Think tank criticizes Richmond's surplus

Richmond was cited as the fourth worst offender by the business-focused think tank, the C.D. Howe Institute, for routinely missing spending targets, but city staff say they don’t agree with the assessment, calling it “simplistic.”

The C.D. Howe Institute study said municipalities prepare their budgets in a different way from how they report their end-of-year financial statements, and they claim Richmond’s budget was off by about 16 per cent in the past nine years. Each time the city budgeted more than it spent.

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City spokesperson Ted Townsend said Richmond’s budgeting process is “responsible and prudent,” and complies with provincial legislation and follows generally accepted accounting practises. 

The report, “Wild Numbers: Getting Better Fiscal Accountability in Canada’s Municipalities,” written by William Robson and Farah Omran, compared annual spending projections of the 31 largest cities in Canada to their end-of-year financial results over the past nine years. 

Because the city can’t run a deficit, they take a conservative approach in their budget forecasting to make sure they don’t end up in a deficit, he added.

But Donald Flintoff with the Richmond Taxpayers Alliance said there is always a “carry-over” resulting in a surplus. The city’s operating surplus at the end of 2017 was about $22 million, according to city staff.

“Does the city budget more than it needs? All you have to do is look at the surplus,” Flintoff said. 

“They should be told how much money they get, then they go away and do their budget,” he added, saying that he doesn’t think council necessarily takes a “taxpayer’s perspective” on budgeting. 

Flintoff, whose group meets to look at the city’s finances “item by item,” also doesn’t like all the levies that are being collected, for example, the sewer metering levy that Douglas Symons recently approached council about. 

“There’s things that are being collected that you have to scratch your head about,” Flintoff said.

The Community Charter, which determines how municipalities are run and how they must run their finances, specifies that a municipality cannot make “an expenditure other than one authorized” so the city of Richmond must budget for all anticipated expenses, even though some of them might not occur, for example, snow and ice removal and policing costs, explained Townsend.

“So, for example, variations between budget and actual spending regularly happen due to staff vacancies that occur through the year, most notably within the RCMP,” Townsend explained in an email. “We need to provide the ability to fund a full complement of RCMP officers, but the reality is we routinely have a large number of vacancies at any given time and we are reliant upon the RCMP’s ability to fill those vacancies,” he added.

Townsend noted the city has transitioned in recent years to be fully compliant with the new Public Sector Accounting Board, which might have contributed to the city’s high ranking on the report. 

The think tank’s observation on the city’s capital budget is correct, he added as the authors of the report note municipalities expense capital projects over time but they appear as a surplus until the project is done.

“Funding may be allocated in a single capital budget year, but spending often takes place over a number of years as the project proceeds to completion, which may cause anomalies between the budget and actual spending on a year-to-year basis,” Townsend explained.

Richmond ranks high in financial management, Townsend said, and has one of the lowest property taxes in the region.

“We have a solid financial asset base and low debt ratio when compared to our peers,” he said.

The city of Richmond has a surplus of $2.9 billion, which includes $2.2 billion of investments in capital assets, according to Townsend. The rest is made up of both committed and uncommitted reserves, which are restricted and can only be used for capital expenditures.  The cash and investments held are mainly due to the reserves and liabilities, for example, development cost charges (DCCs), most of which have restrictions on how they can be spent, Townsend said. 


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