City of Vancouver spent $219 million on provincial and federal responsibilities in 2021

Jan 15 2022, 1:57 am

Expenses that are traditionally the responsibilities of the federal and provincial governments accounted for the equivalent of almost 15% of the City of Vancouver’s annual operating budget.

The municipal government is increasingly being criticized for taking on responsibilities that are beyond its mandate, which come at the expense of its basic municipal responsibilities and service levels, and places upward pressure on property taxes.

Based on city staff’s recent breakdown of expenses, upon the request of city council, following the approval of a motion by independent city councillor Sarah Kirby-Yung, the municipal government spent at least $219 million in “downloaded” costs from senior governments in 2021.

About $168 million went to affordable housing, with $158 million towards construction costs and about $10 million for operating costs each year. This includes temporary modular housing, SROs, supportive housing, and non-market rental housing. Another $23 million went towards childcare, including $21 million for construction and $2 million for operations.

The city also spent $27 million annually on the operating costs of addressing social issues inflicting the city, including $4 million on measures to deal with the mental health and opioid crisis, and $23 million on homelessness.

“The results affirm what we’ve all known; that Vancouver has issues resourcing core responsibilities because of spending in new, expanded service areas. Instead of advocating for funding from senior governments and working smart to address critical challenges within our means, such as through zoning, City land allocation or enabling policy, the City continues to take on more and more costs in housing, childcare and opioid crisis response (for example) that are beyond our ability to pay,” Kirby-Yung told Daily Hive Urbanized.

“I wanted to pave the way for real conversations at Vancouver City Council when we’re setting budgets and making policy decisions. And to be able to show senior governments how big the gap is, and how essential their investment is to deal with the critical social issues facing our city.”

The federal and provincial levels of government covered just 20% of these downloaded costs — or $44 million. It covered 8% of the city’s affordable housing expenditures ($14 million), 50% of the childcare expenditures ($11 million), and 80% of the homelessness expenditures ($23 million).

The city offers land for affordable housing and childcare, and the in-kind community amenity contributions (CACs) it negotiates and secures from building developers as part of the rezoning process. By directing CACs funded and built by developers towards affordable housing and childcare, it reduces the city’s capacity to support other growth-related amenities and infrastructure — serving the general population — that are explicitly under the municipal government’s responsibilities.

Federal and provincial investments in these areas saw major declines in the 1980s and 1990s. City staff date that the municipal government voluntarily began ramping up funding on these expenditures starting in the early 2000s to address the growing issue of homelessness, initially as land and capital grants for shelter and housing. Over time, the city’s support expanded “in part as an effort to signal to senior governments the importance of these issues and the gaps in the community, and as an effort to incentive their engagement.”

Homelessness, mental health, and opioid issues also add to the city’s operating costs in other departments — a second order effect that has resulted in an estimated $20 million in incremental costs.

For example, homelessness and encampments in the streets and parks lead to higher costs for the Park Board, engineering, sanitation, fire, and police services.

Over recent years, firefighters and police officers have seen their non-traditional work load increase to cover the soaring number overdose response calls, dealing with the administration of naloxone, deaths, and disturbances.

It is estimated that 49% of total response calls for firefighters deal with medical issues, including overdoses. Similar calls for police also take them away from performing investigative work and dedicated patrol calls.

The increased call volume and longer call response are leading to a higher rate of burnout for fire rescue and police department staff.

“Collectively, the impacts of downloading, combined with the municipal role in actively taking on responsibility for certain service delivery areas, has resulted in significant ongoing pressures on the City budget and property taxes,” reads a city staff memo.

“This creates challenges for Councils who must make difficult choices between delivery of important services and increases to property tax to deliver those services, which as a regressive form of taxation can adversely impact residents and businesses. It also points to an opportunity for improved collaboration with senior levels of governments, to ensure that the delivery of services, as well as the policy and funding tools, are aligned across all levels of government to optimize how taxpayer dollars are used to address the increasingly complex challenges facing society.”

City staff state there is now an initiative amongst BC municipalities, through the Union of BC Municipalities, to “upload” some of these costs back to the federal and provincial levels of government, as “they are the most effective level of government to deliver the services, and to provide more revenue tools to municipalities to fund activities best provided at the local level.”

Other than direct downloaded costs, the city says it also incurred $35 million in additional operating costs last year as a result of senior government legislation and regulatory changes that impact municipal budgets. This includes $15 million for the Employer Health Tax and $10 million for changes in the collective bargaining framework.

Like any primary city within any major urban region around the world, Vancouver also absorbs regional-level expenses for the benefit of both the city and the entire region, including operating civic theatres (Orpheum, Vancouver Playhouse, and Queen Elizabeth Theatre), major events that attract the region’s largest crowds, and other costs relating to the congregation of regional residents within its borders, such as sanitation for higher pedestrian traffic on the shopping streets of downtown. The number and frequency of major protests and acts of public disobedience have also surged within Vancouver, resulting in higher policing costs.

But the city is also voluntarily expanding its mandate into other areas.

In 2020, city council also approved city staff’s plan of 32 projects under the Climate Emergency Action Plan (CEAP), which requires $500 million over the next five years. The city intends to spend $42 million in operating costs each year, and an average of $50 million per year in capital costs in its three-year capital plan ending in 2022, with further amounts in future capital plans beyond this year.

Last year, city council voted to kill the plan to enact mandatory parking permits for all residential streets — one of CEAP’s largest revenue sources. A decision could also be made in 2023, after this fall’s civic election, on road tolls in downtown Vancouver, which is by far the largest expense under CEAP.

In December 2021, city council approved a 6.35% hike on the portion of the 2022 property tax paid to the City of Vancouver — representing about 54% of the property taxes and fees for a median single-family home. The remaining 46% goes to the provincial government’s school tax, Metro Vancouver Regional District, TransLink, BC Assessment, and Municipal Finance Authority.

During the 2022 property tax debate, city council also green lighted Mayor Kennedy Stewart’s proposal to enact a new climate tax to raise $100 million over 10 years, which would go towards narrowing CEAP’s forecasted revenue deficit.

Over the coming years, the City of Vancouver’s costs are expected to significantly organically increase, even if new initiatives and mandates are not added. City staff have indicated to city council that an average property tax increase of 9% to 10% in 2023 and an annual average of 7% for the five-year period from 2022 to 2026 are needed to cover growing costs.

The property tax is the primary revenue generating source for municipal governments, and is intended to cover costs that are traditionally under the local level of government.

Kenneth ChanKenneth Chan

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