Mayor's Report - April 2006

On April 25^th Belcarra’s 2006 annual budget and five-year financial plan was presented to the community. Only a few residents attended the information session; however, even with a small number, participation in the discussion and questions was good. (The Financial Plan presentation is posted here in PDF format.) The dominant issues regarding preparation of the budget this year continue to be funding of capital infrastructure and maintenance of financial reserves.

The “Guiding Principles” used for the development of the current five-year financial plan originated from the Capital Planning Form held in November 2000, and are as follows:

Eight years ago the province combined their grants into a single “lump sum” Small Community Protection Grant of $102,900; however, provincial grants have not increased in 15 years. This means that other sources of funding (the tax levy) must make-up the equivalent of 35% of the grant total, that is, the amount lost to inflation over the past 15 years (~ $35,000) in addition to all other increased operating costs.

The 2006 budget has been set at $681,921 which is 5.0% lower than the 2005 actual expenditures. The “bottom line” is a residential tax increase of 5.0% for 2006. By comparison, the average 2006 tax rate increase for the 22 municipalities of the GVRD is 4.56%.

It is important to note that while the municipal tax levy accounts for 70% of the operating budget, the municipal tax levy only accounts for 37% of the overall property tax.

In order to provide additional perspective to the foregoing, I have provided the following background information regarding the financial status of the municipality.

RESERVE FUNDS

As at December 31^st, 2005, the municipal financial reserves stood as follows:

During 2005, interest earnings from the reserve accounts amounted to $2,511 — equivalent to $0.012 per $1000 of assessment. This was a small decrease from interest earned in 2004 of $2,523 due to low interest rates. For 2006, an interest accrual of $4,500 is projected for the reserve funds based on an average interest rate of 2.0%. Note: Reserve funds cannot be used, even temporarily, for operating in order to offset borrowing costs, and all interest earned by the reserve funds must be accrued to the reserve funds.

CAPITAL EXPENDITURES FUNDING

The Contribution To Capital for 2006 has been set at $167,958 to reflect Council’s commitment to the capital program of fire protection infrastructure works and roads reconstruction:

PROJECT	PROJECT COST	GENERAL REVENUE	OTHER FUNDING	COMMENTS
Fire Protection Water Main – Survey & Design Tatlow Extension to West Road	$7,000	$7,000	0	Fire Protection Water Main
Fire Protection Water Main – 2006 works completed in 2005	$113,888	$62,965	$50,923	Fire Protection Water Main
Equipment Purchase – Recycle Depot	$6,500	$6,500	0	Video Camera
Equipment Reserve – Truck Replacement	$20,000	$20,000	0	Purchase Planned in 2008
Equipment Reserve – Tractor Replacement	$15,000	$15,000	0	Purchase Planned in 2010
Office Purchase – Software Upgrade	$5,570	$5,570	0	Accounting Software
TOTAL CAPITAL	$167,958	$117,035	$ 50,923	---

TAXES RECEIVABLE

As at December 31^st, 2005, the taxes receivable totalled $8,880 comprised of overdue 2004 and 2005 taxes. This represents a decrease of $6,900 in taxes receivable over the $15,781 receivable as at December 31^st, 2004.

An important consideration with taxes receivable is the fact that the Village has to borrow funds to operate and pay the School Taxes whenever property owners do not pay taxes. This places an additional financial burden in the form of increased borrowing charges. It is imperative that every effort be made to reduce the level of unpaid taxes.

BORROWING COSTS

The cost of borrowing money during 2005 (interest and bank charges) amounted to $2,472 — an amount equivalent to $0.013 per $1000 of assessment. This was lower than the 2004 borrowing costs of $2,615; this amount includes the offset accrued interest paid on Tax Prepayments. For 2006, the projected borrowing costs are estimated to be $3,000 — which equates to $0.013 per $1000 of assessment. Note: The Village borrows its temporary operating funds from the MFA at prime minus one-half percent.

The most important factor influencing annual borrowing costs is the prevailing interest rate from January until July, when the 2006 taxes are received. However, as a result of Belcarra's property tax prepayment program, there is a reduced requirement to borrow operating funds during the first six months of the year.

As can be appreciated, the prompt payment of taxes means that borrowed funds can be quickly paid back, and investments made earn interest and offset the cost of borrowing during the first half of the year.

INVESTMENT REVENUE

An important financial consideration is the management of municipal funds in order to maximize investment revenue. During 2005, $6,676 was earned as interest on investments — equivalent to $0.033 per $1000 of assessment. Following the receipt of taxes last July, we were able to invest a higher amount in the MFA money market, as a result of no operating loans. A similar investment strategy is proposed for 2006, due to lower interest rates investment income is being projected at $4,500 — equivalent to $0.020 per $1000 of assessment.

PROVINCIAL GOVERNMENT GRANTS

Same as last year, the municipality now only receives a single “lump sum” grant of $102,900 (The Small Community Protection Grant). This amount, however, has not changed over the past 15 years. As a consequence, the residential tax levy has to absorb the amount lost to inflation, which for the past 15 years amounts to ~35% or an additional $35,000 on the general-purpose tax levy. Thus, the “freeze” on provincial grants represents a subtle form of downloading onto municipalities by the province!

GARBAGE LEVY

The 2006 Garbage User Fee has increased from $125 per residence to $140 ($280 if the residence contains an accessory suite). The increase of $15 is the first change to the garbage user fee in 14 years. This change in the fee is needed to offset increased hauling costs (read increased fuel costs) from the contractor that provides the service. Calculated on the basis of a user group of 328 households, the garbage revenues will amount to $46,515 for 2006. Council will continue the two projects initiated in 2001 on a trial basis; namely, the “no charge” tree chipping service and the “nominal charge” large item pickup service.

LICENCE FEES

Licence Fees in 2005 amounted to $3,965. For 2006 Licence Fees are projected slightly lower at $3,500. A big boost is the ongoing filming in Belcarra Regional Park, where the Village receives Business Licence fees; filming revenues cannot be estimated as they are an unknown during the year.

PLANNING PROGRAM

The budget for General Planning has been set at $12,000 for 2006, which includes provision for the OCP review. In 2005, the cost incurred for planning was $40,274; the result of a) the three infrastructure studies completed by Dayton & Knight Consulting Engineers Ltd. for the Belcarra water system supply, design and costing options; and b) the YMCA application for rezoning the Camp Howdy lands. In addition, the 2006 financial plan includes a provision for undertaking the Preferred Option Predesign Study for sourcing GVWD water from the District of North Vancouver.

PUBLIC WORKS MAINTENANCE

The 2006 maintenance budget for roads, drainage and general purposes has been set at $101,869. GVTA funding in 2006 will increase from $59,000 to $61,800 for the maintenance of Bedwell Bay Road under the GVTA Main Roads Network (MRN). $50,923 of the 2006 funds were used in 2005 to complete capital works on Bedwell Bay Road at the time the fire protection water main was installed.

MUNICIPAL LEVY

The 2006 municipal tax rate has been reduced by 7.5% from $2.12 to $1.96 per $1000 of assessed value. This levy will yield a total of $456,661 on the $232,990,601 assessment role. The “bottom line” is that the average property tax increase is 5.0% for 2006. Note: The municipal tax levy accounts for 70% of Belcarra's overall operating budget, and only 37% of the overall property tax.

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