Agenda Index City of Vancouver

ADMINISTRATIVE REPORT

TO:

Vancouver City Council

FROM:

City Manager

SUBJECT:

Impacts of the Provincial Budget on the City of Vancouver

 

RECOMMENDATION

THAT Council receive this report for information.

COUNCIL POLICY

There is no Council policy on this matter.

PURPOSE

The primary purpose of this report is to identify the direct financial impact of the Provincial Budget on the City of Vancouver's 2002 Operating Budget. The report is also intended to identify areas in which the City of Vancouver has financial relationships with the Province, and to identify some of the program and service changes which will impact the citizens of Vancouver.

BACKGROUND

The Provincial Government initiated the Core Review process in 2001. The objective of the process was to identify the Provincial Government's program and service priorities. Ministries were directed to prepare three year budget and service plans, and, for all ministries but Health and Education, the identification of significant budget reductions over a three year period. The results of the process are Core Service Plans for each Ministry for the years 2002-2005. These identify government priorities and identify program changes and, in some cases, eliminations. The financial result of the process is an average reduction in ministry budgets, excluding Health and Education, of 25 per cent over the next three years.
The Provincial Budget was announced on February 19, 2002. The budget for 2002/2003 contains budget reductions as well as increases in a number of revenue items for theProvincial Government.
The Provincial Government is increasing revenues through a number of means, including the following:
· Increased premiums to the Medical Service Plan effective May 01, 2002. This will raise $358 million in Provincial fiscal year 2002/2003;
· An increase in the Provincial Sales Tax Rate from 7% to 7.5% effective February 20, 2002. This will raise $250 million in Provincial fiscal year 2002/2003;
· An increase in the tobacco tax rate, which is expected to raise $150 million in Provincial fiscal 2002/2003.
· A 2% increase in the gross residential school property taxes in 2002, which will raise $20 million in 2002/2003.

The Provincial Government is reducing expenditures by 3.9% ($974 million) over three years through program and service changes. Funding for Health and Education has remained, however all other ministries will be cut by 25% over the next three years.
In brief, the Provincial Government is moving to outcome and performance-based services and programs. There are also shifts towards community-based service delivery, and towards moving people into employment.

DISCUSSION

The changes currently being implemented at the Provincial Government level are having a range of impacts on the City of Vancouver. The attached matrix (Appendix 1) is the result of a cross-departmental effort to identify those areas in which the City of Vancouver is impacted or financially involved with the Province. It is important to recognize that this is an evolving document and does not purport to be a comprehensive and definitive list of impacts. As changes occur and are identified, they will be amalgamated and impacts assessed.

Impacts have been divided into three tiers.
Tier 1 Direct Impacts on City of Vancouver are known at this point in time & quantifiable (e.g. Medical Service Plan premium increases).
Tier 2 Areas in which the City of Vancouver has a financial relationship with the Province. There may be impacts in the future, but these are unknown at this point in time. Identifies City of Vancouver (or associated agency) programs/services which are cost-shared or receive funding from the Province (e.g. Cycling Network Program).

Tier 3 Impacts on the Citizens of the City of Vancouver: Actual impact unknown at this point in time, but may have impact on COV programs and/or services in future. These programs/services are not delivered/provided by the City of Vancouver, but there may be impact on citizens.
Other Other Policy and Regulatory Changes which will impact the City of Vancouver

Tier 1. Direct Impacts on the City of Vancouver 2002 Budget
A number of changes at the Provincial level have a direct and known financial impact on the City of Vancouver. Primarily, these are revenue generating initiatives implemented by the Provincial Government. The estimated financial impact of the following items on the 2002 Operating Budget is $1,548,915.

1.1. Medical Service Plan premiums

MSP premiums are scheduled to increase effective May 1, 2002. This change will directly impact the City of Vancouver due to the fringe benefit packages in collective agreements between the City and employee groups. A number of the collective agreements include provision of partial or full payment of MSP premiums as part of a fringe benefit package to different employee service groups.
The estimated cost of the increase to MSP premiums in 2002 is $778,915. This number is an estimate as there are variables which impact the actual cost to the City of Vancouver. These variables are: number of employees eligible for this fringe benefit and the type of coverage required by individual employees (single, couple or family coverage).
As the increase will be applied to all twelve months in 2003, there will be an additional increase of $389,457 to MSP costs in that year.

1.2. Provincial Sales Tax

The Provincial Sales Tax increased as of February 20, 2002 from 7% to 7.5%. This will have a direct impact on the City of Vancouver, as the City purchases goods and services for use throughout City operations. The increased Provincial Sales Tax will increase the cost of all purchased goods by 50 cents per $100. The impact of this tax increase is estimated at $500,000 in 2002. This has been calculated based upon Provincial Sales Tax paid on city operating and capital expenditures in 2001.

1.3 Additional Fuel Tax (to Translink)

Motor Fuel tax for gasoline and diesel is scheduled to increase 2 cents per litre in Greater Vancouver effective April 1, 2002. As a large user of gasoline and diesel fuel for owned and leased vehicles, there will be a direct impact on City of Vancouver costs. All departments will be affected to some extent, but the greatest impacts will be in Engineering, Police and Parks.

It may be somewhat difficult to estimate the actual cost of fuel to the City of Vancouver as the price of gasoline fluctuates fairly significantly. However, based upon 2001 fuel consumption, it is reasonable to estimate that the increase will cost the City of Vancouver $150,000 in 2002.

1.4 Other Fringe Benefits

The Provincial Government has implemented changes to the Pharmacare program effective January 1, 2002. The Pharmacare deductible changed from $800 to $1,000. This will have a direct impact on the City of Vancouver.

The increase in the Pharmacare limit from $800 to $1,000 means that the City of Vancouver's Extended Health Care Plan will have to cover the cost of an additional $200 per year in prescription drug costs before the Pharmacare Plan will cover the costs. The estimated cost of this change will be $120,000 in 2002.

1.5 Unconditional Grants

The City of Vancouver receives an unconditional grant from the Province annually. The grant for 2002/2003 has been confirmed as $2,437,141. The Province applies a formula to traffic fine revenues generated by municipal police forces and distributes these funds to municipalities to help offset the cost of traffic enforcement.

Tier 2. Areas in which City of Vancouver is financially involved with the Province.

While the City of Vancouver's dependency on direct financial contributions from the Provincial Government has waned in previous years, there are still areas in which the City of Vancouver is financially involved with the Provincial Government.

Tier 2 is intended to identify those programs and/or services for which the City of Vancouver receives funding from the Province, cost-shares programs and/or services, or otherwise has financial relationships with the Province. The future of some of these programs is currently unknown, or in some cases, while the fate of the program is known, the direct impact on the City of Vancouver is unknown at this point in time.

A number of these financial relationships are identified below. Appendix 1 contains the complete listing of programs and/or services as of March 27, 2002.

Public Safety:

· Justice Institute of BC budget reduced by $700,000. JIBC provides recruit and advance training for Vancouver Police officers. JIBC is implementing a $7,200 fee for recruit training.
· Provincial Document Delivery Service eliminated, which provided $25 to Vancouver Police Department per document delivered ($125,000 in 2001).
· Provincial Victims of Crime program eliminated, which provided on-going support through court process to victims. Vancouver Police Department has Victims Services program which provides emergency support to victims, and is partially supported by the Provincial Government.

Public Works

The City of Vancouver has been financially involved with senior governments in public works capital project in the past. There has been no indication from the Province that the capital grants will be reduced or eliminated.

· The City's Cycling Network program is funded 50/50 between the Province and the City. Anticipated funding for 2002 from the Province is $250,000.
· Local Government Grants are a source of revenues for the City. The City was awarded $3.49 million in 1999 for a sewer project for 2000-02. The Provincial fund provides 25% of the funding for the project. $600,000 is the projected grant for 2002 (other funds received in 2000 and 2001). The City of Vancouver's contribution to this project is $1,800,000.
· The Federal-Provincial Infrastructure Program, which is cost-shared 1/3 from each level of government.

Vancouver Public Library

· There are a number of programs in which the VPL benefits from Provincial funding. The Audiobook Program, a Province-wide program in which the Library Service Branch of the Provincial Government produced selected audio tapes of books by B.C. and other Canadian authors, has been eliminated as of fiscal 2003/2004. The estimated cost to purchase audiobooks for VPL is $35,000-45,000 annually.

· The Library Services Branch of the Ministry of Community, Aboriginal and Women's Equality provides funding to libraries throughout BC. The funding for these programs (including the per capita grant of over $1 million annually) has been continued in the Ministry's three year service plan.

Community Centre Programs

Community Centres and community programs offer a variety of services and programs to the communities they serve. The Vancouver Park Board contributes funding to Community Centres for operating costs, including utilities, core staff, and building maintenance. The Community Centre Association's generate some funding to cover additional program costs through grants (including Provincial) and through user fees.

Childcare and Youth programs are examples of services and programs which are partially funded by the City of Vancouver and the Province.

Community, Childcare and Cultural Grants

The Provincial Government and the City of Vancouver each fund a variety of community, childcare and cultural organizations. Any changes to the Provincial process or funding level, whether through capital projects or operating support, will impact the ability of those organizations to function. For example, Provincial support for Westcoast Childcare is scheduled to end in April 2004.

There are a number of other community programs and services in which the City of Vancouver and the Provincial Government have a financial relationship. As with the Public Works projects, there has been no indication from the Province that the funding for these programs and services will be reduced or eliminated.

· The Evelyn Saller Centre provides meal service, health services, recreation and financial management services. Operating funds in 22001 were provided by the City ($554,800) and the Provincial Government ($1.191 million).
· The Gathering Place is funded jointly by the Vancouver School Board ($300,000), the Province ($88,700), and the City ($1,200,000).
· The City of Vancouver operates a number of residences and lodges on behalf of senior governments. The Provincial Government contracts the provision of service/facilities to the City of Vancouver for the following: Antoinette Lodge, New Continental, Oppenheimer, Central Residence and Alexander Residence. The recovery from the Provincial Government for 2002 operations is budgeted at $1,013,146.

Tier 3. Impacts on the Citizens of the City of Vancouver

The City of Vancouver's population of 550,000 will be impacted by many changes at the Provincial level. This section will identify a number of the changes to programs/services which are not delivered or provided by the City of Vancouver, but which our citizens may utilize. The financial and/or social impact of these changes on the City of Vancouver is not yet known.

Childcare
There are a number of changes relevant to childcare in the Province.
· Changes in childcare subsidies (An increase in income threshold will reduce the number of families eligible for subsidies);
· Funding assistance program for out of school child care will end as of July 2002. This means that families will not longer pay $7 per day or $14 per day for professional development days. They will pay a higher fee to cover a greater percentage of the operating costs.

Youth Programs
· Youth Incentives Program eliminated (Provided financial incentives for youth to volunteer in their community)
· Programs for Independence eliminated (Provided assistance to youth of Downtown South to access variety of services, including counselling, health, shelter, food, employability)
· Summer Student Works program eliminated (provided wage subsidies)

Legal Services
· Reductions in services available for legal aid family law and poverty law programs
· Public legal education and information programs reduced to primarily on-line service

Family Advocate Program
· Elimination of program which provided government funded legal representation for children in contested custody and access cases.

Debtor Assistance Program
· Elimination of program which provided assistance and advice to debtors.

Income Assistance
Numerous changes have taken place, including the following:
· Three week waiting period for benefits;
· New income assistance rates (reductions between $50-100 for some recipients);
· Earning exemptions eliminated for most recipients;
· Income assistance eligibility criteria more stringent;
· Return to work status for single parents changed (from Child age 7 to age 3);
· New time limits to receipt of income assistance have been implemented.

Other Policy and Regulatory Issues

Gaming Revenues
Host City Agreements between the Provincial Government and local governments provide for the division of gaming revenues. At this time, 10% of the net gaming income from community casinos and 16.6% of net gaming income from destination casinos is shared with local governments. There are five community casinos within the City of Vancouver. In 2001, the City of Vancouver received $3,624,548 in revenues from this source.
.
Bill 6-2002, the Gaming Control Act, introduced by the Provincial Government on March 4, 2002, is silent on the issue of revenue sharing with local governments. The City of Vancouver has registered its concern over this omission through communications with the Province.

Recent policy changes at the Provincial level will enable some casinos to expand operations to include slot machines. Two Vancouver casinos have been provided this opportunity. As this gaming activity is contrary to City of Vancouver policy, relocation of Vancouver casinos to other municipalities could occur.

Regulatory or Policy Changes
The Provincial Government has introduced a number of regulatory or legislative changes which will impact the City of Vancouver. These include:
· Proposed changes to Provincial liquor licensing (e.g. proposed changes to hours of operation, proposed changes to retailing of alcoholic products, reduction in categories of licenses premises);
· Proposed changes to Provincial community care facility licensing.

FINANCIAL IMPLICATIONS

The financial implications of the Provincial Budget on the City of Vancouver's 2002 Operating Budget are as follows:

There are a number of items identified within Tier 2 which have the potential to financially impact the City of Vancouver. An example is the stated objective of the Provincial Government to eliminate funding for the document delivery service, which provided $25 to Vancouver Police Department per document delivered. At this time, there is insufficient information to identify the cost with the elimination of Provincial Government funding to some of the programs relevant to the City of Vancouver. As details emerge, the financial implications of each change will be determined.

CONCLUSIONS

There are a number of direct and quantifiable impacts on the City of Vancouver from the changes at the Provincial Government level. The financial impact on the City of Vancouver's 2002 Operating Budget is estimated at $1,548,915. There are also a wide range of programs and services in which the City has financial connections with the Province. In many instances, there is not yet sufficient information to determine if there is a direct financial impact on the City of Vancouver. There are also a number of program and service changes which will impact our citizens. The financial or social impact of these changes is not yet known.

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