2025 DRAFT FINANCIAL PLAN OVERVIEW AND DRIVERS

2025 DRAFT FINANCIAL PLAN OVERVIEW AND DRIVERS

RECOMMENDATION:

THAT the report dated March 13, 2025 from the Director of Finance titled “2025 Draft Financial Plan Overview and Drivers” and attached 2025-2029 DRAFT Financial Plan Schedules be received for information.

PURPOSE:

This report provides an overview of the 2025-2029 DRAFT Financial Plan (Plan), budget cost drivers, the 2025-2029 DRAFT Financial Plan Schedules.

BACKGROUND:

The Community Charter requires that local governments in British Columbia approve a Five-Year Financial Plan (in bylaw format) and Tax Rates Bylaw on or before May 15 of each year. To produce this bylaw, the Town updates its Five-Year Financial Plan which includes general and sewer operations, general and sewer capital programs, and reserves budgeting.

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, and
• Use debt strategically

This report provides information to assist Council and setting expectations for 2025 budget deliberations, increases, and to consider direction to staff during deliberations.

2025 Budget Highlights:

The Plan provides status quo funding for the continuation of services expected by the community from the 2024 Financial Plan, in addition to the following changes,

• Fire Department implementation of new IAFF Collective Agreement, first full year of three new career Firefighter positions, and addition of a second Assistant Chief position Feb 1st
• Increase Information Technology Coordination/Manager position from 0.6 FTE to 1.0 full-time position
• Status quo service levels for RCMP members and municipal staffing, plus transition of E-Comm dispatch services to the Town
• Sustainable Infrastructure Replacement Plan (SIRP) financial strategies of 1.0% property tax increase, non-market change assessment revenue contribution, increase in Casino Reserve funding, and sewer fee increase of 5.0%
• Building Permit related revenue five-year average trend decrease due to declining activity
• Increase in investment portfolio returns five-year trend due to favourable returns and forecasts for Municipal Finance Authority pooled fund investments

DISCUSSION:

Wage and Benefits Increases

The most significant operations cost drivers for the annual budget are labour related costs. Wages and benefits represent approximately 65-70% of the Towns general operations (including Policing). The only collective agreement with the Town is for the Fire Department IAFF which expires December 31, 2025. Unknown wage rate increases does create budgeting risks. IAFF contract increase estimates, and other employee groups, have been forecast that reflect knowledge/judgement of current market conditions, and Town past practices.

New service level increases for 2025 wages and benefits include:

• Fire Department Assist Chief – Feb 1st hire, tax funded
• Increase Information Technology Coordinator position from 0.6 to 1.0 FTE, tax funded
• Community Planner, phased in tax funding over three years, with use of Growing Communities Fund grant. No 2025 tax impact

2025 tax impact from prior year positions implemented:

• First full year budget for three Career Firefighters hired mid-2024
• First full year budget for 0.5 FTE Communications Coordinator

Contracted Services

RCMP Police Services Cost

The Police budget represents core policing costs of labor, contracted costs for E-Comm dispatch (new for 2025), integrated units and supplies. Approximately 18% of the Town’s general operating budget is for RCMP Policing. The 2025 budget for RCMP contracted services and support staff is approximately $3.2 million or a 5.6% budget increase over 2024. In addition, the Town is now responsible for EComm dispatch costs starting in 2025 with a budget of $276,600.

Westshore Parks and Recreation and Greater Victoria Public Library

As presented to Committee of the whole January 14, 2025, the 2025 Westshore Parks and Recreation requisition to the Town is $790,789, an increase of $22,144 or 2.88% over 2024,and a Greater Victoria Public Library requisition of $688,064, or an increase of $27,878 or 4.30% over 2024.

Non-Core Projects (non-recurring strategic projects and new employee positions identified)

The Town has an ambitious program of strategic projects for a small municipality and limited staff capacity. For 2025 the Draft Plan will see over 20 projects identified for over $1.2 million. The five-year Draft Plan includes 39 projects totaling over $3.5 million funded from a variety of different sources. Project Summaries will be provided to Council for budget deliberations.

Sustainable Infrastructure Replacement Plan (SIRP) Financial Strategies

A Sustainable Infrastructure Replacement Plan was introduced to Council in early 2024. The Plan’s focus is on the Town’s core responsibility of maintaining it’s existing assets through sustainable levels of annual funding and reserves balances. Highlights of the Plans finding are as follows,

• Current levels of annual funding are too low at 41.3% of targeted funding ($2.0 vs. $4.9 million)
• Current levels of reserves are too low at only 4.7% of a sustainable target or asset utilization ($6.5 vs. $138.7 million)

The Plans annual funding recommendations to get to targeted levels over time are as follows,

• Dedicate $500,000 of Casino funding toward annual replacement reserves funding
• Increase property taxes by 1.0% for 12 years for general renewal reserves
• Convert debt servicing budgets to replacement reserves when debt is retired
• Utilize non-market change assessment revenue to increase replacement reserves funding until the annual targeted funding is reached
• Increase sewer utility revenue by 5.0% a year for 5 years

The above was incorporated into the 2024 and future budgets, with the exception of Casino funding which is being phased in at $100,000 increase a year over 5 years.

One of the key success factors to asset replacement funding increases is Council’s commitment to the Plan while other financial pressures exist. Deferring increases pushes the costs of capital services to future generations and higher levels of debt and interest costs in the future.

The Plan and financial strategies do not include new or upgraded infrastructure of the Town. Significant new or upgraded infrastructure should be funded with grants or debt. If or when new asset programs become a priority for the Town (eg. active transportation) it’s recommended a new property tax financial strategy be implemented over time to fund so as not to deplete replacement reserves. A specific new/upgrade asset levy could be used to fund new assets directly or service-related debt.

To keep the Plan up to date, it should be updated every five years to account for increasing infrastructure levels, escalation of replacement costs and annual targeted funding levels.

2025 Draft Financial Plan increase

As is the case each year, the budget will be developed with an approach of balancing services being delivered, saving for the future, and overall impacts on taxation.

As the Town does not have a consistent tax rate setting practice, the benchmark average home tax increase is an estimate which will change depending on 2025 tax rate setting decisions and change in the BC Assessment revised roll and final Non-Market Change (NMC) assessment (April 1st). Estimated based on 2024 tax rate multipliers and estimated NMC, the draft average home tax increase is 10.19% or $225, including approximately $45 for new assessment revenue dedicated to future asset replacement.

There are a number of escalating economic and political risks that may impact the Town in the future, along with significant construction and contracted costs that are escalating at rates much higher than property taxes and CPI.

2025 DRAFT Property Tax Increase Summary

Below is a summary of the primary 2025 draft budget property tax revenue drivers,

Non-market change (NMC or new construction) in property assessment forecast from the January 1st BC Assessment completed roll (with contingency) contributes approximately $285,000 to the SIRP Plan and saving for future infrastructure replacements. The final budgeted NMC revenue for tax rates calculation is determined from the April 1st revised roll and will be updated in the final budget. New NMC revenue for 2025 is significant but is expected to decrease in future years as new construction slows in the Town.

During the budget preparation process staff worked to refine both revenues and expenses to deliver the services expected while keeping property tax increases reasonable. This is reflected in the Draft Plan Schedules presented. Should Council direct the draft tax increase be reduced, staff can bring back reduction scenario options and recommendations for Council’s consideration.

Property Tax Rate and Multiple Setting

Primary property taxation principals include predictability, consistency and fairness. Fair treatment between different property classes with use of multiples and consistent application from year to year so taxpayers know what to expect. Property class multiples represent how Council believes different property classes, example residential vs. business, have different utilization and consumption of municipal services. Unfortunately, there no Provincial guidelines or considered best practices for multiple or tax rate setting, due to differences of municipal property inventories and Council taxation philosophy.

Staff recommend Council determine a consistent practice of setting tax rates. Common methods below are recommended for consideration to maintain a consistent practice going forward. Tax rate setting options,

1. Consistent tax increase to representative property across property classes
2. Maintain consistent tax multiples based on utilization of services
3. Determine tax rate multiples by property class, and a transition plan to get there if different than 2024 multiples

Best practice is to have consistent rate or multiple setting through an identified practice or tax policy that is consistently applied. It’s also recommended that the practice or policy be reviewed with Council in the first year of an election term for information and any change in direction.

2025 Financial Plan format and presentation

Although review of the budget each year is for council to approve the entire budget and existing services, staff presentations will be focused on the property tax revenue increase and departmental increases for 2025 including,

• New staff positions and additions
• RCMP costs and EComm,
• Fire Department
• Increases to reserve contributions for future asset replacement

In addition, project summaries for strategic projects and new staffing requests (non-core) and capital will be provided to Council for information. Staff will be available if there are questions on specific projects during deliberations.

The 2025 budget presentation and deliberations are expected to be a compressed schedule later in the budget cycle than usual. The DRAFT 2025-2029 Financial Plan will be published by March 20th for public review and engagement. Public engagement feedback and comments are expected be provided to Council at the start of budget deliberations.

NEXT STEPS:

• Budget presentation and deliberations
• Financial Plan and tax rates bylaw approvals (final reading by May 14th)

PUBLIC PARTICIPATION GOAL:

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

TIME CRITICAL:

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

Appendix A: 2025-2029 DRAFT Financial Plan Schedules