B.C. municipalities had a combined $3.1-billion surplus last year. Why the caution?

Collectively, B.C. municipalities have likely never been in better financial health.

Yearly data aggregated by the provincial government showed that in 2021, municipalities had a combined $3.1-billion surplus, the highest number on record.

That includes surpluses of $583 million in Vancouver, $305 million in Surrey and $432 million in Burnaby which continues to have the largest financial reserves of any city in the province, at $1.9 billion in net financial assets.

"We're fortunate to be in a good position," said Burnaby Mayor Mike Hurley, "and that's thanks to those who went before us many, many years ago ...that set up a good base for us to work from."

Hurley cautioned that some of that long-growing reserve would cut into the years ahead, as Burnaby council voted in 2022 to spend $504 million to replace multiple pools and recreation centres while building new facilities.

Burnaby is also one of the 19 municipalities in B.C. without any debt, and Hurley says they intend to keep it that way.

"Burnaby just sat down a path that we weren't going to borrow money anymore, and we've stuck to that. So we are a little behind on our facilities, and we really want to catch up now."

Reasons for caution

There are a few reasons for the culture of municipal financial caution in British Columbia.

One is the fact that municipalities aren't legally able to go into debt for their yearly operating budget.

"We have to budget fairly conservatively on the expenditure side ... and we have to go the other way in terms of revenue, we have to be a little conservative on that as well," said Richmond Mayor Malcolm Brodie.

"So that leads to a small surplus usually every year."

But another key factoris that aside from Vancouver and Surrey, most cities eschew taking on significant debt for capital infrastructure, in part due to several B.C. communities having had large financial issues in the '80s and '90s.

"You have to be very cautious," said Delta Mayor George Harviewho, before taking office, was the city's chief administrative officer for two decades.

Delta had a surplus of $31.1 million in 2021, and has just $313,328 in total authorized debt.

"Surpluses are interesting, but when you look at it as a percentage of our overall operating budget, it's not that much," he said.

Bigger tax increases this year?

Aside from going into reserves for future infrastructure spending, many cities use their surplus to create stabilization funds that can reduce the rate of tax increases in tougher financial years.

"Every city is in a tough process I think this year was especially hard because of inflation," saidBrodie, who is also chair of the Municipal Finance Authority of B.C., which pools municipal money across the province for financing and borrowing purposes.

The city's proposed 2023 budget has a property tax increase of 5.89 per cent, but the increase would have been 6.5 per cent if not for the city dipping into its reserves. Richmond had a $103-million surplus in 2021, and has $940 million in net financial assets.

"You're hearing of cities that are budgeting for seven, eight per cent increases you want to keep your increase down as much as possible toward what the cost of living increases have been," he said.

But as Hurley noted, that can be a challenge particularly in an era where many local governments feel more pressure to fund services they didn't use to.

"We don't have much room to manoeuvre," said Hurley.

"There's more and more getting downloaded to us now, and we're trying to find ways on things like housing, like child care. They're not really municipal responsibilities as such, but they are the right thing to do."