 Overall Provincial Rank (1=Best, 152=Worst) Last Yr. Rank Real Operating Capita Growth (%) 2013 Operating Change in Municipal Capita from (%) Real Operating Spending Growth (%) Population Growth (%) Houston , Squamish , Central Saanich , Sidney , Castlegar , Creston , Prince George , Bowen Island , Kent , Cache Creek , Spallumcheen Enderby , Vernon , Fernie , Delta , North Vancouver City , Salmo , North Vancouver District , Nakusp , New Westminster , New Hazelton , Princeton , Kamloops , Smithers , Cranbrook , Mackenzie , Port Alice , Vancouver , Chetwynd , Peachland , Warfield , Telkwa , Kimberley , Victoria , Williams Lake , Trail , Gold River , Abbotsford , Elkford , Esquimalt , Logan Lake , Lions Bay , Pitt Meadows , Osoyoos , Oak Bay , Lumby , Langley District Mun , Fort St. John , Sooke Penticton , Grand Forks , Burns Lake , Sparwood , Dawson Creek , Merritt , Summerland , Harrison Hot Springs , Kitimat , West Vancouver , Nelson , Tofino ,