THE CORPORATION OF THE CITY OF NELSON

REQUEST FOR COUNCIL DECISION

DATE: May 1, 2017 Regular
TOPIC: Five Year Financial Plan 2017 - 2021
PROPOSAL: Financial Plan Bylaw No. 3371, 2016 for first three readings
PROPOSED BY: Staff

ANALYSIS SUMMARY:
The Five Year Financial Plan Bylaw No. 3371, 2017 for the period 2017-2021 is being
presented for councils consideration. The plan includes the revenues and expenditures
planned for 20172021 that have been presented to both Council and the public. All
proposed expenditures, funding sources and transfers to or between funds must be
included in the plan. Both the operating budget and the capital budget information are
attached in Schedule A of the bylaw. The Five Year Financial Plan Bylaw No. 3371, 2017
is being presented for first three readings.

BACKGROUND:
The 2017-2021 Financial Plan process included Council and Staff having a variety of
internal, external and public meetings over the past six months to review current financial
performance, budgetary pressures and forecasted departmental budgets.

The Budget Open House was held at the new Nelson Chamber of Commerce board room
in Railtown on February 27, 2017 with an attendance of 32 Citizens plus another 13 in
Staff and Elected officials. The Open House was comprised of a meet and greet session
an hour before the 7pm formal interactive evening presentation of the draft financial plan,
ending with a question and answer period and more mingling with Council, Staff, and
attendees.
As in previous years any written submissions received at the Budget Open House, other
presentations or just from walk-ins at City Hall have been compiled and are included as
attachments to this document. Like 2016, there was only 1 comment sheet filled out this
year.
At the Budget Open House the proposed tax increase was 4.85% but there was also a
caveat at the meeting that the tax increase number was awaiting the outcome of City
negotiations with the RDCK Recreation Commission. The member of Council who sit on
the RDCK Rec Commission were working with our Area E & F partners on lowering the
Nelson and District Community Complex (NDCC) tax requisition as well as looking for
support to help fund capital upgrades at the Civic Centre Arena for 2017 from this
recreational partnership service. The Rec Commission was successful in decreasing the
tax requisition for the NDCC for 2017, however, no agreement was made on the Rec
Commission assisting in the funding of upgrades to the Civic Centre.

As Staff worked through the effect of the decrease in the tax requisition from the RDCK
and noted the now underfunding of necessary capital upgrades to the Civic it became
apparent that a plan to assist in the long-term funding of City buildings could be
undertaken this year with minimal effect to taxpayers. As can be seen from the attached
2017 Tax scenario options document presented to Council the overall tax increase
amounts to 2.25% from 2016 to an owner of an average single family dwelling from a
Municipal tax increase of 6.35%. The effect of the same Municipal tax increase on
commercial buildings actually results in a .5% decrease in overall taxes when compared to
2016.

After reviewing all the updated budget documentation at the April 19, 2017 budget meeting
Council increased the original 4.85% tax increase to 6.35%. This decision was not made
lightly and only came on the condition that the $120,000 (1.5%) in new tax income is to be
allocated to the building reserve fund to assist in the ongoing challenges of required
capital improvements and upgrades to City owned buildings.

The financial plan includes a 6.35% increase in property taxes for 2017 plus rate
increases for water, sewer and Nelson Hydro which have been previously approved by
Council. The attached 2017 Budget impact overview on average single family dwelling in
Nelson shows the effect of these changes.

Tax Rates:
There was a 7.65% increase in the residential assessment values for 2017, in addition, the
commercial assessments went up this year by 3.25% as compared to 2016. In keeping
with Councils objective to maintain the same tax rate ratios as previous years staff were
directed to prepare the 2017 2021 financial plan and 2017 Tax rate bylaw using the fixed
share approach (keeping the share of the tax levy collected from each property class
constant except where changes are due to non-market changes such as growth). The
result is the same 73% and 25.4% residential and commercial ratio of the total Municipal
tax burden. The required adjustment to the tax multiplier was different this year as
compared to the previous few years as this time the residential assessed values were
significantly higher than in the commercial sector.

LEGISLATIVE IMPACTS, PRECEDENTS, POLICIES:

Under S. 165 of the Community Charter, Council must have a financial plan that is
adopted annually, by bylaw, before the annual property tax bylaw is adopted. All proposed
expenditures, funding sources and transfers to or between funds must be included in the
plan. Legislation implemented in 2008 requires Council to make explicit statements about
each of the following:
The proportions of revenue proposed to come from various funding sources;
The distribution of property taxes among property classes; and
The use of permissive tax exemptions.

COSTS AND BUDGET IMPACT - REVENUE GENERATION:

This document is the Five Year Financial Plan and includes the estimated revenues and
planned expenditures for all functions of the City.

COMMUNICATION:
The proposed financial plan was presented to the public at an open house held on
February 27, 2017. The 2017 budget presentation is also posted on the Citys website.

OPTIONS AND ALTERNATIVES:

1. Proceed with 1st, 2nd and 3rd reading of the Financial Plan Bylaw
2. Make additions or deletions to the Five Year Financial Plan Bylaw
3. Refer the matter back to staff for further review and recommendations
ATTACHMENTS:
Financial Plan Bylaw No. 3371, 2017
Schedule A 2017-2021 Five Year Financial Plan
Schedule B 2017-2021 Five Year Financial Plan
2017 Tax Scenarios
2017 Budget impact overview on average SFD in Nelson
Comment Sheet from February 27, 2017 Open House meeting

RECOMMENDATIONS:
The Council passes the following resolutions:

1. That the Financial Plan Bylaw No. 3371, 2017 be introduced and read a first time and
read a second time by title only.
2. That the Financial Plan Bylaw No. 3371, 2017 be read a third time.

AUTHOR: REVIEWED BY:

___________________________ __________________________
CHIEF FINANCIAL OFFICER CITY MANAGER
 THE CORPORATION OF THE CITY OF NELSON

BYLAW NO. 3371

BEING A BYLAW TO ADOPT

A FIVE-YEAR FINANCIAL PLAN FOR THE YEARS 2017-2021
__________________________________________________________________________

WHEREAS Section 165 of the Community Charter requires Municipal Councils

to annually prepare and adopt, by bylaw, a five-year financial plan;

AND WHEREAS the Council of the Corporation of the City of Nelson has
reviewed, prepared and solicited public input on the attached five-year financial plan;

NOW THEREFORE the Council of The Corporation of the City of Nelson in

open meeting assembled enacts as follows:

1. Schedule A attached to and forming part of this bylaw is hereby adopted as the
Financial Plan for the City of Nelson for the five-year period starting January 1, 2017.

2. Schedule B attached to and forming part of this bylaw is hereby adopted as the
Revenue Policy Disclosure Requirement for the five-year period starting
January 1, 2017.

3. This bylaw may be cited as The Corporation of the City of Nelson Five Year Financial
Plan (2017-2021) Bylaw No. 3371, 2017.

READ A FIRST TIME the day of , 2017

READ A SECOND TIME the day of , 2017
READ A THIRD TIME the day of , 2017

FINALLY PASSED AND ADOPTED the day of , 2017

_______
Mayor

_______
Corporate Officer
 2017-2021 FIVE YEAR FINANCIAL PLAN
SCHEDULE A

REVENUES 2017 2018 2019 2020 2021

Property Taxation: Operations & Debt 10,154,323 10,323,559 10,496,179 10,672,251 10,851,845

Sale of services 3,516,764 3,640,435 3,362,583 3,311,986 3,322,648

Other revenue own sources 3,988,286 3,804,777 3,781,652 3,787,823 3,239,119
Investment income 423,400 456,600 459,000 501,500 505,700
Grants - unconditional 783,865 783,865 783,865 783,865 783,865
Grants - conditional 5,977,488 1,905,093 1,713,630 4,596,353 5,606,847
Collections for Other Agencies 13,499,584 13,634,580 13,770,926 13,908,635 14,047,721
Total General 38,343,710 34,548,909 34,367,835 37,562,413 38,357,744

Water: User Fees 3,466,651 3,540,984 3,639,393 3,747,225 3,827,170

Sewer User Fees 2,982,626 3,031,690 3,101,025 3,177,847 3,229,839
Transit User Fees 242,279 244,702 247,149 249,620 252,116
Nelson Hydro: Sales 17,150,555 17,750,824 18,372,103 19,015,127 19,680,656
Total Consolidated Revenues 62,185,821 59,117,109 59,727,505 63,752,232 65,347,526
 2017-2021 FIVE YEAR FINANCIAL PLAN
SCHEDULE A

EXPENSES 2017 2018 2019 2020 2021

General Government 3,544,465 3,538,542 3,593,005 3,602,838 3,632,369

Protective Services 6,228,960 6,370,884 6,483,078 6,606,585 6,722,710
Transportation Services 3,723,098 3,601,495 3,627,034 3,677,872 3,723,696
Environmental health services 272,070 276,953 281,923 286,983 292,134
Public health and welfare 189,923 193,394 196,929 200,529 204,194
Recreation and cultural services 2,926,126 2,965,496 2,994,596 3,026,823 3,056,048
Interest and other debt charges 899,113 898,602 898,046 943,441 714,782
Payments to Other Agencies 13,499,584 13,634,580 13,770,926 13,908,635 14,047,721
Total General Operations 31,283,339 31,479,946 31,845,537 32,253,706 32,393,654

Nelson Hydro Operations 11,681,227 11,718,437 12,097,390 12,489,322 12,894,689

Water Operations 1,317,332 1,340,385 1,373,895 1,408,242 1,443,448
Sewer Operations 1,813,399 1,845,134 1,891,262 1,938,544 1,987,007
Transit Operations 1,569,945 1,596,071 1,625,992 1,656,476 1,687,535
Total Operations 47,665,242 47,979,973 48,834,076 49,746,290 50,406,333

Amortization 5,253,868 5,306,407 5,359,471 5,413,066 5,467,197

Surplus (deficit) 9,266,711 5,830,729 5,533,958 8,592,876 9,473,996

Add back:
Amortization 5,253,868 5,306,407 5,359,471 5,413,066 5,467,197

Principal payments on Municipal Debt 896,851 897,362 897,918 1,026,235 677,072

Capital Expenditures
General 8,692,742 4,426,250 4,403,100 4,137,600 5,787,100
Nelson Hydro 3,010,524 2,469,664 3,030,450 2,103,273 2,187,467
Water 3,635,000 1,810,500 2,174,436 5,942,765 5,520,404
Sewer 2,570,000 816,000 936,360 848,966 974,189
Total Capital Expenditures 17,908,266 9,522,414 10,544,346 13,032,604 14,469,160

Proceeds from Borrowing 561,000 - - 1,533,333 500,000

Transfer to / from Reserves

Transfer to General Reserves 2,763,266 2,696,431 2,709,860 2,723,557 2,737,528
Transfer to Utility Reserves 193,400 1,137,348 622,028 2,252,206 1,496,487
Transfer from General Reserves (4,144,151) (3,229,500) (3,761,100) (3,777,850) (3,668,350)
Transfer from Utility Reserves (2,251,372) - (250,794) - (307,871)
Total Transfer to (from) Reserves (3,438,857) 604,279 (680,006) 1,197,913 257,794

Transfers to (from) operating surplus (284,681) 113,081 131,171 282,523 37,167

Financial Plan Balance - - - - -

 2017-2021 FIVE YEAR FINANCIAL PLAN
SCHEDULE A

CAPITAL FUNDS

COMPONENTS 2017 2018 2019 2020 2021

Sources of Funds
Parcel tax & General Operating 60,000 60,000 60,000 60,000 60,000
Community Works Grant 299,500 389,000 261,000 400,000 400,000
Water Operating fund 2,208,375 1,810,500 2,174,436 1,476,099 2,279,200
Sewer Operating fund 1,180,584 866,000 986,360 898,966 1,024,189
Nelson Hydro Operating fund 2,293,194 2,469,664 2,779,656 2,103,273 2,187,467
Utility Reserves 2,251,372 - 250,794 - 307,871
Other Reserves 4,084,151 3,169,500 3,701,100 3,717,850 3,608,350
Allocation from Surplus 513,530 335,000 270,000 109,750 368,750
Borrowing 561,000 - - 1,533,333 500,000
Other revenue/donations 260,730 349,000 61,000 - -
Government Grants 4,195,830 73,750 - 2,733,333 3,733,333
Total Sources 17,908,266 9,522,414 10,544,346 13,032,604 14,469,160

Expenditures
General 8,692,742 4,426,250 4,403,100 4,137,600 5,787,100
Nelson Hydro 3,010,524 2,469,664 3,030,450 2,103,273 2,187,467
Water 3,635,000 1,810,500 2,174,436 5,942,765 5,520,404
Sewer 2,570,000 816,000 936,360 848,966 974,189
Total Expenditures 17,908,266 9,522,414 10,544,346 13,032,604 14,469,160
 Schedule B - 2017-2021
Five Year Financial Plan
REVENUE POLICY:
The revenue policy will provide direction on how Council chooses to fund the
expenditures of the City, distribute property taxes among the property taxes, and use
permissive tax exemptions.

1. REVENUE SOURCES
a. Property Taxes
The existing proportionate share has been established through years
of public process and the City will strive to keep the proportions at a
similar ratio to past years.
The City will encourage the use of alternate revenue sources in
conjunction with property taxes.

b. Parcel Tax
Parcel taxes will be used whenever Council determines that they are
more appropriate than property taxes.

c. Fees and Charges

The City will review fees/charges annually to ensure that they keep
pace with changes in the cost of living as well as changes in the
methods of levels of service delivery.
City utilities (water, sewer, garbage and electrical) will be operated
on a self-funded basis through equitable user fees.
The City will consider market rates and charges levied by other
public and private organizations for similar services in establishing
rates, fees and charges.
The City will establish cost recovery policies for fee-supported
services. The policies will consider whether the benefits received
from the service are public and/or private.
The City will establish cost recovery policies for services provided for
other levels of government.
The City will develop and pursue new and creative partnerships with
government, community institutions (churches, schools), and
community groups as well as private and non-profit organizations to
reduce costs and enhance service to the community.
Fees may differentiate between a resident and a visitor when
appropriate.
d. Debt Financing
Debt financing of capital improvements and equipment will be
considered when the project will provide benefits to taxpayers
over a long period of time (e.g. 15+years).
The City may consider borrowing when significant cost savings
can be obtained by pursuing the capital project prior to raising the
required funds.
The City may consider borrowing when it can be determined that
future users will receive a benefit from the improvements.
The City will only consider borrowing when:
1. the total cost of the debt does not constitute an unreasonable
burden to the taxpayers and;
2. when there is adequate room in the liability servicing limit to
proceed with the borrowing.
e. Surplus Funds
The Community Charter does not allow municipalities to plan an
operating deficit (i.e. where expenditures exceed revenues). To
ensure this situation does not occur, revenue projections are
conservative and authorized expenditures are closely monitored.
The combination of conservative revenue projections and
controlled expenditures should produce a modest annual
operating surplus.
Use of Surplus Funds
1. Council will review options and provide direction to staff
regarding the allocation of any operating surplus prior to
completion of the budget process for the following year.
2. Staff will facilitate Councils review of the amount of
Accumulated Surplus funds available on an annual basis.
f. Reserve funds
Reserve funds shall be set aside to:
1. Provide sources of funds for future capital expenditures;
2. Provide a source of funding for areas of expenditures that
fluctuate significantly from year to year;
3. Protect the City from uncontrollable or unexpected increases
in expenditures or unforeseen reductions in revenue (eg.
unexpected high snowfall);
4. Provide for working capital to ensure sufficient cash flow to
meet the Citys needs throughout the year.
g. Alternate Revenue Sources
The City will continue to seek other sources of revenue in order to
reduce reliance on property taxes.
 Revenue Source Breakdown for 2016

Revenue Source % Total Revenue

Property Value Taxes 18%

User Fees and Charges 43%
Grants 12%
Other Sources 14%
Reserves 12%
Proceeds from borrowing 1%
Total 100%

2. Proportion of Taxes Allocated to Classes

a. It is Councils goal to ensure that there is a fair and equitable apportionment
of taxes to each property class. The apportionment to each class is
calculated using the multipliers determined by Council prior to preparing the
annual tax rate bylaw. The tax multipliers will be reviewed and set by
Council annually.

Councils objective is to maintain the current tax distribution of property tax

value among the property classes.

3. Permissive Tax Exemptions

a. Permissive Tax Exemptions are approved on a schedule and for the number
of years that are appropriate as determined by Council. All applications for
permissive tax exemptions will be considered in accordance with the
Permissive Tax Exemption Policy.
2017 Average SFD and Commercial Property
Effect of 4.85% or 6.35% Municipal Tax Increase

Residential
2016 2017 - Scenario 1 2017 - Scenario 2
4.85% $ % 6.35% $ %
Average home $ 328,738 $ 353,886 $ 353,886

Combined tax rate 9.1558 8.6370 8.6995

Municipal tax $ 1,477 $ 1,546 $ 69 4.67% $ 1,568 $ 91 6.16%

Debt 40 39 (1) -2.50% 39 (1) -2.50%
WKB Hosp 98 102 4 4.08% 102 4 4.08%
CK Hosp - - - 0.00% - - 0.00%
RDCK 563 541 (22) -3.91% 541 (22) -3.91%
School Tax 814 813 (1) -0.12% 813 (1) -0.12%
BCA 18 15 (3) -16.67% 15 (3) -16.67%
MFA - - - 0.00% - - 0.00%
Storm 15 15 - 0.00% 15 - 0.00%
Total $ 3,025 $ 3,071 $ 46 1.52% $ 3,093 $ 68 2.25%

Commercial
2016 2017 - Scenario 1 2017 - Scenario 2
4.85% $ % 6.35% $ %
Average building $ 1,000,000 $ 1,037,000 $ 1,037,000

Combined tax rate 19.7358 18.7994 18.9307

Municipal tax $ 9,007 $ 9,515 $ 508 5.64% 9,651 $ 644 7.15%

Debt 243 237 $ (6) -2.47% 237 (6) -2.47%
WKB Hosp 732 735 $ 3 0.41% 735 3 0.41%
CK Hosp (3) - $ 3 -100% - 3 -100.00%
RDCK 4,199 3,885 $ (314) -7.48% 3,885 (314) -7.48%
School Tax 5,400 4,978 $ (422) -7.81% 4,978 (422) -7.81%
BCA 158 144 $ (14) -8.86% 144 (14) -8.86%
MFA 1 1 $ - 0.00% 1 - 0.00%
Storm 15 15 $ - 0.00% 15 - 0.00%
Total $ 19,752 $ 19,510 $ (242) -1.23% $ 19,646 $ (106) -0.54%
 2017 Proposed Budget
Effect on an Average SFD
Net
Net Monthly
2016 2017 Change Change
Assessed Value $328,738 $353,886 $25,148 n/a

Property Tax (municipal only) 1,517 1,607 90 7.50

Property Tax (School, RDCK, ect) 1,493 1,471 -22 -1.83
Water Rates (after discount) 527 538 11 0.92

Sewer Rates (after discount) 454 462 8 0.67

Resource Recovery 118 118 0 0

Overall $4,109 $4,196 $87 $7.26