B.C.’s new auditor general for municipalities announced Wednesday that two of its first performance audits will look at cost containment measures and police agreements in 18 local governments.
The announcement came on the same day that the Canadian Federation of Independent Business released a Big City Spenders report that suggests Canadian municipalities — which often complain about not having enough money to provide services and infrastructure — have a spending problem rather than a revenue one.
The assertion followed a look at the country’s four biggest cities — Vancouver, Toronto, Montreal and Calgary — that showed spending over the last 12 years has risen by more than 55 per cent, far in excess of population growth and the rate of inflation. The CFIB also compiled figures for four Metro Vancouver cities, including Surrey, Richmond, West Vancouver and Burnaby.
The report was released ahead of the Federation of Canadian Municipalities convention, which will kick off at the Vancouver Convention Centre on Friday. But while both Surrey and West Vancouver are among the initial 18 cities to be audited — for “local government performance in managing policing agreements and police budget oversight” and “achieving value for money in operational procurement” respectively — this isn’t necessarily because they are big spenders.
Basia Ruta, British Columbia’s auditor general for local government, said in a statement the audits and selection of local governments followed “extensive consultation with local governments and other stakeholders on issues most relevant to them in their efforts to deliver value for the tax dollars they spend.”
Surrey, for instance, was chosen for the audit on managing police costs because it has one of the largest RCMP detachments in the province, according to Deputy Auditor General Mark Tatchell. Some cities, like New Westminster, have their own police forces, which adds another dimension to the audits.
“We’re not just interested in looking at Surrey because of the costs. We’re looking at what systems they have in place for managing those costs,” Tatchell said. “The audit may determine Surrey has an excellent system in place.”
Tatchell noted the audit announcement wasn’t made intentionally in conjunction with the CFIB release, but noted it does focus on municipal cost containment. “These are not financial audits but we’re looking at ways to help local governments contain their costs,” Tatchell said. “If we can make recommendations and suggest best practices there is opportunity for cost savings.”
The CFIB review, which follows on a regular “municipal spending watch” report published by the CFIB, looked at municipal operating spending between 2000 and 2011, but did not include capital budgets. It adjusted the amounts for inflation, and considers appropriate municipal growth to mirror increases in population. According to the report, Surrey’s operating expenses have doubled over the past 11 years, while in West Vancouver, operating expenses have grown 12 times faster than population.
Operating costs, which include salaries and benefits and provision of municipal services, are financed largely through property taxes and user fees.
But Karen Leibovici, president of the FCM, noted that of every tax dollar collected by municipalities, only eight cents is returned, while the province receives 42 cents and the federal government 50 cents.
“The fastest growing costs for property taxpayers are in areas where other orders of government have downloaded unwanted responsibilities on to municipalities,” she said in a statement. “When other governments off-load these costs, local governments have no choice but to pick up the tab, pull police off the street, or delay vital road, bridge, and water-main repairs.”
Policing is one of the biggest drivers in operating spending for B.C. municipalities, who argue it is largely out of their control because the contracts are negotiated by senior levels of government. In Surrey — where real spending costs, adjusted for inflation, rose from $189.4 million in 2000 to $378.9 million in 2011, according to the CFIB — policing costs rose $93 million, 137 per cent, between 2000 and 2011, according to Mayor Dianne Watts.
In Burnaby, $85.4 million, or 76 per cent of the $112.4 million increase in operation spending, was for enhanced public safety services.
Municipalities acknowledge that while operating costs are going up across B.C., so are the services — particularly parks and recreation, protective services and cultural programs — that people want. They also argue the CFIB report doesn’t portray the whole financial picture because it doesn’t note that a significant portion of the cost increases relate directly to responsibilities transferred from the federal and provincial governments, or include revenue generating municipal activities that offset those operating costs.
Michael Koke, chief financial officer for West Vancouver, said his city, for instance, spent $1 million to build a bus lane along Marine Drive but was reimbursed by TransLink, which was not seen in the CFIB numbers. At the same time, Richmond argues the report also ignores the fact that many services are driven by customer demand; if YVR, for instance, wants more police officers, the city has to provide them, which increases spending.
“They’re only looking at one side of the balance sheet,” said Richmond spokesman Ted Townsend. “This is a simplistic analysis. If this was turned in as an economics paper for a university course it would get a failing grade.”
Watts argues that despite the increasing costs, Surrey’s spending is at $970 per capita, compared with a regional average of $1,400 per capita. She and city officials in Richmond and West Vancouver maintain they have kept property taxes at the rate of inflation, raising funds through other user-pay fees for non-core functions to provide services. But Burnaby Mayor Derek Corrigan said his city will raise property taxes by about 2.5 per cent this year to cover the costs, of which “the vast majority relate to water and sewer and protective services.”
“I don’t see us paying $17 million to our CEOs,” he said. “You negotiate costs with your employees and the costs go up. We’re always accepting increases. It’s got to come from somewhere and it comes from the taxpayer.”The CFIB argues cities are reaping more money through user fees — such as development fees, parking fees and business licenses — and spending too much on wage and benefits packages that aren’t in line with the private sector.
“Certainly we’re aware that cities are finding new ways to raise revenue, which contradicts some of the complaints we’re hearing at FCM,” said Mike Klassen, spokesman for the CFIB. “They’re making a high profit offsetting some taxes with increases in fees. Are they using it to level the amount of spending? It would appear not ... the challenge here is to have an open and real conversation about what the core needs are for the city.”
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