While the city’s financial statement for 2024 listed an annual surplus of around $42.5 million and an accumulated surplus of around $940.7 million, that doesn’t mean Prince George has that much cash lying around.
The statement was released at the Standing Committee on Finance and Audit’s May 7 meeting and said that the actual surplus in 2024 was more than double than the $19,446,000 projected in that year’s budget.
The Citizen sat down with the city’s director of finance and IT services, Kris Dalio, on Thursday, May 29 to go over those surplus figures in greater depth.
Every municipality in Canada, he explained, is held to the Canadian Public Sector Accounting Standards.
Under those standards, what municipalities like Prince George report as their surplus is more complex than the amount of cash they have on hand.
“Our surplus also consists of any reserve funds that we will have held aside for future infrastructure investment,” Dalio said. “The vast majority of it is what’s called investment in tangible capital assets. When I say it’s not cash, I literally mean that we can’t just reach out and grab it.
“I can’t rip up a road and sell it to somebody on the road market, right? It’s just not there. It’s a big representation of the assets that we have that deliver the services that the public wants.”
Those tangible capital assets include items like buildings, pieces of infrastructure like water and sewer pipes and vehicle fleets.
Purchases of those assets are not included in the surplus total under the public sector accounting standards, nor are debt payments, deferred revenue. However, amortization — spreading out the cost of an asset over time — is included.
When it comes to the $940.7 million accumulated surplus figure in the statement, Dalio likened it to the replacement value of all the city’s assets put together.
Under British Columbia law, municipalities are required to run balanced budgets. For each dollar spent, there must be an equivalent amount of money coming in.
Dalio said the city has cash on hand to manage any unexpected operating expenses, maintain cash flow and remain solvent, but the amount of money on hand depends on the time of year.
Larger cash injections come in July, when property taxes are due and in the spring and fall when utilities are due.
Contributions are made to various city reserves and those are reflected in the surplus, but they represent money put aside for future projects.
So, the annual and accumulated surpluses represent more than just cash on hand and don’t necessarily mean the city can apply that dollar value to paying for projects or lowing property taxes.
At the Monday, May 26 city council meeting, final readings of borrowing bylaws for three loans worth a collective $11.369 million. Before these loans could be finalized, they had to be approved by the public.
When local governments in BC want to borrow money over a period of greater than five years, they must either go through a referendum or an alternative approval process.
Running a referendum, Dalio said, is like running an election. In a year where a municipal election is scheduled, he said the city’s legislative services staff must basically put aside all their other work.
“It’s not just the cost,” Dalio said. “You’re preventing that division from being able to accomplish anything else, so that’s why we tend to steer away from referendums.”
There have been two referendums in the last decade, both held in 2017. That year, voters approved $50 million in spending for the new Fire Hall No. 1 and the Canfor Leisure Pool.
“If we’re going to spend a lot of money on something really important or even just replacing a building of great importance, that is a good time to re-look at the service level and say ‘oh, is this still what the community wants,’ then I think the referendum is a really good process to include the public on.”
In the alternative approval process, voters have to submit forms expressing their disapproval with a project. If 10 per cent or more of eligible voters do so, the local government must hold a referendum before borrowing the money.
When it comes to the alternative approval process, Dalio said he’s in favour of it regardless of the dollar figure when the project will maintain an existing service level. Though for both alternative approvals and referendums, the decision of which one to proceed with is up to council.
When the city has to borrow funds for a project, it usually does so through the Municipal Finance Authority of BC, a non-profit that harnesses the collective borrowing power of BC’s local governments to allow its members to borrow at lower rates than they could on their own.
Dalio said that while he could suggest the city borrow from another institution, it’s unlikely better rates could be found elsewhere.
The other upside is that because the MFA is a non-profit, it invests the payments it receives from its members. That also takes some investment work off the hands of city staff.
“If they make money on the investments, then it changes,” Dalio said. “Sometimes I get some debt forgiveness at the end of the loans.”
When a city loan is approved, Dalio said the city doesn’t usually borrow the money until the project is complete unless funds are needed for cash flow purposes. In the meantime, projects are internally funded through reserves and surplus amount and the city tries to plan to make sure enough money is on hand at the right time.
For instance, he said borrowing had yet to start for the $37 million worth of loans approved to pay for work on the Aquatic Centre through the alternative approval process last year.
Dalio cited two projects where money had to be borrowed along the way: the construction of the Canfor Leisure Pool and the current RCMP building on Victoria Avenue, which both exceeded $30 million in spending.
For those, he said he used what are called temporary borrowing bylaws, which are eventually rolled into the loan authorization bylaw into a single debenture at the end of the process.
When it comes to determining the length of a loan, Dalio said you don’t want it to go on longer than the expected lifespan of the item being financed.
For infrastructure pieces like buildings and pipes, borrowing is typically done over 20 years. A fire truck is usually spread over 15 years.
“But things like floor scrubbers or fire hoses, things like that, they might have shorter life spans,” he said. “A garbage truck only has a lifespan of about seven years, so you would have different terms of debt for different pieces of equipment.”
The Citizen asked about borrowing for something like the Civic Core Plan, which is likely to feature large capital projects downtown like a replacement for Kopar Memorial Arena.
Dalio said that in cases like those, longer terms allow for the tax impact of the loan to be spread out rather than having to spike them in the short term.
“Let say a project’s $100 million,” he said. “If you borrowed over 10 years, well then I need to make payments of over $10 million a year, including interest. Well now I have to spike the (property tax) levy a ton to allow for that, right? I’m going to need an eight to nine per cent tax increase just for that one piece of debt.”
If that hypothetical $100 million was spread out over 30 years, there would be about $3.5 million in payments and corresponding tax increases of around 2.5 per cent.
It’s the time of year where Prince George residents will be getting their property tax notices. While all of a property owner’s taxes are paid to the city, Dalio said only about 70 per cent goes to Prince George while the rest is collected and distributed to the Regional District of Fraser-Fort George, the Fraser-Fort George Regional Hospital District and BC Assessment.
“I sometimes think that the shock of it, maybe why people have such a hard time paying our bill compared to, let’s say income tax, is that income tax comes off your paycheque … however often you get paid, but with property tax we kind of do it in one shot in the middle of the year,” Dalio said.
He argued that for what residents pay, they get a lot of great services like snow plowing, public parks, public pools, public arenas, water supply and more. If residents had to secure these services on their own, Dalio said they’d probably have to pay a lot more.
While the city controls the mill rate at which property taxes are charged, it doesn’t have control over the value at which property is assessed.
“So if you have a five per cent tax increase but your assessed value went up 20 per cent and the average is only three per cent, you’re going to actually end up paying a lot more than the five per cent that the city said you were going to pay … and the contrary is true as well,” Dalio said.
“If your house value decreased and everyone else’s went up, you’re not going to end up paying five per cent tax more, you’re going to pay something less than that.”
For residents who are interested in learning more about how the city spends the money it collects, Dalio recommends looking at the financial statement or even the annual Statement of Financial Information that will be published in June going over how much members of city council were compensated, a list of municipal employees make more than $75,000 per year, grants awarded to non-profits and the total amount paid to supplies in excess of $25,000.
