Trying to Understand Nanaimo Finances
Ron Bolin — October 13, 2010
In an effort to see what is happening on the Fiscal side of Nanaimo’s operations I’m starting a series examining the information contained in the city’s published documents to help me understand what it is that I complain about when I am called upon to pay my taxes on July 1 each year. I hope that you too may learn from the data and better yet, help me to understand when I miss something important or run astray. It will be manifest that I am not an accountant and need all the help I can get.
This first examination tries to present an overview by looking at a table (the 2005-2009 Fiscal Summary) contained in Nanaimo’s 2009 Annual Municipal Report. I have, for the sake of brevity, removed the intervening three years so as to simply examine the five year period. The data is presented in a table containing a number of comparable city derived categories.
I have calculated the percent increase in each category over the five years and compared it to the BC Consumer Price Index (CPI) to see how our figures match to the CPI and also to compare growth among the categories themselves. To begin with we can note that Revenues and Expenses balance. A good sign. We can also note that between 2005 to 2009 the figures for both revenue and expenses increased at a rate 2.11 time the CPI. How long can this overall trend continue until taxpayers are overwhelmed?
Next we can note that taxes in this period increased by 26.4% or 3.38 times the CPI increase of 7.82%. Is this reasonable? We can also note that almost the entire increase in the growth of total expenses from $98,336,531 in 2005 to $114,577,933 in 2009 (around $16 million) could be attributed to the increase in taxes from $60,599,591 in 2005 to $76,595,009 in 2009. On balance everything else stayed about the same. But of course it didn’t. Note that in two categories expenses increased by over 100%. Fortunately, in neither is the expenditure too great, but nevertheless the trend is disconcerting.
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Looking over the rather ragged figures in other revenue categories or in expense categories things look like rather violent gyrations rather than a smoothly sailing corporation. There is lots to think about in this table and new questions to be asked. What do you think? And what questions need to be asked next?
Sunny Dan has prepared these pie charts of the data contained in the table below. Hopefully this may relieve at least some of Gordon’s confusion. OK Gordon?
| Nanaimo REVENUE | 2005 | 2009 | % +/- | x CPI |
| Taxes | 60,599,591 | 76,595,009 | 26.40 | 3.38 |
| Grants in lieu of taxes | 1,059,688 | 1,193,276 | 12.61 | 1.61 |
| Sales of services | 9,001,404 | 12,632,580 | 40.34 | 5.16 |
| Other revenue | 7,984,251 | 9,741,113 | 22.00 | 2.81 |
| Transfers from other governments | 4,816,858 | 6,059,066 | 25.79 | 3.30 |
| Actuarial adjustments on debt | 436,228 | 315,270 | -27.73 | -3.55 |
| Transfers from reserve accounts and Other revenue | 13,940,721 | 7,941,619 | -43.03 | -5.50 |
| Surplus appropriated from prior years | 497,790 | 100,000 | -79.91 | -10.22 |
| TOTAL | 98,336,531 | 114,577,933 | 16.52 | 2.11 |
| Nanaimo EXPENSES | ||||
| Administration | 590,279 | 1,189,442 | 101.51 | 12.98 |
| Corporate Services | 25,782,548 | 19,950,573 | -22.62 | -2.89 |
| Community Safety | 25,488,333 | 35,442,756 | 39.05 | 4.99 |
| Development Services | 9,284,095 | 9,856,167 | 6.16 | 0.79 |
| Parks, Recreation and Culture | 20,251,897 | 28,204,405 | 39.27 | 5.02 |
| Public Works | 19,866,625 | 22,155,934 | 11.52 | 1.47 |
| Payments on debt | 2,079,465 | 4,176,753 | 100.86 | 12.90 |
| Interprogram credits | -5,521,578 | -6,513,757 | 17.97 | 2.30 |
| Excess of revenues over expenditures | 514,867 | 115,660 | -77.54 | -9.92 |
| TOTAL | 98,336,531 | 114,577,933 | 16.52 | 2.11 |
| Sources: | ||||
| Nanaimo Data: 2009 Municipal Report | ||||
| CPI Data : BC Stats (2005-2009 CPI change = 7.82%) |
Posts and Comments on Nanaimo Governance 
Way too confusing for my brain. Where does the NNC stuff come into it or is this for a later table?
Gordon: Can you give me an example of what is confusing. I need to know if it is in the presentation. I thought that percentages were pretty simple and the fact that complete revenues and expenses were shown in comparable categories would make this overview about as simple as it could get.
I know that most of us go to sleep when we see figures and this lets our masters at all levels get away with a great deal. Can you suggest some other ways to make this more comprehensible? Would graphs or charts help?
How did Dan come up with an Expense increase of 17.01% and in your charts it is 16.52%? The charts are not actually that confusing, was just muddled brain day yesterday.
((2005 expenses – 2009 expenses)/2005 expenses) x 100). I’m no accountant so I’m no sure that is right, but that’s how I did it.
Ron/Dan,did your calculations take into account the increase in Nanaimo’s population increases over the 5 year period?
Reading the City’s report confirms that over 25% of the workforce will be eligible to retire on full pension over the next 5 years.This statistic further confirms that increasing amounts of taxes paid by Nanaimo taxpayers are being allocated to the well being of the 500 or so elite employees of the City,while services remain stagnent or are being cut.
Good point Wayne. The only calculation which I performed was to calculate the percentage increase and its difference from the BC CPI. I could examine the cost per capita increase to see where that would put us. It should make the picture look somewhat better.
Your point about the number of city employees who will be eligible for their pensions in the next five years is a good one -and these pensions are expensive. If I recall correctly, the city has been putting extra money toward funding their/our pension liabilities for a couple of years now. The effect on the budget of losing at the highest end of the pay scale and bringing in newbies at the bottom plus funding all the retirees is worthy of examination in its own right. Perhaps we have a reader who could look at these questions.
Another interesting calculation, given the aging population, would be how much taxes will be lost as those eligable reach the age where they can apply for the senior subsidy on their property taxes. Will it balance out with younger families purchasing homes or have they been priced out of the market.
Ron,you note that “revenues and expenses balance.” Unfortunately,as far as municipal accounting is concerned,and certainly as it is practiced in the City of Nanaimo,nothing could be furthur from the truth.When the City’s Finance Department needs to take action to “balance” their budget (by law they cannot run a deficit) they simply transfer funds from reserve accounts instead of cutting spending.In other words,they just take tax monies paid by taxpayers in previous years to feed their insatiable spending.The concept of balancing spending and revenues is a hoax,pure and simple.
The reason far and away for the growth in expenditures from $98M (2005) to $114M (2009) is the increase in wages,salaries and benefits provided to all levels of City employees.The money certainly is not going into more ashphalt to repair potholes or more concrete to install quality curbs,but rather for far too excessive employee remuneration,for boondoggle special projects such as the V.I.C.C.,for the ill-conceived cruise ship terminal,for payments to shell companies with no assets,and of course $600,000 payoffs to former employees to cover up the mistakes.
You have asked for suggestions on how to understand the City’s finances.My recommendation would be to not get too hung up on minutia,but rather concentrate directly on tax increases and salaries and benefits.Remember that former City Manager Jerry Berry is driving around in a luxury vehicle courtesy of the Nanaimo taxpayer and Mayor Ruttan.
Wayne. You are absolutely correct in your interpretation of the use of reserve account swapping to make things balance. Since we have over $80 million in various reserves it is possible to do a lot of shuckin’ and jiven’. I know that you have previously prepared some information about the increase in wages, salaries and benefits and I wonder if you might share them here.
As for your not about getting hung up in minutia, I understand what you are saying, but as the old saying goes, often the devil is in the details. Your comment did remind me, however, of a Dilbert cartoon which I think says it all about the manner in which we are taught to approach figures – to our sorrow.
Click to access dilbert-cartoon-data-hurts.pdf
Ron,here is some information on the overall increases in salaries and wages of City employees for the calendar year 2009.Benefits are not included in the figures noted below and would add another 40%+/- to the sums.
Dec.31/08 Dec.31/09
# Salaries > $75,000. 112 146
Remuneration of above $10,886,234 $15,726,294
Total $ < $75,000 $29,743,679 $28,432,962
———– ———–
All Salaries $40,629,943 $44,159,256
Percentage increase in 2009 vs.2008 +8.69%
What I referred to in not getting too deep into the minutia is that City staff are very adept at spinning answers to a specific question (ie:see answers to questions posed on the ‘Budget Forum’) but will have less credibility in the public’s eyes when they spin the the overall budget impact.
Sorry,but the information did not format properly.I doubt one can understand it as shown.
The main point is that in Calendar year 2008 the employees of The City of Nanaimo earned $40,629,943 in salaries/wages.This does NOT include benefits which are an additional +/-40%.The comparative figure for calendar 2009 is $44,159,256 which an increase in 12 months of 8.69%.
Gord said: “Another interesting calculation, given the aging population, would be how much taxes will be lost as those eligable reach the age where they can apply for the senior subsidy on their property taxes.”
Gord: If you are referring to the Home Owner Grant program, as it is offered by the province, I don’t believe that there is any loss of revenue at the municipal level.