The Corporation of the City of Nelson

Agenda
1. Introduction
2. Quick Facts
3. 2016 2020 Financial Plan Process
4. 2016 Budget Overview
5. Taxation & Operating Budget
6. City Assets/Reserves/Debt
7. Comments & Questions
Presenter: Colin McClure, Chief Financial Officer

Council Priorities 2016

1) Waterfront Downtown MasterPlan

Railtown planning project

Public art
Hall St. & Baker St. washroom facility
Waterfront/Downtown Urban Design
Strategy

2) Community Energy Plan

Ecosave Energy Retrofit Program

District Energy Business Plan
Solar Garden
Active Transportation Improvements

3) Bylaw Updates
Sewer Regulatory
Parks Regulation and Fees
Business Licence

4) Infrastructure Renewal Program

Water & Sewer

Nelson Hydro
IT Investment
Buildings

5) Broadband
Fibre lines
Educating business community

6) Doing Business Differently

Look for ways to generate non-

tax revenues
1.75% taxation cap
Managing costs

Financial Planning Process, Environment & Direction

Five Year Plan Overview and Quick Facts
Operating Costs
Funding Sources User Fees, Debt, Reserves & Taxation
Utilities, City Assets & the Capital Budget

Financial Planning Process

Departmental staff
prepare budget
Finance staff &
senior management
review

Bylaw introduction
and adoption

Council review of
input & potential
subsequent changes

Today

Adjustments by
staff

Staff presentations
to Council

Public consultation

Council debate &

propose tax rate

Financial Planning Environment

Economic performance expected to increase 3.1% in BC
Shifting of responsibilities/downloading
Public demand for services
Increasing demands on aging infrastructure and the need

to address this issue

Sustainability & GHG Reduction Plans
Long term planning
Current and potential new private development will assist
in generating new market construction taxation revenue
Reduced interest earned on investments

General Operating Budget Principles

Councils Direction to Staff
Support delivery of municipal services
Maintain services delivered at 2015 levels
Reduce costs of service delivery, where possible, while

minimizing service impact levels

Can additional support be found for arts and culture?
Generate new revenue
Minimize tax rate increase
Long term planning as a focus
Continue infrastructure program
Implement sustainability principles

Revenue Sources
Operating Expenses

Quick Facts
All City Operational revenue close to $42 Million
Total operational expenses $37 Million
Revenue over expenses pay down debt & flow into

Operational and Capital reserves

General Fund Operational expense is budgeted at $17.2M
in 2016, funded by $9.2M in Taxation (approx. 2 to 1 ratio)
A 1% increase in taxation produces about $75,000 to cover
operational expenditures
The dividend from Hydro to operations is equal to a 36%
tax increase
Only Municipality in Western Canada that generates and
distributes electricity
162 Regular Employees

City of Nelson 2014 Operating Revenues

41,982,203

City of Nelson 2014 Operating Expenses

37,142,463

Five Year Financial Plan

Areas:
General
Water
Sewer
Hydro
Resource Recovery
Costs include:
Capital
Operating

Funding Sources
Debt &
Grants
General
Water
Sewer
Hydro
Waste

Taxation User
Fees

Budget Overview - 2016

Highlights:
New market construction taxation revenue generation for 2016 is
expected to be $98,000
Hydro dividend to operations increased by $100,000
Recommending a 1.75% average overall property tax increase
3% or $15 annual increase in water rates for a home
2% or $9 annual increase in sanitary sewer rates for a home
3.8% increase in Hydro rates effective April 1, 2016 (2.6%
annual increase)
No change in garbage and recycling fees
2016 Capital Budget:
$12.6M including General, Water, Sewer & Hydro

General Operating Budget Principles

Councils Direction to Staff
Support delivery of municipal services
Maintain services delivered at 2015 levels
Reduce costs of service delivery, where possible, while

minimizing service impact levels

Can additional support be found for arts and culture
Generate new revenue
Minimize tax rate increase
Long term planning as a focus
Continue infrastructure program
Implement sustainability principles

2016 Operating Budget Revenues

GRANTS GRANTS UNCONDITIONALCONDITIONAL
3%
3%
OTHER REVENUE
FROM OWN
SOURCES
15%

SALE OF
SERVICES
17%

GRANT-IN-LIEU OF
TAXES
3%

INVESTMENT
INCOME
1%

TAXES
58%

Operating Fund - How did we get there?

Operating Budget Shortfall

$(419,250)

New Revenues
New Development Taxation

98,000

New Tenants at City Hall

25,000

Increase in Prison Maintenance Revenue

10,000

Nelson Hydro Dividend

Total New Revenues

100,000
$233,000

Operating Fund - How did we get there?

Expenditure Additions/Reductions

Restructure of Public Works Management Wages

$40,000

Add 1 Year Initial Funding of Restorative Justice

15,000

Police Management Restructure

30,000

Shortfall after adjustments

Proposed 1.75% Taxation revenue

131,250
$131,250

Revenue Sources
Operating Expenses
Capital Plan

Who does the City collect taxes for?

Assessment * Tax Rate = Property Taxes
What is the proposed change for 2016?

2015 Tax Collection Over All Govt Sectors

Regional
Hospital
3%
RDCK
19%
School Taxes
39%

BCAA & MFA

1%
Municipal
Taxes
38%

Municipal Taxes

$ 8,368,827

School Taxes

8,375,914

RDCK

4,072,753

Regional Hospital

646,190

BCAA & MFA

163,842

Total

$21,627,526

Taxation - Assessment
BC Assessment is a provincial Crown corporation that

determines the market value of all real properties in BC.

After determining correct classification, actual value and

exemption status of every property, BC Assessment

provides taxing authorities with an Assessment Roll
which lists all properties, names of owners and taxable
values of the land and any improvements (buildings).

Tax Revenues: Growth Where does

it come from?
New revenue only exists when there is new

assessment
Increase in inventory i.e. through subdivision or
new construction
General increases in market value do not generate
more tax dollars
Past couple of years has resulted in minimum new
revenues from growth

Effect of Assessments in 2016

Average market changes:
Residential up 3.45% from 2015
Commercial up 4.75% from 2015
As in the prior year Council has directed staff to lower the
Business tax multiplier in order to offset the larger increase
in Commercial assessment values versus Residential in the
current year.
This will keep the tax burden consistent with prior years
instead of shifting it to the Commercial sector.
Business Tax Class Multiple will likely decrease from 2.04 in
2015 to 2.00 in 2016.

2015 Business Tax Class Multiples

North Saanich
Kimberley
Revelstoke
Castlegar
Invermere
Cranbrook
Fernie
Nakusp
Kelowna
Nelson
Trail
Creston
Rossland

4.83
4.11
3.82
3.42
2.70
2.65
2.61
2.14
2.13
2.04
2.00
1.93
1.75
0.00

1.00

2.00

3.00

4.00

5.00

6.00

Property Taxes & Assessments

Property Class

Assessed
Value
Percentages

% of Property
Taxes Levied

$1,288,708,300

79.6%

73.11%

104,295,375

6.4%

1.28%

1,284,800

0.1%

0.13%

Business/Other

223,974,200

13.8%

25.42%

Recreation/Non
Profit

1,777,600

0.1%

0.06%

Residential
Utility
Light Industry

Total

2016 Assessed
Values

$1,620,040,275

Allocation of 2015 Taxes on an average SFD

Regional
Hospital
3%

RDCK
19%

School
Taxes
27%

BC
Assessment
Authority &
MFA
1%

Municipal Taxes
School Taxes

805

RDCK

554

Regional Hospital

96

BCAA & MFA

19

Total
Municipal
Taxes
50%

$1,482

$2,956

2016 Proposed Budget

Effect on $328,814 Home (Nelson 2016 average)
2015
Actual

Property Tax (municipal only)

2016
Proposed

Net
Annual
Change

Net
Monthly
Change

1,482

1,508

$ 26

$ 2.17

Water Rates (after discount)

512

527

15

1.25

Sewer Rates (after discount)

445

455

10

0.83

Resource Recovery

118

118

$2,557

$2,608

$ 51

$4.23

Overall

2016 Proposed Budget

Effect on $1,000,000 Commercial Restaurant
(50 seats - Nelson 2016 average)

2015
Actual

2016
Proposed

Net
Annual
Change

Net
Monthly
Change

Property Tax (municipal only)

$9,300

$9,463

$163

$13.58

Water Rates (after discount)

1,535

1,581

47

3.90

Sewer Rates (after discount)

1,334

1,360

26

2.18

$12,169

$12,404

$236

$19.67

Overall

Where your tax dollar goes:

Reserves, $0.08
Nelson Municipal
Library, $0.04
Rec &
Community
Services,
$0.12

Debt, $0.03

Operations,
$0.21

Other Protective
Services, $0.01

Corporate
Services, $0.17

Police Services,
$0.22

Fire Services,
$0.12

2016 General Budget Expenditures

INTEREST AND
OTHER DEBT
CHARGES
4%

DEBT REPAYMENT
5%

GENERAL
GOVERNMENT
SERVICES
19%

CONTRIBUTION
TO RESERVES
10%

RECREATION &
CULTURAL
11%

POLICE PROTECTION
18%

TRANSPORTATION
SERVICES
19%

FIRE SERVICES
9%

PUBLIC HEALTH
AND WELFARE
SERVICES
1%
ENVIRONMENTAL
HEALTH SERVICES
1%

OTHER PROTECTIVE
SERVICES
3%

Transit
2015
Budget
Transit operating costs

2016
Budget

$1,293,000

$1,333,000

199,000

205,000

$1,492,000

$1,538,000

$226,000

$237,000

RDCK/BCT Contribution

968,000

997,000

City Contribution

298,000

304,000

$1,492,000

$1,538,000

Debt service costs

Total costs

Fares

Total Funding

Overall Capital Plan 2016 Highlights

Total Capital - $12.6M
$7.1M Water, Sewer & Hydro
Complete Mountain Station UV project
Continuation of CIPP relining
Hydro Distribution System upgrades

$5.5M General Capital

General paving & park improvements
Building improvements (i.e. roof replacement)
IT Network cabling, fiber lines, virtual desktops
Vehicle & equipment purchases

Why are Assets important?

Assets exist to provide services
Changes in services and service levels drive capital costs

Assets depreciate over time

Each asset requires ongoing maintenance to maintain the

infrastructure

Many of the Citys assets are long lasting and

very old, such as:
Hydro generating station
Water pipes
Roads
Buildings

Overview Total City Assets

300

$ Millions

250

Replacement
Historical

200
150
100
50
0
Water Utility

Sewer Utility

Hydro Utility

PW Assets

City Assets

Surplus and Reserves

Debt

Funding - What is a Surplus?

A surplus is the amount by which revenue exceeds

expenditures in a year. We do not budget for a

surplus.
May be caused by:
Unexpected revenue
Revenue exceeding budget (i.e. investments, fees difficult to budget)
Budgeting may be conservative because we cannot
have a deficit
Vacant positions

How Should We Spend

General Surplus or Reserves?
Good tool for non-recurring items (e.g. capital or one-

time projects).
Recurring items (e.g. policing costs or parks

maintenance) should generally not be funded through

reserves, as the benefits can be short lived.

Statutory Reserves
Statutory Reserves are set up by bylaw. The bylaw

describes the specific purpose of the reserve, how it is

funded and what expenditures the funds can be used for.
Examples are:
Equipment replacement reserve
Capital projects reserve
Water licence reserve
Land sales reserve
Parks acquisition reserve

Non-Utility statutory Reserves at the end of 2015 was approx.

$6.2 Million

Other Appropriated Surplus

Past Councils have directed allocation of surpluses to be

reserved from a variety of one-time and ongoing activities

including:
Selkirk College Campus
Services Recycling, Economic Development
Administrative Costs Insurance, Legal
Development and Infrastructure Land Sale, Bridges,

Airport, Buildings
Fortis Pay Down

Appropriated Surplus at the end of 2014 was $3.4 Million

Debt and Debt Servicing

Major capital projects typically funded by
using combination of existing reserves and by
borrowing funds.
Strategic decision when to borrow vs using
reserves or taxation.
$18.1M in General & Utility Debt
Of $9.6M in General Debt (Dec 31, 2015),
only $1.26M is supported through
general taxation.

2016 $5.5M General Capital Funding Sources

Borrowing
0.25%

Recovery
1%

Special
Reserves 11%

Storm Sewer
Parcel Tax 1%
Contrib.
&
Donations
6%

Statutory
Reserves
80.75%

Water Licence Reserve

Opening bal.
Water licence rev.

2016

2017

2018

2019

2020

$2,166,656

$1,129,253

$767,353

$875,133

$1,114,628

743,867

761,500

773,230

785,195

797,398

175,000

175,000

175,000

175,000

175,000

(1,978,370) (1,313,400)

(857,650)

(742,600)

(1,288,350)

Borrowing
Grants/Donations
Debt Servicing
Capital program
Interest
Closing Balance

22,100

15,000

17,100

21,800

16,000

$1,129,253

$767,353

$875,133

$1,114,628

$814,676

Water License Building Reserve

Planned Five Year Expenditures
$2,500,000
$2,000,000

Other
Info. Tech.

$1,500,000

Sidewalks
Parks

$1,000,000

Buildings

$500,000
$0
2016

2017

2018

2019

2020

Capital Reserve (Transportation System)

2016

2017

2018

2019

2020

$419,253

$483,753

$441,288

$531,688

$623,888

Parking meter
revenue

730,000

730,000

730,000

730,000

730,000

Other funding

25,000

3,420,331

(700,000)

(4,201,496)

(650,000)

(650,000)

(650,000)

9,500

8,700

10,400

12,200

14,100

$483,753

$441,288

$531,688

$623,888

$717,988

Opening bal.

Road/sidewalk
maintenance
program
Interest Income
Closing Balance

Assets Versus Reserves - 2015

$200

$200
$180

$ Millions

$160
$140

$125

$122

$120

Annual Contribution

$100

Reserve Balance

$91

Historical Cost
Replacement Cost

$80
$60

45.5

$40

51.0

40.4
27.9

$20
$0

58.7

$53

2.9

3.1

3.8

Water

Sewer

Hydro

5.4
General *

0.4
Roads & Storm

Debt Payments Trend Line 5 years

$1,000,000
$900,000
$800,000
$700,000

Sewer Utility

$600,000

Water Utility
Hydro Utility

$500,000

General (NET)

$400,000

General (GROSS)

$300,000
$200,000
$100,000
$2016

2017

2018

2019

2020

Statutory Reserves Trend Line

$4,500,000
Water Licence

$4,000,000

Capital (Roads)

$3,500,000

Equipment
Water Utility

$3,000,000

Hydro Utility

$2,500,000
$2,000,000
$1,500,000
$1,000,000
$500,000
$-

2016

2017

2018

2019

2020

Water
Sewer
Resource Recovery
Nelson Hydro

Overview Water Utility

Strategic Direction:
Long term planning critical to maintain safe and

accessible water and fire flow protection

UV disinfection, water conservation analysis, and other
secondary water sources (i.e. Grohman Creek)
Continuation of watermain replacement and strategic
and data gathering water metering plan

Rates:
Council approved 3% or $15 annual increase in rates

for 2016 (after discount).

Rates proposed to increase 3% per year for the next
10 years

$0
2030

2029

2028

2027

2026

2025

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

Projected Water Rates - SFD

$1,000

$800

$600

$400

$200

Overview Water Utility 2016

Operating Highlights
Revenue:
User fees $3.4M
Other $163,000

Operating costs:
Approx. $1.2M

Debt Service:
$106,000 per year
No new debt planned

until 2019

Capital Highlights
2016 Budget $2.5M
Water treatment $440,000
Continuation of UV
Disinfection (Mt. Station)
ICI Metering & data collection
Other infrastructure

expansion & replacement:

Source/Supply $620,000
Water Distribution $1.5M

2016-2020 Capital
funded through User Fees, Govt
grants, and borrowing (2019)

Overview Sewer Utility

Strategic Direction:
Sewer Masterplan asset repair & maintenance
Develop replacement program in conjunction with

water utility and road network upgrades

Improved technology CIPP (cured-in place pipe) has
cut cost of relining sewer pipes

Rates:
Council approved 2% or $9 increase in 2016 sewer

rates
Rates proposed to increase 2% per year on average

$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030

Projected Sewer Rates - SFD

$1,000

$800

$600

$400

$200

Overview Sewer Utility

Operating
Revenue:
User fees $2.9M
Other $103,000
Operating costs:
Approx. $1.7M
Debt Service:
$93,000 in 2016

Capital
2016 Budget $1.5M
Infrastructure expansion and
replacement:
Lift Stations $275,000
Grit Chamber & Surge Tank
$150,000
CIPP Relining $600,000
Sewer Main $350,000 (incl.
Hall St. Phase II design)
2016-2020 Capital
funded through User Fees &
grants

Overview Resource Recovery Utility

The waste function is based on a fee for service

model

The yearly charge per household pays for the

collection

2016:
No increases proposed
Monitoring the increase in transportation costs to

truck garbage to new RDCK transfer station

The City is receiving $140K annually from MMBC
to collect recycling this revenue is currently
being used to fund operations

Overview Hydro Utility

Strategic Objective:
Provide safe and efficient generation, distribution and sale

of electrical energy

Strategic Infrastructure Priorities:

Transmission Distribution Systems
Reliability (Vegetation Mgmt & Voltage Conversions)
Safety (Porcelain Cut-Out Changes, Pole Replacements)
Power Plant G5 Protection & Control Upgrade, Head gate

Strategic Business Priorities:

District Energy Business Plan
EcoSave Energy Retrofit Program

Overview Hydro Utility

2016 Budget:
Status quo in most areas with a one time increase for
decommissioning the City substation;
Decrease in capital budget - largest capital upgrades to the
power plant, substations, and transmission lines are
behind us now.

Nelson Hydro 2016 Contributions:

$2,700,000 to City of Nelson operations

$568,000 Water Licence Reserve
$90,000 to the Nelson District Community Complex
Utility pays a share of admin costs

Overview Hydro Utility

2016 General Rate Changes (prelim. data)
Nelson Hydro

Apr 01

3.80%

FortisBC

Jan 01

2.96%

Municipal Utilities

various 3.0 9.0%

BC Hydro

Apr 01

4.0%

(3.80% Apr 1st - equivalent to 2.6% annual)

Average 2016 Nelson Hydro residential bill:
approximately $92.01 / month
an increase of $2.25 / month from 2015

Overview Hydro Utility

Operating

Capital

Revenue:
2016 Budget $3.1 M
Energy Sales $16.6M
Infrastructure Renewal:
Other Revenues $440k
Vegetation Management
Operating costs:
G5 Upgrades
Est. $4.6M
Pole Replacements
Power Purchase:
60L3 Rebuild
Est. $6.8M
Debt Service:
2016-2020 Capital funded
Debt payments of $499k
through Energy Sales
Transfers
To City Funds $3.4 M
To Capital Reserve $2.3 M

Email: budget@nelson.ca