2016 OPERATIONS ASSET LEVY and ASSET RESERVES A Presentation to the Council of the District of West Vancouver February 22, 2016
DWV 2016 – 2020 Financial Plan The proposed 2016 Financial Plan is tackling two challenges: 1. Operational Funding for Services 2. Asset Management Solutions for these two challenges are connected.
DWV 2016 – 2020 Financial Plan Decision making for the Financial Plan for Council revolves around the tax levy: cut, hold the line, or allow an increase? Because costs continue to go up, cutting or holding the line on taxes usually means cutting services. But is this the only way?
• The answer is “No”. • Better decisions can be made, by focusing on how the financial plan is created. 1. Tax levy does not pay for everything 2. Tax levy actually depends on amount obtained from non-tax revenues, as well as amount needed for expenses 3. Operations and capital are mixed together, which creates asset management issues 4
Property Tax Levy : Does not pay for all services Operational subsidies from the tax levy in the District of West Vancouver
Property Tax Levy : Does not pay for all services Operational subsidies from the tax levy in the District of West Vancouver
Asset Levy: Budget Must Balance General Fund NON TAX REVENUES $28.6M Operational EXPENSES $80.2M TAX LEVY $48.2M For Operations $7.4M FOR CAPITAL SPENDING Asset Asset Maintenance Maintenance $7.4 7
Asset Levy: Budget must balance, but not at the expense of the assets General Step 1: Increase as Fund NON TAX much as REVENUES possible $28.9M 1% Operational EXPENSES $79.3M Step 2: Step 3: TAX LEVY 3% Decrease Tax Levy $48.2M as much as For Operations Makes Up possible the 2% Difference 8
Asset Levy: Budget must balance, but not at the expense of the assets General ASSET Fund RESERVES NON TAX REVENUES $28.9M $7.4M for Operational Asset 1% inc Maintenance EXPENSES ASSET LEVY: Additional $6.1M for $79.3M Asset Maintenance TAX LEVY 3% inc $49.4M For Operations 2% inc CAPITAL SPENDING Asset Maintenance $13.5 9
2016 Preliminary Operational Budget: Tax % Impacts
Prudent Operational Expenditure The Finance Committee recommends that a proposed 2016 operating budget increase of 1.62% be approved. 11
Long Term Financial Planning Asset Management The District currently owns over $1B in assets (not including utilities). This is approximately $57,700 for each household, based on 18,700 households. Over the next 50 years, virtually all of these assets will be coming due for repair and replacement. The District now has the data to begin building a long-term strategy for asset management, and to create financial projections for incorporating this strategy into the annual budget.
Long Term Financial Planning Asset Management Asset Management Questions: 1. What assets do we have? 2. What is their state and condition? 3. What investments need to be made to maintain the assets in a condition that enables them to perform their intended function? 4. What funding needs to be provided, over time, in order to make these investments?
Long Term Financial Planning Asset Management Fiscal Sustainability Study To answer the questions about the state and condition of the assets, and the required asset investments, the District has undertaken a fiscal sustainability study, which has determined the amounts required to maintain the District’s assets over the long term.
Land Improvement Assets: Quantity & Types • 41 athletic fields (3 • 4 gardens artificial turf fields, 27 • 64 community garden grass fields, 11 gravel all- plots weather fields) • 46 playground structures • 15 baseball backstops (4 in 24 areas premium) • 36 parking lots • 6 sets of bleachers • 150,000 metres of trails • 7,500 metres of chain • 13 information kiosks link fencing • 37 interpretive signs • 33 tennis courts • 1 seawalk • 7 other outdoor courts • 46 waterfront access • 2 skate parks points • 430 benches • 12 swimming beach • 14 off-leash dog areas parks • 5 piers and 1 lake float
DW V Capital Assets – Replacem ent Values Historical Cost Accum ulated Net Book Value Replacem ent Cost Capital Asset Category ( 2014 Am ortization ( tw enty-years @ Financials) 2015 values) Land Improvements $ 26,275,315 $ 14,429,425 $ 11,845,890 $ 23,232,436 Buildings* 85,492,497 27,089,981 58,402,516 91,070,519 Machinery & Equipment 14,356,201 8,163,275 6,192,926 9,762,242 -Information Technology In M&E In M&E In M&E 17,645,636 -Library Materials In M&E In M&E In M&E 5,156,000 -Other Assets* * In M&E In M&E In M&E 8,046,691 Vehicles 14,265,795 8,967,292 5,298,503 12,972,165 -Heavy Equipment In Vehicles In Vehicles In Vehicles 19,167,900 Streets 86,235,880 33,468,174 52,767,706 112,569,370 Totals $226,625,688 $92,118,147 $134,507,541 $ 299,622,959 * Buildings includes the remaining $23.8 Million in construction costs for the new PBMH building. * * Other Assets includes clothing, apparel, furniture & furnishings, guns, and other assets which are not usually capitalized, as well as a rough estimate for parks underground assets. These numbers exclude utility infrastructure, as well as land and assets under construction
Building: West Vancouver Aquatic Centre In 1976, the original construction cost (historical value) = $ 3 ,5 7 8 ,9 2 2 This is the amount less depreciation recognized in the financials as part of TCA . Tw enty- Capex $ years ( 2 0 1 6 - 2 0 3 5 ) Capex - Building Capital $14,691,209 Maintenance 2,298,750 - Other Assets (IT, M&E) required replacement Total Capex $ 1 6 ,9 8 9 ,9 5 9 This does not include inflation or saving for the construction of a new pool one day.
West Vancouver Aquatic Centre Statem ent of Operations Per Year Revenues $ 3,599,193 Less Expenses - Program Labour & Materials - Facilities Labour & Operations 3,123,678 664,700 Operating Surplus ( Deficit) ( 1 8 9 ,1 8 5 ) before Capex Capex, avg. per year - Building Capital Maintenance 734,560 - Other Assets 114,938 Capex required, avg. per year 849,498 Total Tax funding required $ 1 ,0 3 8 ,6 8 3 per year *Per the District’s 2014 operations
Optimal and Critical Asset Investment Replacing assets at the ‘optimum’ point avoids costly maintenance which does not prolong asset life, and therefore provides the best value for money The ‘critical’, or balance point (in circle) is the point at which risk of failure starts to climb. At this point, repairs are required just to keep the asset functioning, and, even then, may not be sufficient . 19
Long Term Financial Planning Asset Management This chart shows 2015 replacement value, which does not include any assumptions for inflation, foreign exchange rate, or any new building construction. Estimates for capital maintenance of the new public safety building is included post 2018. 20
Long Term Financial Planning Asset Management Proposed Solution: Three Steps 1. Set up a system of asset reserves 2. Set up a system of funding the reserves through an asset levy 3. Provide graduated annual increases to the level of asset levy funding
Long Term Financial Planning Statutory Reserves Financial Services recommends that the following statutory reserves be created or updated: • General Fund Reserves: – Capital Facilities Reserve (Update) – General Infrastructure Reserve (Establish) – General Equipment Reserve (Establish)
How Asset Management Reserves Work Operating Projects Annual Project Operating per Council $850,000 Reserve Resolution Budget Current Capital Contribiution February 2016 $7.3M Facilities Projects Facilities Reserve per Council $2.0M Internal Funding Sources Resolution Asset Levy Additional (Identified portion of annual tax levy) Funding Sources: DWV Funding Grants AssetLevy Infrastructure $9.1M DCC's Infrastructure (Identified $4.6 Projects per Council $4.6M $$$$$$ Reserve portion of $2.6M Resolution Project Donations annual tax levy) CAC's C Equipment Projects Equipment per Council $2.5M Reserve Resolution Surplus (Determined at $$$$$$ year end) Projects completed by December 2017 Projects Not Completed by December 2017 23
What Difference Does the Asset Levy % Make?
Prudent Operational Expenditure • The Finance Committee recommends that: – a 2016 asset levy, applied equally to both residential and business class properties be approved; and – the 2016 asset levy be applied based on the one year implementation option, equalizing the impact at $372 to the average residential and business class taxpayer. 25
Property Tax Levy in 2016 1% property tax rate increase = $585,000 of revenue to the District 1% property tax rate increase = $34 for the average West Vancouver household
Impact on Average Residential Taxpayer
Public Consultation - Survey Results
Public Consultation - Survey Comments: General support for the levy Strong support for including both residential and business properties Confusion about phasing
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