2021 2025 Financial Plan - DISTRICT OF LANTZVILLE

2021 – 2025 Financial Plan
  Presentation to Council

    DISTRICT OF LANTZVILLE
    2018-2022 FINANCIAL PLAN
    October 5, 2020 Special Council Meeting 6:00pm

Agenda
   Overview of Financial Planning Process
   Lantzville – Challenges
   Specific Examples of Financial Planning Challenges
   Budget Highlights
       Impact on Average House
       Water, Sewer, Garbage Rates
   Accounting Overview
   Property Assessments & Property Classes (Multiples)
   What is not in the Financial Plan
   Special Projects
   Capital Projects

Overview – Financial Planning Process

   The 2021-2025 Plan has been prepared in accordance with the
    District of Lantzville’s 2021 Financial Plan Guidelines
       Copy included in Financial Plan Binder

   A zero-based budgeting approach has been used, which
    includes a thorough review of each line item

   The 2021-2025 Financial Plan Bylaw will impact the Property Tax
    Rates for 2021
       The Property Tax Rates bylaw will be brought to Council in April 2021
        once the District receives BC Assessment’s final roll information
        around March 31, 2021

Legislative Requirement
•       Financial Plan – Section 165 and 166 of the Community Charter
        • Be adopted annually by bylaw, before the annual tax rate
           bylaw is adopted (before May 15th)
        • Be for a 5-year period (2021-2025)

        • For each year, set out the proposed expenditures, funding
           sources and transfers to or between funds
•       Municipal best practice is to adopt the Financial Plan before the
        end of December, as municipalities are based on a calendar year
        • This facilitates planning for the entire year, so that projects can
          be tendered and progress can be made earlier, resulting in cost
          savings

    4

No Surplus Rule

•       Municipalities cannot purposefully budget for an operating
        surplus. Revenue should only be collected if there is an
        associated expense in the Financial Plan

        •   However, Budget may provide for reserve fund contributions
            • E.g. Asset Management
            • E.g. Snow Removal

•       The Financial Plan should balance (net to $0)

    5

No Deficit Rule
•       Section 165 (5) and (9) of the Community Charter
        • The total of the proposed expenditures and transfers to other
          funds for a year must not exceed the total of the proposed
          funding sources and transfers from other funds for the year
          (simply put, no deficits are permitted)

        •   This differs from Federal and Provincial Governments

    6

Budget Review Process
       Budget process started in July 2020 with the Financial Plan
        Guidelines and Department Heads submitted budgets in early
        September 2020
       Since then, multiple budget review meetings have taken place
       Budget to be amended when direction is received from
        Council
         Council may provide direction at any time
       Even after the budget is adopted, the Financial Plan Bylaw
        can be amended at any time
           However, amendments that impact property taxes need to be
            completed before tax rates are set (around March/April 2021)

    7

Accounting Overview
       All Financial Information is Recorded in separate funds
         General Fund

         Water Fund

         Sewer Fund

         Capital Fund

         Reserve Funds

       The Water Fund and Sewer Fund are stand-alone utilities, which
        operate as self-sustaining entities
         i.e. utility revenues are adequate to support expenditures in
          each year
    8

Accounting Overview
       There are three main categories of expenditures
        1.     Operating Expenses – required, annual expenses to maintain
               operations
        2.     Special Project Expenses – Expenses that do not happen annually
               and are specifically approved by Council
             a)   These may include special projects and larger repair &
                  maintenance items
             b) Temporary or one-time changes to existing level of service
             c)   Larger purchases but do not meet capital asset criteria
        3.     Capital Projects – Capital purchases or project costs where the
               cost is significant and will be amortized over the useful life of the
               asset

    9

Revenue
    PILT (Payment in Lieu of Tax)
      Government & crown corporations exempt from paying tax under
        Section 125 of the Constitution Act, 1867
      PILT is a way of making a payment to municipal governments for
        services it receives
      Lantzville has one PILT from BC Hydro for $28,600

    Grants
      Small Community Grant

         Around $450k/year has been used by the District to reduce the tax
          rate (this is a risk)
         Funds are not guaranteed

    10

Lantzville - Challenges
   Residential Tax Base
       In 2020, 85.7% of property tax revenue was from Residential Assessment
       Light Industry accounts for 1.2%, and Commercial/Business accounts for 8.7%
       There is no significant source of commercial property tax revenue
   Asset Management Funding Gaps
       General Fund - $437,000 annually
       Sewer Fund - $169,000 annually
       In some instances, replacement cost assumptions made were low and the
        replacement cost is actually higher (e.g. Fire Trucks)
       Construction costs have increased
       Higher replacement costs create a larger funding gap

Lantzville – Challenges – Mill Rate
    In 2019, Lantzville had the 9th lowest mill rate out of 161 BC municipalities
     at 1.5655 (including Library)
            Source: Province of BC Schedule 702 for 2019

    The average mill rate for the 161 municipalities was 4.10473
    Neighbouring municipalities / comparable municipalities have mill rates in
     this range:
                Cumberland         3.0454
                Ladysmith          3.9590
                Nanaimo            4.1819
                Parksville         3.3221
    These other communities have significantly more industrial and
     commercial tax base than Lantzville

Lantzville – Challenges – Mill Rate
    Since Incorporation, the mill rate has been kept low - which has
     benefitted taxpayers but has created:
      Infrastructure funding gaps
      Low reserve fund levels for core infrastructure
      Fewer Community services

Examples of Specific Financial
Planning Challenges

Public Works Reserve – Example #1

   Example #1 - Public Works Vehicles and Equipment Reserve
       At December 31, 2020, projected balance in this reserve is ~$31,000
       Previous annual contributions to this reserve from 2007 to 2018 have
        averaged $26,000 each year, or $312,000 over 12 years for all Public
        Works equipment
         This is not enough to sustain all of the Public Works department
           vehicles
       Replacement dump truck is needed in 2021 at a cost of $110,000 but
        can’t be purchased until 2022 as there are not enough funds available
         Current dump truck is a 2008 model that was up for replacement in
           2016

Public Works Reserve – Example #1

   Example #1 - Public Works Vehicles and Equipment Reserve
       If the dump truck is purchased, reserve fund contributions for 2020
        need to be at least $80,000
       After the purchase of the dump truck, this still leaves $0 in the Public
        Works Vehicles and Equipment Reserve
          There are numerous pieces of equipment that we should be putting
            away money for so that they can be replaced at the end of their
            useful life (Asset Management)
       Reserve fund contributions need to increase – but there is limited
        Community appetite for property tax increases

Fire Truck Equipment Reserve –
Example #2
   Example #2 – Fire Truck Equipment Reserve
       At December 31, 2020, projected balance in this reserve is ~$197,000
         Replacement Fire Truck for Rescue 3 (purchased in 1994) is needed in
           2021 at a cost of $350,000
         Truck cannot be replaced in 2021 because there aren’t enough funds in
           the reserve
       Previous annual contributions to this reserve from 2007 to 2018 have
        averaged $98,400 each year, or $1,180,900 over 12 years for all Fire
        Department Vehicles
         This is not enough given that Engine 1 or Engine 2 would cost $900,000
           to replace in today’s dollars

Fire Truck Equipment Reserve –
Example #2
   Example #2 – Fire Truck Equipment Reserve
       Replacement costs for a Fire Truck can vary from $350,000 to over
        $1M
       If the truck is purchased in 2022 for $350,000, there will be minimal
        amounts left in the reserve (Asset Management Funding Gap)
       Reserve fund contributions need to increase but there is limited
        Community appetite for property tax increases

Roads Infrastructure Reserve –
Example #3
   Example #3 – Roads
     The Roads asset management gap was identified as a large issue
      last year and continues to be problematic, although increased
      reserve fund contributions are a step in the right direction
     Over the last 12 years Lantzville has made contributions to the
      Roads reserve for $3,300,000, for an average of $275,000 each
      year
     Over the next 5 years, the Roads Capital Plan includes
      $6,350,000 for required Roads Projects
     The roads infrastructure reserve has been significantly
      underfunded for years

Tax Requisition Increases 2005 to 2020

20

Budget Highlights
    The proposed budget outlines an increase of approximately $551k
     over the prior year’s budget, or 24.17%
      Total amount of municipal taxes requisitioned is ~$2.8M, as
       compared to $2.3M requisition for 2020
      For reference, using the current budget draft, approximately
       $23,000 of additional expenses increases the tax rate by 1%

    Inflation estimates have been used as follows:
       Wage and benefit increases at approximately 2% (CUPE)

       Victoria, BC, Consumer Price Index at 2%

       Insurance premiums at 9%

       Fuel / Gas at 10%

    21

Tax Requisition Increase - ~$551k
                                                                                               % of Prop
Reserve Fund Contributions                                                           Amount       Tax
Roads Reserve Fund Contributions                                                     200,000       8.77%
Public Works Vehicle Reserve Fund Contributions                                       43,500       1.91%
Property Acquisition Reserve Fund Contributions                                       22,500       0.99%
Other Reserve Fund Contributions                                                       5,800       0.25%
                                                                                     271,800      11.92%
Other:
Expenses Cut from 2020 Budget (COVID), added back for 2021, UBCM, Training, etc..     56,850      2.49%
Inflation (2%) on All General Expenses & CUPE Collective Agreement                    45,000      1.97%
MIABC Insurance Cost Increase                                                         10,000      0.44%
Net Bylaw Enforcement Costs (Estimated)                                               50,000      2.19%
Working Foreman & Deputy Director of Corporate Admin Positions at Full Year           46,000      2.02%
Special Project Requests for 2021 (Primarily Fire Equipment)                          24,350      1.07%
Deputy Director of Financial Services                                                 67,500      2.96%
Other Miscellaneous Budget Line Item Changes from Prior Year                        - 20,500     -0.90%
Budget Requisition Increase:                                                         551,000     24.17%

       22

Impact on Average House

Impact to Average       2020          2021
Single Family House,
$724,494*
Residential Mill Rate   1.6861        2.0822

Municipal Property      $1,221        $1,508
Taxes
Dollar value increase                 $287
(annual)
Dollar value increase                 $23.91
(monthly)

      *Based on the BC Assessment “2020 Folio Count and
      Average Value By Jurisdiction” Report

 23

Comparative Data
    Comparative data for Regional Municipalities can
     be found under Tab 2
    Average Single Family Home for Lantzville is
     $724,494
    Note: Levels of service, commercial and industrial
     revenue, financial health, fee structures, and other
     items vary between municipalities

    24

Comparative Data

Current Financial Plan
     Sewer User Fee
          Approximate 4% increase in user fees required
              If attributed equally to the rate categories now, quarterly
               base fee would increase from $123.30 to $128.23, or $4.93
               each quarter

     Water User Fee
          Approximate 5% increase in user fees required
              If attributed equally to the rate categories now, quarterly
               base fee would increase from $65.28 to $68.54, or $3.26
               each quarter

26

Garbage Collection Fees
     Garbage Collection Fees
        Will be changing effective October 1, 2020
        Rates will depend on the cart selections that each resident
         has chosen
               The annual rate for default cart selections (240L) is $160

          The October 1 to December 31st, 2020 quarterly billing will
           be the first billing under the Automated Collection program

27

Assessment
    Preview Roll (Expected by end of November)
    Completed Roll (December 31st)
    Revised Roll (March 31st)
    NMC = Non Market Change or New Assessment
            Calculation process – exclude Non Market Change to
             obtain same taxes as prior year
            Apply projected tax increase
            Add factor for Non Market Change

    28

Property Taxes - Continued
    Taxes are set per $1,000/assessed value
    Non-Market Change estimated at $16.7M from BC
     Assessment
       Largely due to Foothills property assessments

    In 2021, this would generate approximately $30,000 of
     extra tax revenue
    In other municipalities this would generate:
            Nanaimo      $69,838
            Cumberland   $50,858
            Parksville   $55,479

    29

Property Taxes - Continued
    The current Financial plan includes the additional revenues
     from non-market change to help to fund District operating
     expenses and will soften the tax rate
       A portion of these funds should be used to offset new
        maintenance and operating costs
       New growth funding policy to be drafted

       These funds could be set aside into a reserve fund

       However, this would further increase taxation

    30

Property Taxes – Tax Rate Multiples

    Currently, the tax rate multiples are as follows:
      Class 1 Residential        Base - Multiple of 1.00
      Class 2 Utilities          Maximum $40/$1,000 of assessment
      Class 5 Light Industry     Multiple of 7.00
      Class 6 Business           Multiple of 4.00
      Class 7 Forest             Multiple of 3.75
      Class 8 Recreation         Multiple of 1.75
      Class 9 Farm               Multiple of 1.30

            The Multiples have not changed in at least 10 years

    31

Class 7 – Managed Forest
    With a tax multiple of 3.75, the District’s 2019 Mill Rate for Managed Forest
     was 5.8706
    According to the tax rate summaries posted by the Province of BC (Schedule
     702):
            Of the 68 properties that have a mill rate for this property class, Lantzville
             has the 60th/68th lowest mill rate
            The average mill rate (after removing outliers) is 13.2467
    If the tax multiple for this property class was increased, it would shift more of
     the property tax burden onto Managed Forest Land property class, and less
     onto Residential
    All of the Class 7 Property in Lantzville is assessed at $1,913,000, so any
     changes aren’t going to yield high numbers
            At 2020 rates (6.3227), these properties generated $12,095 in Property
             Taxes
    32

Property Taxes - Others
    The District collects and remits taxes on behalf of other
     taxing authorities. The tax amounts and rates are set
     external to the District and are entirely out of the District’s
     control

    33

Property Taxes – Others (2020)

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Property Taxes Collected
Type                                       % Total Revenue (2020)
General Municipal                                    38%
School District                                      36%
Nanaimo Regional District – General*                 14%
Nanaimo Regional District - Hospital                  3%
Library                                               4%
Policing                                              4%
BC Assessment Authority & Municipal                   1%
Finance Authority

   * This does not include Service Contracts paid to the Regional
   District for 2020 (e.g. Garbage Collection, Animal Control,
   Bylaw Enforcement, Building Inspection, Emergency Planning,
   GIS/Mapping
 35

2021-2025 – What is not in the plan?
    Official Community Plan
      Based on $15k of contributions every year and a cost of $150k to
        create an OCP, the next OCP document could potentially start in
        2027 or 2028
    Funding requests from Committees not yet approved by Council
    Consulting fees required to analyze potential new developments (e.g.
     Urban Land Economist) if required by Council
    Significant additional reserve fund contributions required for asset
     management (specifically roads, public works vehicles, fire
     department vehicles, facilities)
    Decrease reliance on the Small Community Grant

    36

Questions?
        Note that the operating budget (or any budget items)
         may be adjusted in the future with direction from
         Council

37

Special Projects – 2021 - Admin
    Council Chamber Black Out Blinds - $2,750
    Municipal Branding Products - $3,000

    All items funded from taxation

    38

Special Projects – 2021 - Fire
    Fire Nozzle Replacements - $5,000
            Grant unsuccessful in 2020 for $25,000, so these
             expenses are being split up at $5,000/year
    Six Portable Radios - $8,100
    Gas Powered Vent Fan - $5,500

            All items funded from taxation

    39

Special Projects – 2021 - Planning

    Community Wildfire Resiliency Plan - $25,000
            Carry forward from 2020, 100% grant funding
    Small Scale Village Beautification Projects- $2,500
            Carry forward from 2020
            Budget was for two murals at $2,500 each and one has
             been completed

    40

Special Projects – 2021 - Parks &
Recreation
    Lavender Road & Harper Road Beach Road Ends -
     $9,800
            Carry forward from 2020
            Public engagement to take place in 2021

    41

Special Projects - 2024 -
Transportation
    Roads Master Plan - $100,000 (2024)
            Funded by Gas Tax
            The timing of the Roads Master Plan is recommended
             to be after the completion of the Phase 3 Sewer
             Project

    42

Special Projects - 2022 - Sewer
    Sewer Master Plan - $100,000 (2022)
            Funded by Gas Tax
            Full Sewer Master plan is required to plan for future
             phases of the District’s Sanitary Sewer System

    43

Questions on Special Projects?

44

Capital Budgets
    Capital Project Overview
            2021 through 2025

    Council’s budget
            Projects may be added, approved as is, moved
             between years, modified, or removed from the budget

    45

General Government

Project                    2021      2022       2023       2024   2025
Website Upgrade (Carry       7,000
Forward)
Photocopier Replacement    14,000

General Government Total   $21,000          -          -    -      -

 46

Protective Services
Project                     2021     2022     2023      2024      2025
Replace Rescue 3 – Fire             350,000
Engine
SCBA & Bottle                                 250,000
Replacement
Replacement of Bay Doors                                100,000

Protective Services Total      $-   $350,000 $250,000 $100,000       $-

Planning & Economic Development

Project                     2021      2022       2023       2024   2025
Village Core Streetscape   400,000
Improvements
General Government Total   $400,000          -          -    -      -

 48

Public Works - General
Project                        2021       2022      2023       2024       2025
Utility Vehicle                20,000

Dump Truck Replacement                   110,000
Dodge 2500 Replacement                    70,000

Public Works – General Total   $20,000   $180,000          -          -          -

  49

Public Works - Roads
Project               2021       2022       2023        2024        2025
Venture Road         233,000
Lantzville Road 3M   255,000     228,472
Wide Path
Alger Road                       120,000
Aulds Road                                 1,118,000   1,118,000
Metro Road           227,000
Mart Road            172,000
Dickinson Road                 1,042,000
Philip Road                                                        1,840,800
Roads Total          $887,000 $1,390,472   $1,118,000 $1,118,000 $1,840,800

Public Works – Storm & Drainage
Project                       2021      2022       2023       2024      2025
Huddlestone Road Piping      350,000
Dickinson Road Culvert                  50,000
Between Jacks &
Lavender
Clark Alger Road                                  350,000
Crossing of Blood’s Creek,
Arch Culvert Storm Drain

Lantzville Road Blood’s                                      350,000
Creek Crossing
Storm & Drainage Total       $350,000   $50,000   $350,000   $350,000          $-

Sewer Fund
Project           2021       2022   2023   2024   2025

Sewer Phase 3   $2,000,000
Sewer Total     $2,000,000    -      -      -      -

 52

Water Fund
Project                        2021      2022      2023      2024      2025
Water Meter Reading             13,000
Equipment
Clark Crescent Water Main      374,000
Venture Road                   175,000
Lantzville Rd – Peterson to              540,000
Huddlestone Road
Water Main Replacement –                           225,000
Millard Drive
Water Main Replacement –                                     365,000
Lynn Drive and Lancewood Ave
Water Main Replacement – Joy                       275,000
Way and Rossiter, Peterson
Road to Lancewood

  53

Water Fund
Project                          2021         2022        2023       2024       2025
Water Main Replacement –                                 250,000
Harby Road East, Peterson Rd
to Joy Way
Clark Drive Water System       3,202,000    3,202,000
Expansion (Grant Dependent)
Huddlestone Road Water                                                         200,000
Main Replacement
Winds Residential Area         3,600,000    3,600,000
Water System Expansion
Total Water Projects           $7,364,000   $7,342,000   $750,000   $365,000   $200,000
(Both Slides)

  54

Questions?

55

Next Steps

October 26, 2020 – 6pm    Complete Presentation (if not    Special Council Meeting
                          fully completed October 5th)

                          Staff updates to Financial
                          Plan as Requested by Council
November 9, 2020 – 6pm    Staff updates to Financial       Special Council Meeting
                          Plan as Requested

November 23, 2020 – 6pm   Potential 1st 2nd 3rd readings   Special Council Meeting
                          of Financial Plan Bylaw,
                          public input session

December 7, 2020 – 7pm    Adoption of Financial Plan       Regular Council Meeting
                          Bylaw (if first three readings
                          happen on Nov 23rd)
     56