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CITY OF WILLIAMS LAKE

COMMITTEE OF WHOLE COUNCIL
REPORT #30-2016

PRESENTED: Regular Meeting of Council September 13, 2016

FROM:
Committee of Whole Council
SUBJECT:
2017 Financial Plan

DATE: September 8, 2016

FILE: 1700-01

The Committee of Whole Council met on September 6, 2016 to consider the above matter and makes the
following recommendation to Council:
RECOMMENDATION:
That the Committee of Whole Council recommends the report from the Chief Financial Officer dated August
29, 2016 regarding the 2017 Financial Plan be received and referred to the Finance Committee for further
consideration and bring forward financial projection goal options for 2017 to Committee of Whole Council for
recommendation back to Council; and further the budget meetings will be held in an open and transparent
manner.

Respectfully submitted,

Cindy Bouchard
Corporate Officer

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CITY OF WILLIAMS LAKE
COUNCIL REPORT
DATE OF REPORT:
DATE & TYPE OF MEETING:
AUTHOR:
SUBJECT:
FILE:

August 29, 2016

September 6, 2016 Committee of Whole Council Meeting
William Wallace, Chief Financial Officer

2017 FINANCIAL PLAN

1700-01

SECTION 1: EXECUTIVE SUMMARY

The purpose of this report is to provide information for Councils consideration, prior to Council setting
overall direction for the preparation of the 2017-2021 Financial Plan (FP). Section 4 (parts e-g), at page
7, of this report provides important contextual information on the scenario facing the City over the next
10 years and ideally should be read before Sections 2 and 3.
SECTION 2: BACKGROUND
Annually, in accordance with the requirements of the Community Charter, the City updates its Five Year
Financial Plan (FP). The FP is important because it details the financial resources that will be available
for operations, capital projects and debt repayment; further, it details the sources of those financial
resources including taxes, fees, grants and debt. The FP reflects Councils balancing of City and
community needs in the short and long term against the burden of paying for those needs today.
The 2016 FP forecast for 2017 includes total revenues and expenditures of $31,591,983 comprised of General Municipal $23,586,893, Sewer $4,764,500, Water $2,584,000, and Transit $656,590.
The following information brings forward matters arising from the preparation of FP 2016 for purposes of
consideration in setting FP 2017 direction.
General Municipal Revenues
The 2016 FP forecast a general municipal property tax increase of 3% or $354,000 in 2017 (in 2016,
general municipal property taxes were $11,786,753). A 3% tax increase represents $43 in additional
taxes on an average Williams Lake residence. The 2016 operating labour cost assumption for 2017 is
consistent with the new 2016-2019 Collective Agreement. The 2016 non-labour operating costs
assumption for 2017 calls for a zero overall cost increase which will be a challenge to achieve.
The 2017-2020 capital investment plan in the 2016 FP is not robust. This was recognized by Council
during the finalization of the 2016 FP and it was understood the capital plan would receive further
consideration as part of preparing the 2017 FP. The Citys general municipal capital plans would benefit
greatly from increased funding. FP 2016 demonstrated that after providing for general municipal services
delivery (e.g.: fire, police, public works, roads) there is not enough general municipal property tax
revenue raised for general City capital investment so as to sustain existing infrastructure and assets.

Roads and Sidewalks - rehabilitation (a $1 million annual gap has been estimated)
Buildings, Facilities, Parks - sustaining capital expenditures (a minimum $250,000 annual gap)
City share of jointly funded projects with BC/Canada (a minimum $250,000 annual gap)

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In addition to the items listed above, Fleet and Major Equipment replacement funding was highlighted at
Councils Public Works and Finance Committees during 2016 FP preparation. The City did not, and has
not committed going forward, to save for the replacement of existing fleet vehicles/equipment over their
operating life. Many municipalities save this money in advance by charging their operating departments
hourly rates for use of fleet vehicles/equipment. The total annual charges are transferred to an
equipment replacement capital reserve fund established for that purpose by bylaw. Because the City
does not have a funded reserve, FP 2016 provides for financing larger equipment purchases by way of 5
year loans. The replacement cost is estimated to average $600,000 annually over the next 20 years.
Paying for fleet replacements using short term loans requires the annual total investment be maintained
at a relatively constant level with sufficient amounts budgeted annually to smooth demand for general
tax revenues. Under this approach total annual loan repayments may grow to $600,000 annually.
A current example of the need for jointly funded project money (often saved in a general capital
reserve fund) is the continuing challenge of paying for the Citys $1,730,000 share of the provincial
Highway 97/Toop project expected to start in 2017. The proposed use of $500,000 of Development Cost
Charges (DCCs in FP 2016) to cover the Citys 2017 share is being examined to determine the extent to
which those monies can be applied to this project. Planning for the Citys 2018 $1,230,000 share of
project funding is not yet complete with $602,000 identified to date. The City may need to consider
switching to debt financing for this new, long term infrastructure in FP 2017.
Waste Revenues (Garbage/Recycling)
In 2017, plans call for the net cost of garbage/recycling (in 2016 $1,291,846) to be disclosed on a standalone basis by the City, that is the individual property share on property tax notices or utility billings, as is
the case for water and sewer. Through 2016, garbage/recycling costs have been funded using general
municipal property taxes. Not billing separately for annual waste fees to cover those costs is unusual.
Waste fees set-out in a waste services bylaw are billed along with water and sewer fees by most
municipalities.
Council approved a 2016 project that involves a summary review of the waste systems operating model,
how its being paid for, and how waste costs can be billed fairly by the City. One option is to reduce
general municipal taxes and to charge waste fees in their place resulting in no change in net revenue.
Another option is charging waste fees (estimated at $225 annually for residential properties) while
maintaining general municipal revenues in full or to a lesser extent. This second option would result in
increased revenues for general municipal purposes.
Sewer Revenues
In 2016, storm sewer activities and costs (capital $442,260 and operating $123,010) were moved from
general municipal services to sewer services. There was no reclassification of revenues simply a
regrouping of all sewer related activities together. This change is being accompanied by a re-examination
of the revenues currently raised through related bylaws (e.g.: sewer user fees/rates, sewer frontage
taxes) to ensure there continues to be a reasonable relationship between normalized long term sewer
costs and the revenues raised. Further, this re-examination is considering and detailing the existing sewer
services so as to ensure fairness in the sharing of system costs. An option that may be required to
improve fairness across system users is a storm sewer fee.
Water Revenues
There currently appears to be a reasonable relationship between normalized long term water system
costs and the revenues raised. Anticipated senior government changes in water quality regulations

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focused on manganese reduction will likely trigger the need to develop a water filtration plant projected
to cost in the $10 million range. Assuming that senior government grant funding will support 66% - 75%
of such a plants cost, the water fund is projected to have the Citys 25% - 33% share of the projects
investment cost in hand.
Expenditure Management
Expenditure management was the citys primary area of budgetary focus in 2015-2016. At this point,
staffs consensus is that no major operational cost savings can be realized without cutting service levels.
The completion of 2015-2016 operating expenditure and financial practices reviews was the justification
for the deferral of municipal tax increases in those years.
2015 Staffing Reductions
In early 2015, a staffing reorganization was undertaken by the City to realize permanent annual cost
reductions. A significant portion of the savings realized in 2015 went towards payment of severance.
Approximately half of the annual cost savings after 2015 have been reallocated to higher value delivery
and investment options (e.g.: in the areas of information technology and economic development). The
remainder of the annual cost savings have been used to cover reduced airport operating profit
assumptions.
2016 Departmental Cuts
As part of the preparation of FP 2016 all City Departments undertook detailed cost reviews seeking to
eliminate 2% of non-labour operating costs. Sufficient savings were found to cover 2016 labour cost
increases.
2017 Change Management
Change management efforts are still ongoing at the City in response to the staffing and departmental cost
reductions of 2015-2016. Staff have not finished reorganizing processes based on the continuing staffing
levels and tools and resources available (e.g.: communications).
Upcoming staff retirements of highly skilled and experienced individuals over 2017-2021 require
attention to safeguard continuity of City operations. The initial focus would be on determining if
processes and other positions can be reorganized to realize further staff reductions. Labour has indicated
its willingness to work on this with the City provided that both management and employee group
positions are part of such reviews. Most positions are likely to continue, and trained and reasonably
experienced individuals will be needed to fill them. Labour has indicated its willingness to work on
succession planning with the City, to help ensure appropriate individuals are identified for positions, and
formal and on-the-job training is accommodated.
SECTION 3: DISCUSSION
The City has found itself trapped in recent years by a financial mismatch between its sources of revenue
and the costs of the services it delivers. Specifically, revenues raised for core services such as water and
sewer exceed short term needs. Meanwhile, revenues raised for general purposes such as roads and
equipment have not been sufficient. When the City focuses on the short term only, there appears to be
enough money raised to cover the current level of services.

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In recent years, in order to balance the annual Financial Plan, increasing amounts have been charged to
the sewer and water funds to the benefit of the general fund by way of publicly disclosed administration
fees. While such charges are an accepted accounting practice, the amount of fees charged needs to
approximate actual administrative costs rather than whats required to balance the general fund budget.
Prior to balancing the overall 2016 Financial Plan, inter-fund charges were reduced to approximate actual
administrative or operational costs, and projected airport profits were reduced to the breakeven level
actually expected. The option of raising general property taxes in 2016 was revisited. Council was not
prepared to do so, at least not until the review of the Citys expenditures and financial practices was
complete. However, in recognition of the Citys progress in this regard, Council did provide for revenue
increases starting in 2017 in the 2016-2020 Financial Plan.
The solution to balancing the 2016 Financial Plan arose from further consideration of the Citys financial
practices. The funding mismatch outlined above, can in part be attributed to how certain core service
costs have been categorized for accounting purposes, and in part by how some service costs are being
funded. Specifically, storm sewer costs and solid waste costs (garbage/recycling) have been accounted
for in the general fund and paid for with general property tax revenues. In 2016, storm sewer costs were
re-classified from the general fund to the sewer fund for accounting purposes. As noted in the prior
section of this report, Council approved a 2016 project to review the waste systems operating model,
how its being paid for, and how waste costs can be fairly disclosed/billed by the City starting in 2017.
The following headings group matters raised by Council and/or Staff for FP 2017 consideration that are
generally understood to be of material significance to the City and Williams Lake. Through discussion and
consideration of these matters, Council can assess the Citys options and the balancing of overall priorities
so as to set directions for FP 2017.
Council Service Parameters
Budget Priorities - Services
1.
2.
3.
4.
5.

Increase the effectiveness of all types of City Communications using existing staff/tools.
Complete the Fire Protection Services capacity survey by independent consultant with CRD.
Increase resources to Development Services for long-term Geotechnical monitoring program.
Increase the support for the Citys investment and efforts in Economic Development.
Complete Policing Services efforts (e.g.: Inter-Agency Panel, Police Committee, Camera System)

Budget Priorities - Issues

1.
2.
3.
4.
5.

Increase 2025 economic Transition Planning (forestry) and detail actionable options.
Increase Asset Management (AM) capacity as lead by Canada/BC, UBCM and AMBC.
Reduce Carbon/GHG by integrating planning, finance, operations & AM processes/tools.
Increase outreach effort to First Nations on grants information sharing and coordination.
Increase Human Resources succession planning program including staff development.

Expenditure Management Guidelines

Plan labour costs in accordance with the Collective Agreement (2016-2019) and current senior staff
compensation policy.
Plan for operational, non-labour costs to remain unchanged.

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Taxes & Fees Changes

General Municipal Property Tax
Plan to increase general municipal property taxes by 3%. [$43 on an average Williams Lake residence.]
Plan to bill waste costs in 2017 based on following options: [$225 annually for a residential property.]

Option (A) maintain taxes, reallocate $1,292,846 general tax revenue to general capital budget.
Option (B) reduce taxes ~5%, but apply $707,208 (6% tax equivalent) to general capital budget.
Option (C) fully reduce taxes ~11%, so that waste fees fully offset by municipal tax reduction.

As part of Financial Plan public consultation process seek public input on waste revenue options.
Frontage Taxes
Plan to maintain sewer or water frontage taxes at the current level.
Sewer Fees
Plan to maintain sewer fees/rates at the current level. If Council approves the introduction of a storm
sewer fee in 2017, plan to charge only those properties not currently charged sewer fees/rates in 2016.
Water Fee
Plan to maintain water fees/rates at the current level.
Waste Fee
Plan to establish by bylaw full waste cost recovery rates for implementation in 2017 on property tax
notices (residential) and on bimonthly utility billings (ICI).
Capital Budget Parameters
Minimum Level of General Revenue Funding
Plan for no increase in general revenue funding beyond that outlined in FP 2016 for the listed 2017 capital
projects including major vehicles/equipment needs. Any additional funding arising from the
introduction of waste fees in 2017 may be directed by Council to Roads and related infrastructure. A
minimum level of annual funding will be considered by Council when asset management program work
has progressed sufficiently to determine that amount. That is, staff is to determine the annual
investment required to sustain existing infrastructure and assets.
Budget Priorities Capital Asset Categories
Joint Projects BC MOCSCD grant for River Valley Trails project extension expires March 31, 2017.
Joint Projects City share of Hwy 97/Toop upgrades project with BC MOTI scheduled for 2017-2018.
Joint Projects Water Treatment Facility project reports required for a Canada/BC grant application.

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Rehabilitation Roads & Sidewalks (funding may increase, subject to waste fee option decision).
Replacement New City phone system in 2017 (core system components no longer available).
Specific Financial Policies
Reserves
Plan for no increase in general revenue funding for reserves beyond that outlined in FP 2016 for 2017.
Council is aware that the City has very limited general reserves and is not contributing significantly to
them at this time. A minimum level of annual funding to reserves will be considered by Council when
asset management program work has progressed sufficiently to determine that amount. Staff to
determine the contributions to reserves required to sustain existing infrastructure and assets.
For FP 2017, a proposal to establish a Fleet and Major Equipment Replacement capital reserve fund by
bylaw may be presented. Alternatively, as part of asset management program work this could be brought
back to Council for FP 2018.
Debt
Do not plan for the issue of new debt without specific approval of Council.
A carry-forward approval from FP 2016 provides for short term loan financing (up to 5 years) of major
vehicle/equipment purchases.
For FP 2017, proposals for additional approvals may include (A) borrowing if necessary to meet the Citys
share of jointly funded government projects, and (B) borrowing if necessary for replacement of existing
long-term core infrastructure not eligible for senior government grant funding.
Capital Asset Management
Do not plan for expanding or acquiring new capital assets without specific approval of Council, capital
asset management is to focus on the renewal/rehabilitation of existing assets that are part of the Citys
long-term core infrastructure. Approvals would normally be given for new investments that would be
substantially paid for by Canada/BC grants.
Rate Setting Guidelines (Taxes)
In general, plan to maintain current property class shares of municipal taxes paid. As part of economic
transition planning, property class shares may be reviewed for long term adjustment with Councils
approval.
Rate Setting Guidelines (Fees)
In general, plan to set rates/fees at levels sufficient to match the normalized long term cost of each
service including operating and capital expenditures.
SECTION 4: DETAILED ANALYSIS
a. Financial Considerations Cost and Resource Allocations:
N/A
b. Legislative Considerations (Applicable Policies and/or Bylaws):

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N/A
c. This project most closely supports the following ICSP Priority Areas:
N/A
d. This project potentially conflicts with the following ICSP Priority Areas (also list mitigation measures)
N/A
e. Environmental Considerations:
The 2015 Paris recommitment by Canada and BC to carbon reduction, as part of sustainability and climate
action, is expected to require integration of that goal in the Citys financial planning and operations
management.
f. Social Considerations:
The Citys need for greater revenues to pay for core infrastructure renewal in a limited growth economic
environment is an unwelcome financial challenge for many residents and businesses. Public consultation
needs to be a robust part of the 2017 FP preparation process. Active outreach to specific groups to
explain the Citys current situation, 10 year outlook, and the major decision choices arising from those is
one method to achieve that. Council as part of its FP 2017 direction may refer specific matters out for
public consultation and input prior to reaching decisions on those matters.
g. Economic Considerations:
Global Outlook (FP 2017-2021)
Assumption (1) the global low/negative interest rate and deflationary environment is expected to
continue.
Implication for City Subject to the communitys ability to service new debt, this may be a good time to
borrow for replacement of existing long-term core infrastructure. The focus of such debt would likely be
on investments not eligible for senior government grant funding.
Assumption (2) - global economic growth is expected to remain below long term potential as the worlds
leading economies evolve (China, USA).
Implication for City global trends will probably not drive/support local growth or real estate value
increases, therefore tax revenues will probably not increase automatically based on global growth;
accordingly, this is likely a poor time for plans requiring significant City money for expansion or new (not
already existing) investments. However, new investments may be justified when they are eligible for
majority funding by senior government grants.
Canada/BC Outlook (FP 2017-2021)
Assumption (3) Canada/BC will remain the biggest and best sources of money for many types of
infrastructure (re)investment (up to 75% joint project contribution); however, Canada/BC grant
requirements for asset and carbon management are increasing/mandatory winning future grants will
require demonstrated capacity in those areas and may require evidence of First Nations
partnerships/support.

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Implication for City build and maintain permanent capacity (people/tools) to consistently win major
grants, and to publicly demonstrate effective asset and resource management including First Nations
partnerships/support; consider borrowing when necessary to meet Citys share (up to 50%) of jointly
funded projects rather than forego grant funding.
Assumption (4) - a new Canada-US softwood lumber trade agreement appears unlikely to be agreed upon
for some time, the market place may be disrupted by US trade lobby actions as it was in 2000-2005 [see
Attachment A]. The forestry and industrial service sectors, the primary drivers of the Williams Lake
economy, may as a result minimize reinvestment and focus instead on their potential forest sector
consolidation plans driven by the forecast reduction in annual allowable cut in 2025.
Implication for City economic transition planning would likely consider the Citys property class revenue
mix (industry/ business/ residential cost sharing); this is likely a poor time for plans requiring significant
City money for expansion or new (not already existing) investments. However, new investments may be
justified when they are eligible for majority funding by senior government grants.
Williams Lake Outlook (FP 2017-2021)
Assumption (5) the total assessed value of Williams Lake real estate for tax purposes is not anticipated
to change appreciably during the FP period, as economists advise there is not currently sufficient local
demand, net population migration, or new development to support increased value [see Attachment B].
Implication for City - this is likely a poor time for plans requiring significant City money for expansion or
new (not already existing) investments. However, new investments may be justified when they are
eligible for majority funding by senior government grants.
Assumption (6) Williams Lake appears to be in the initial stage of a potentially significant economic
transition resulting from the 2025 reduction (30% - 50%) in the annual allowable timber cut in the
Williams Lake Timber Supply Area; BCs Chief Forester issued this determination in February, 2015 [see
Attachment C].
The City is not aware of any definitive analysis having been published on the potential economic
transition impacts on Williams Lake of the 2025 timber supply reduction. The major commercial forestry
sector companies operating in Williams Lake are either publicly traded or privately owned. For
commercial reasons, they are usually unable to comment in advance on plans for their operations.
However, early actions taken by major forestry companies in response to mountain pine beetle timber
supply reductions has included mill closures and swaps of timber rights across multiple BC Timber Supply
areas (West Fraser and Canfor in Quesnel and Houston in 2015). The Citys understanding is that forest
industry consolidation is expected to continue over the coming years. Given the importance of the
forestry sector to Williams Lake as a whole, the City as part of its planning is interested in
understanding the range and probabilities of the potential future outcomes.
One way of assessing the potential future outcomes on Williams Lake follows. This indirect approach is
useful for purposes of discussion but is not definitive. Forestry accounts for approximately 27% of the
basic income for Williams Lakes population of 10,938 (this does not include indirect jobs/benefits). In a
best case scenario, as many as 16% or 1,772 residents of Williams Lake are likely to be impacted over time
by the forest sectors consolidation [10,938 people x 27% income x 30% reduction = 836 directly
impacted + 836 indirectly (1x economic multiplier ratio) impacted = 1,772 residents]. In a worst case
scenario, as many as 27% or 2,954 residents of Williams Lake could be impacted over time by the forest
sectors consolidation [10,938 people x 27% income x 50% reduction = 1,477 directly impacted + 1,477

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indirectly (1x economic multiplier ratio) impacted = 2,954 residents].

Implication for City In situations involving major planning decisions by large established commercial
enterprises the general approach is to plan for the best and manage for the worst. The large forestry
companies will make the decisions on production and employment given the available timber supply. The
City may be best prepared for future change by following the same general approach. For example, a
campaign to attract up to 3,000 new or returning residents to the City through 2025, in order to
safeguard the communitys population base and investments, could be a response to this challenge.
SECTION 5: RECOMMENDATION(S)
That Council receive this report for information and consider the suggested directions for the preparation
of the 2017-2021 Financial Plan as set-out in Section 3. Further, that those directions as accepted,
modified, rejected or supplemented by Council, be included in a resolution as the 2017 Council Financial
Plan Guidelines.
Respectfully submitted,
William D. Wallace, CPA, CA
Chief Financial Officer
This report has been prepared in consultation with the following:
Chief Administrative Officer (Interim & Appointed)
Director of Community Services
Director of Development Services
Director of Human Resources
Director of Municipal Services
Director of Protective Services
Airport Manager
Manager of Community Policing
Manager of Legislative Services
Manager of Water/Sewer Division

Initials

ATTACHMENTS:
Attachment A US Lumber Coalition on Softwood Lumber Agreement (expires October 2016)
See markups, pages 1-3
Attachment B Central 1 Credit Unions Cariboo Regional Economic Outlook (August 2015)
See markups, pages 1-3
& BC Housing Forecast Update 2016-2018 (August 2016)
See markups, pages 1, 3, 6
Attachment C BC MoFLNRO Williams Lake TSA Timber Supply Analysis (January 2014)
See markups: p. 4 Population, Forestry Sector Income
See markups: p. 12 Timber Harvest Forecast, Base Case (Figure 4 graph)
See markups: p. 17 Timber Harvest Forecast, Best Case (Figure 9 graph)
& BC Chief Foresters AAC Rationale for Williams Lake TSA (February 2015)
See markups, page 46