2026 DRAFT FINANCIAL PLAN - OPERATING

2026 DRAFT FINANCIAL PLAN - OPERATING

RECOMMENDATION:

THAT the report dated January 27, 2026 from the Director of Finance titled “2026 Draft Financial Plan - Operating” be received for information.

PURPOSE:

This report provides an overview of the 2026-2030 DRAFT Financial Plan (Plan), budget cost drivers, and options for property tax increase for Council consideration.

BACKGROUND:

The Community Charter requires that local governments in British Columbia approve a Five-Year Financial Plan (in bylaw format) and Tax Rates Bylaw before May 15 of each year. To produce this bylaw, the Town updates its five-year Financial Plan which includes general and sewer operations, strategic projects, general and sewer capital programs, and reserves budgeting. The authority to spend in the current year is provided under year 2 of the preceding year’s Financial Plan Bylaw.

The annual budget process, public engagement, and review are used to balance the level of operational services, implement Council's strategic initiatives, and maintain Sustainable Infrastructure Replacement Plan (SIRP) financial strategies and long-term planning. In doing this the Town strives to:

• Ensure adequate funding for services
• Continue long-term financial strategies to increase future infrastructure replacement funding levels and reserves
• Manage expenses, contain costs, be efficient
• Assess staff capacity and delivery of work plans
• Provide for contingencies, manage risks and operate prudently
• Maintain reserves for the future
• Use debt strategically

This report provides information to assist Council and setting expectations for 2026 budget deliberations, increases, and to consider direction to staff during deliberations.

DISCUSSION:

2026 Budget Development Process

To prepare the Town’s draft budget, staff aim to maintain existing levels of service, unless Council has approved a change in service. To accomplish this, staff apply cost escalation factors where necessary and integrate new regulatory requirements. In addition to this, staff integrate all budget implications from Council direction after the adoption of last year’s Financial plan.

The first draft of the financial plan forecasts an 9.11%% tax increase as outlined below:

Council may reduce the tax increase by directing that the items listed above not proceed; however, each item offers a different level of discretion for reduction or expansion. For instance, the Small Community Grant reduction is non-discretionary. Further information on select items is described below.

SIRP Funding for Capital Reserves

As recommended in the Town’s Sustainable Infrastructure Replacement Plan (SIRP), the 2026 Financial Plan includes the transfer to capital reserves of 1% of property taxes, toward the goal of closing the sustainable funding gap.

New Fire Salaries & IAFF Collective Bargaining Support

On February 3, Council authorized the hiring of two full-time and two temporary, full time fire fighters. Also contributing to the increase in salaries is a retroactive 5% lift in 2025 and 4.5% lift in 2026, plus regular staff step increases.

IAFF collective bargaining originally planned for 2027 have been moved to 2026 and may require consulting support.

Reduced Development Services Revenue

Slowing development in the Town has resulted in a lower projected level of permit related revenue. Any budgeted reduction in this revenue results in a like increase in required taxation revenue. Staff suggest that future budgeted increases in permit revenue be transferred to reserve rather than reducing taxation, so that these fluctuations from one year to the next do not result in fluctuations in required tax revenue.

RCMP Contracted Services and Police Dispatch

RCMP contract cost increased by 6.6% over 2025 ($170,200). The per capita cost at View Royal’s 70% share increased $11,500 per officer. This increase includes costs related to pay increases (3.5%) and body-worn cameras ($2,000/member not including administrative time). A 20% increase in Prisoner Guard costs is included in the contract increase as well as increased RCMP building operations costs. Any excess of police related taxation revenue over police-related expenses is transferred to the Police Operating Reserve Fund. Below is a table of Approved vs Actual RCMP Strength Per British Columbia Police Resource Statistics.

ECOMM 911 costs began in April 2025, and 2026 is the first full year. Dispatch costs are increasing by $110,200 over 2025 to $386,200.

Accumulated Surplus Funding

On April 15, 2025 Council resolved to utilize accumulated surplus in the amount of $175,000 as a source of funding the 2025 Financial Plan. This replaced taxation as a funding source for capital renewal reserve contributions. This one-time transfer creates a need to fund the same amount in 2026 from taxation in order to build a level of SIRP funding that is sustainable through taxation.

Other Cost Escalation

Given that the Town’s 2025 operating budget exceeded $20M, cost escalation of approximately $36K represents a level significantly below inflation.

The Town was also able to reduce operating budgets as a result of recent tenders such as the boulevard maintenance award. Two substantial contracts will be undergoing a competitive public process in 2026, and staff will take the opportunity to find cost-savings where possible.

Staff carried out a comprehensive review of core operating budgets to identify opportunities to reduce reliance on property taxes while maintaining levels of service. While the Town achieved good success in reducing operating budgets for 2026, this process cannot be sustained annually without resulting in incremental service cuts.

Non-Market Change (NMC) Revenue

NMC revenue represents property tax revenue generated from new tax base. Specifically, it is revenue from new properties created through development or subdivision since 2025. As a result, the number of taxable properties increases, which contributes to growth in overall tax revenue.

This revenue should be used prudently, as new development also generates new costs for the Town, many of which have not yet been realized. For example, as the Town’s population grows, the need for additional police officers and firefighters will also increase. These pressures may not be immediately apparent and often emerge only once population growth reaches a threshold that requires new hiring to maintain existing service levels. At that point, NMC revenue can be used to help offset tax increases, ensuring that new residents contribute to the cost of the additional services they require.

The NMC revenue is estimated to be $300,000 for 2026 but this figure may change as BC Assessment releases the revised assessment roll.

The breakdown between classes of the estimated NMC is:

Staff are recommending that the Town use this revenue to offset the new fire and policing costs that are proposed in the budget. This is an appropriate policy use of this revenue since new development drives the need for an increase in firefighter and police force size.

Declining Grant Revenue

The Town is being impacted negatively by declining Gaming Grant revenue and inconsistent Small Communities Protection Grant Revenue. In this Financial Plan, steps are being taken to reduce reliance on Casino funding for operations by partially funding WSPR from taxation (.5% or $65K in 2026). In 2025 and forecast for 2026 are reductions in the Small Communities Protection Grant which funds general operations. When there is a planned decline taxation funding for operations must increase. The following is a table reflecting the year-over-year actual values for both.

Budgeting during a time of increased external pressures

As Council are aware, of the several cost drivers impacting financial planning, many are not in the Town’s control. Downloaded regulations force municipalities to shoulder the cost of higher levels of service. These costs relate to Protective Services, Development Services, and Administration. While it is difficult to quantify with accuracy the cost of these changes, over time, upward pressures have been placed upon the Town’s budget.

Costs related to all Protective Services have skyrocketed since 2020. Factors include the unionization of Full-Time staff, increased compensation for paid on call members, post COVID supply chain and labour issues driving up costs of equipment and associated services. There is also a correlation between increased response and training standards established by updates to the BC Fire Safety Act, Worksafe and NFPA standards , as the minimum benchmarks for safety and service levels. View Royal Fire often provide pre-hospital care as first responders to medical calls, and is responsible for all technical, marine and collision rescues including overdoses which have increased substantially. From 2020 to 2025, calls for service increased over 100% resulting in a doubling ($1.7 million) in operating budgets during that same period. RCMP contract costs have increased over $1 million since 2020, and in 2026 the Town will be responsible for funding ECOMM 911 Dispatch at an additional cost of $386K (2025 - $276,000). Collective agreement patterns related to RCMP have also contributed to the increased costs.

Provincial housing legislation has fundamentally changed how the Town administers its Development Services, and workloads have materially increased. Implementing the legislative changes have created heavier operational demands such resulting in increased labour and consultant costs.

The Employer Health Tax (EHT) was introduced in 2019 to replace Medical Services Plan (MSP) premiums. As the municipality’s workforce grows, so does the Town’s EHT budget. In 2026 EHT will cost the Town approximately $110K. Prior to the introduction of the Employer Health Tax in 2019, average MSP-related costs were approximately $18K per year.

NEXT STEPS:

• Public engagement – TBD
• Finalization of operating budgets – March 2026
• Capital and Non-Capital Projects deliberation – March 2026
• Financial Plan and tax rates bylaw approvals (final reading by May 14, 2026)

PUBLIC PARTICIPATION GOAL:

The desired level of public participation for the recommended option is: [x] Inform [ ] Consult [ ] Involve [ ] Collaborate [ ] Empower [ ] N/A

TIME CRITICAL:

Financial Plan and Tax Rate Bylaws require final reading by May 14, 2025

CONCURRENCE: