2016 OPERATIONS ASSET LEVY and ASSET RESERVES A Presentation to the - - PowerPoint PPT Presentation

2016 OPERATIONS ASSET LEVY and ASSET RESERVES

A Presentation to the Council

• f 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?

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• 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

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

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Asset Levy: Budget Must Balance

$7.4M FOR Asset Maintenance CAPITAL SPENDING Asset Maintenance $7.4

TAX LEVY $48.2M

For Operations

NON TAX REVENUES $28.6M Operational EXPENSES $80.2M

General Fund

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Asset Levy: Budget must balance, but not at the expense of the assets

TAX LEVY $48.2M

For Operations

2% NON TAX REVENUES $28.9M 1% Operational EXPENSES $79.3M 3%

General Fund

Step 1: Increase as much as possible Step 2: Decrease as much as possible Step 3: Tax Levy Makes Up the Difference

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Asset Levy: Budget must balance, but not at the expense of the assets

$7.4M for Asset Maintenance CAPITAL SPENDING Asset Maintenance $13.5

TAX LEVY $49.4M

For Operations

2% inc NON TAX REVENUES $28.9M 1% inc Operational EXPENSES $79.3M 3% inc

General Fund

ASSET LEVY: Additional $6.1M for Asset Maintenance

ASSET RESERVES

2016 Preliminary Operational Budget: Tax % Impacts

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Prudent Operational Expenditure The Finance Committee recommends that a proposed 2016 operating budget increase of 1.62% be approved.

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

• f 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.

• 41 athletic fields (3

artificial turf fields, 27 grass fields, 11 gravel all- weather fields)

• 15 baseball backstops (4

premium)

• 6 sets of bleachers
• 7,500 metres of chain

link fencing

• 33 tennis courts
• 7 other outdoor courts
• 2 skate parks
• 430 benches
• 14 off-leash dog areas
• 4 gardens
• 64 community garden

plots

• 46 playground structures

in 24 areas

• 36 parking lots
• 150,000 metres of trails
• 13 information kiosks
• 37 interpretive signs
• 1 seawalk
• 46 waterfront access

points

• 12 swimming beach

parks

• 5 piers and 1 lake float

Land Improvement Assets: Quantity & Types

DW V Capital Assets – Replacem ent Values

Capital Asset Category Historical Cost ( 2014 Financials) Accum ulated Am ortization Net Book Value Replacem ent Cost ( tw enty-years @ 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

This does not include inflation or saving for the construction of a new pool one day. Tw enty- years ( 2 0 1 6 - 2 0 3 5 ) Capex $

Capex

• Building Capital

Maintenance

• Other Assets

(IT, M&E) required replacement $14,691,209 2,298,750 Total Capex $ 1 6 ,9 8 9 ,9 5 9

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.

Statem ent of Operations Per Year

Revenues Less Expenses

• Program Labour & Materials
• Facilities Labour & Operations

$ 3,599,193 3,123,678 664,700

Operating Surplus ( Deficit) before Capex

( 1 8 9 ,1 8 5 )

Capex, avg. per year

• Building Capital Maintenance
• Other Assets

734,560 114,938

Capex required, avg. per year

849,498

Total Tax funding required per year

$ 1 ,0 3 8 ,6 8 3

*Per the District’s 2014 operations

West Vancouver Aquatic Centre

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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 .

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Long Term Financial Planning Asset Management

This chart shows 2015 replacement value, which does not include any assumptions for inflation, foreign exchange rate,

• r any new building construction. Estimates for capital maintenance of the new public safety building is included post

2018.

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
• f 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)

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How Asset Management Reserves Work

Internal Funding Sources Asset Levy (Identified portion of annual tax levy) $$$$$$ $$$$$$ C AssetLevy (Identified portion of annual tax levy) Surplus (Determined at year end) DWV Funding $9.1M Facilities Reserve Infrastructure Reserve Equipment Reserve Facilities Projects per Council Resolution Infrastructure Projects per Council Resolution Equipment Projects per Council Resolution Projects completed by December 2017 Additional Funding Sources: Grants DCC's Project Donations CAC's Projects Not Completed by December 2017 Current Capital Contribiution $7.3M

Annual Project Budget February 2016

$2.6M Operating Reserve $4.6 Operating Projects per Council Resolution $850,000 $2.0M $4.6M $2.5M

What Difference Does the Asset Levy % Make?

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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.

Property Tax Levy in 2016

1% property tax rate increase = $585,000

• f 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

2016 Home Owner Grant Changes

The threshold for the grant is $1,200,000. Above this value, the grant is reduced by $5.00 for each $1,000 increase in assessed value Phase out amounts: Regular Grant ($ 570) Phased out at $1,314,000 Additional Grant ($ 845) Phased out at $1,369,000 In 2016, 393 properties that received some amount of Homeowner Grant will no longer qualify for any grant 43 properties that received the full grant in 2015 will not receive any grant in 2016; 27 of these were getting the Regular Grant ($570), and 16 were receiving the Additional Grant ($845) Resident owners aged 65 or older, and resident owners supporting children under 18, have the option to defer some or all of their taxes.

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2016 Budget Process

October/November 2015

• Divisional work plans
• Divisional operating and capital budgets

Mid-December 2015

• Preliminary Finance Committee Review
• Preliminary Council Review

January 2016

• Additional Council Review
• Public consultation (Minimum 3 meetings; plus web survey)

February 2016

• Final Review by Council (Consideration of Tax Rate and

Asset Levy)

• Asset Management Reserve Bylaws

March 2016

• 2016 – 2020 Financial Plan Bylaw
• 2016 Capital Project Resolutions

April 2016

• 2016 Tax Rate Bylaw

2016 Budget Process Council is Asked to Determine

OPERATIONS 1. Operational Tax Increase (if any) : Staff recommends 2.09% ASSET LEVY 1. Asset Levy: Whether to establish 2. If Asset Levy Established: Whether in 1 year, 4 years, 7 years, or 10 years 3. If Asset Levy Established: Whether to apply to Residential only, or to Business and Residential equally 4. If Asset Levy Established: Establish Asset Reserves Staff recommends establishment of a levy, in 1 year, applied to Residential & Business equally