Vancouver Mayor's Task Force says City needs "disciplined focus" on spending | Daily Hive

Vancouver Mayor's Budget Task Force says City needs "disciplined focus" on spending: report

Vancouver City Hall (City of Vancouver)

Scope creep is deemed to be a problem with the City of Vancouver, according to a newly released report by Mayor Ken Sim’s Budget Task Force analyzing the municipal government’s finances and operations.

The 33-page report was created by a team of volunteers of certified professional accountants in the private sector, as well as research teams with a background in analytics, business, finance, accounting, and infrastructure, with the task force chaired by MLA Canada President Randy Pratt and the research effort led by Emily Pearson.

In April 2023, Sim created the task force, which was originally expected to return with their report by early October 2023 just in time for Vancouver City Council’s deliberations on the 2024 municipal budget and property tax increase, but this was delayed until today due to the need for more time to perform their work. City Council is expected to review the task force’s report findings in a public meeting next week.

You might also like:

A total of 17 recommendations are made in the report, which zeroes in on identifying ways to “effectively enhance the ‘return’ on taxpayers’ dollars and on the City’s assets through improvements in how the City refocuses, operates, and invests.”

According to the task force, it is estimated the City spent over $150 million in operating expenses and over $230 million in capital expenditures outside of traditional municipal service areas in 2023 alone. This includes climate initiatives, social housing, childcare, emergency aid, and healthcare, such as Vancouver Fire and Rescue Service, dedicating significant resources towards first responders and medical responses for the high frequency of opioid overdose calls.

This is up from a combined operational and capital total of $219 million in downloaded costs in 2021, according to a separate estimate by City staff.

It is suggested that while these services benefit the community, it has come at a significant cost. The municipal government “needs a more disciplined focus to determine what it must do, what it should do, what it cannot do, and what trade-offs exist within these decisions.”

In recent years, there has been growing criticism that traditional municipal service areas have suffered from an increasing focus on initiatives and services beyond the core mandate of the municipality.

“At present, when Council decides to provide services outside of the City’s core jurisdiction, the current process does not allow for the internal segregation of operations or funding in order to track, manage, and report on the associated costs,” reads the report, noting that City Council could establish “guardrails” for its decisionmaking process.

The provincial and federal governments should have a greater role in these non-traditional areas, including allocating more government funding transfers to the City of Vancouver, and providing leadership in cross-jurisdictional coordination, such as in the wide range of services provided to Downtown Eastside residents from multiple levels of government and numerous organizations for “far superior outcomes.”

The task force states the City of Vancouver receives just 1% of its revenue from government funding transfers, which means nearly 100% of its revenues are generated by its own sources. In contrast, most cities in Canada see at least 10% of their funding from provincial and federal grants.

It is specifically suggested the City should see a share of the provincial government’s school taxes, with Vancouver residents accounting for 21% or $735 million of 2023’s provincial school tax revenues, even though Vancouver accounts for only 13% of the province’s population.

There also needs to be a more holistic consideration of the impacts of collective property tax hikes, given that municipal governments, the provincial government, TransLink, and Metro Vancouver Regional District all levy their own property taxes.

Recommendations were made in the report identifying a need to achieve economies of scale with the municipal government’s leadership, labour, in-house expertise, and resources across departments, with interdepartmental resource sharing and collaboration, instead of the City’s current “siloed” approach within departments.

An example includes centralizing lease management to improve negotiating power, significantly reduce costs, and create efficiencies in office space use. As well, it was asserted by Sim last month that his proposal to dissolve the elected body that governs the Vancouver Park Board and transfer its responsibilities to the Mayor’s Office and City Council would reduce costs and improve outcomes for parks and recreation services.

The City’s relatively high employee absence rate was also noted, with an absence rate of over 18 days per year per full-time equivalent (FTE) — ranging from under five days to over 23 days, depending on the department, to a high of 25 days per year per FTE in the park board — whereas the overall provincial average is 10 days per year per FTE. This average absence rate is estimated to cost the municipal government about $4.5 million per day of absenteeism per year.

Currently, the City does not have a way of measuring the cost efficiencies of each department, with its existing ways of tracking overall performance potentially “skewed, as it may neglect efficiency and how resources are used. The lack of cost-of-service measures may result in suboptimal decision-making, the overlooking of opportunities for cost optimization by departments, and hinder oversight by Council.”

“In the absence of effective performance indicators, it can be challenging to organize, motivate, or direct workforces towards a strategic priority or goal. Creating an innovative culture that embraces necessary change is a difficult challenge for all organizations, perhaps even more so in the public sector due to the enhanced level of scrutiny under which political environments operate.”

As for new revenue generation opportunities, one of the largest revenue possibilities identified by the task force is the “significant untapped value” held by the municipal government’s Property Endowment Fund (PEF), which currently has an assessed value of $5.7 billion. Currently, the PEF only generates $13 million in dividends annually, as of 2023, as a substantial portion of the existing PEF properties are under long-term leases secured decades ago.

One of the largest properties in the PEF is the neighbourhood of False Creek South, which was built in the 1970s and 1980s. Due to an outcry from the area’s residents, the previous makeup of City Council rejected the City’s Real Estate division’s redevelopment proposal for the area, instead choosing to renew leases beyond their original expiration dates over the coming years.

“Although it may take many years — in some cases even decades — for these [PEF] leases to expire, once they do, there is the potential for the properties to be leased out at significantly higher market levels than is now the case,” reads the report.

The task force notes that there are plans in place to transform the PEF from mainly a land bank to a “more actively managed property endowment fund with a greater focus on generating sustainable income and creating long-lasting value to benefit future generations of residents.” The University of British Columbia’s revenue-generating success of UBC Properties Trust is noted to be an example.

There could also be potential cost savings if multiple municipal governments in Metro Vancouver worked together to streamline services and standardize union agreements, and from possible public-private partnerships for the operation and management of “non-core assets,” including the potential sale of “underutilized assets” that are not core to the City.

Each $10 million in revenue collected from PEF dividends or other sources of ancillary revenue is equivalent to about a 1% reduction in property taxes, which accounts for 60% of the municipal government’s total revenue.

Without greater measures towards finding new types of revenue sources, it is anticipated the City will have to put more pressure on increasing property taxes and utility fees, especially with the decade-plus approach of “growth pays for growth” strategy potentially weakened moving forward from the shift by private developers to build more secured purpose-built rental housing and social housing instead of strata ownership condominiums. Rental housing and social housing generate fewer development-related fees for the City, compared to the significant fees applied to condominiums.

Other specific recommendations by the task force include creating a newly appointed Finance Committee with financial expertise and strong interest in budgetary matters to advise and guide City Council and City staff, and establishing a long-term horizon and a shorter budget cycle.

Without meaningful action, the task force suggests more businesses could relocate to other municipalities with lower taxation, and residents could see their living standards further eroded when escalating costs are passed on to homeowners, renters, restaurants, services, and other businesses.

In December 2023, City Council approved a 7.5% average property tax increase for 2024 — a rate that is below the drastic increase of 10.7% in 2023, but still high. In 2024, the municipal government’s operating budget is set at $2.154 billion, marking the first year the annual operating budget will reach and also exceed $2 billion. The operating budget has grown annually by about 10% over the last three years, following years of accelerating growth prior to the pandemic.

The capital budget for renewing aging infrastructure and building new community amenities and facilities has also seen major increases, rising from $481 million in 2021 to $782 million in 2024. The City is still facing an estimated annual $500 million infrastructure funding shortfall, with a significant proportion coming from its aging sewer system.

You might also like: