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City's Participation in the Fraser Valley Regional District

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City's Participation in the Fraser Valley Regional District COUNCIL REPORT =====~ABBOTSFORDA Report No. CM26-2011 Executive Committee October 28, 2011 File No: 0540-20 / 0400-40-20 To: Mayor and Council From: Frank Pizzuto, City Manager, and Nathan Koning, Project Engineer Subject: Updated Review - City's Participation in the Fraser Valley Regional District RECOMMENDATIONS 1. THAT Report No. CM26-2011, dated October 28, 2011, from the City Manager and the Project Engineer, regarding Updated Review - City's Participation in the Fraser Valley Regional District, be received ; 2. THAT Council authorize the Mayor to formally request the Provincial Government to consider a single tier governance structure for the City of Abbotsf~rd; and 3. THAT Report CM26-2011 be forwarded to the Fraser Valley Regional District for their information. BACKGROUND The Fraser Valley Regional District (FVRD) is a regional government serving the Fraser Valley in Southwestern British Columbia. The FVRD's primary purpose is to provide services to its members, including sub-regional services, regional services, and local government for electoral areas. Abbotsford is the largest member of the FVRD in terms of population and assessed land value and contributes nearly half of the collected funding for significant items such as general government, fire dispatch and regional development. The services received by the City are primarily administrative in nature, and are paid for through the annual tax requisition or through user fees. The City has a responsibility to review all of its arrangements and programs to ensure they provide full value to taxpayers. While some of the intended benefits of the FVRD arrangement have been realized, many significant ones have not, leading to questions about Abbotsford's costs for regional services. In addition, representation by population in regional district governance is a concern for Abbotsford. The City holds five of the twenty FVRD board positions, providing 25% of the voting strength for unweighted votes and 42% for weighted votes. As a result, Abbotsford can be outvoted by the other members, despite representing almost half of the regional district's population and contributing the largest portion of the funding for many significant items. On July 12, 2010, City staff provided Council with a closed report on the value in being a member of the FVRD. The report outlined the various services provided to the City by the FVRD in 2010, and evaluated whether Abbotsford was receiving good value for the $3 million it spent on these services. The report was presented at a Special (Closed) Joint Abbotsford/Mission Council meeting in September 2010, where it was noted that further information was required before options could be considered. On January 24, 2011, City staff presented a report to Council evaluating a single tier model as a change in governance away from the FVRD. Under this model, the Report No, CM26-2011 Page 2 of 5 Abbotsford City Council would be the single decision maker for residents, and the City's current administrative structure would manage the total services provided to residents. The model did not involve a formal regional district, as services would be provided by existing staff or through partnerships formed around specific initiatives. The analysis estimated that the arrangement would save the City between $800,000 and $1.4 million annually over the amount paid to the FVRD in 2010. At the January 24, 2011 meeting, Council endorsed the staff recommendation to further examine this model. The 2011 annual FVRD tax requisition included significant cost reductions for Abbotsford. This was the result of several changes made by the FVRD over the past year, including a revised overhead cost allocation model, a reorganized corporate structure, and increased user fees. The City's 2011 requisition was reduced by approximately $720,000 over the amount collected in 2010, with the majority of the reduction coming in the area of general government. The savings to Abbotsford residents and businesses will be partially offset by the estimated $100,000 increase in the Call Answer Levy and the Tipping Fee Levy in 2011, resulting in a net savings to the City of approximately $620,000. ANALYSIS Staff have completed additional work on the single tier governance model to assist Council in determining if it should be presented to the Province for consideration. This work includes a further review of the FVRD's governance role and mandate, a peer review of the proposed financial savings by an independent chartered accounting firm, and an expanded review of the costs associated with the model. Review of Regional Districts' Role and Mandate Professor Harry Kitchen, Department of Economics, Trent University has completed a review of the role and mandate of regional districts and the benefits to Abbotsford as a member of the FVRD. Professor Kitchen is an expert on municipal governance and finance, having completed over 100 reports, studies, articles and books on this topic. Professor Kitchen's attached report (Appendix A) presents various local government models from across Canada, and explores British Columbia's regional district model as it relates to service provision and governance. The report also examines Abbotsford's position in the FVRD and proposes a governance model for the City moving forward. Professor Kitchen will present his report to Council on November 7, 2011. Peer Review of Financial Savings The City has retained the accounting firm BDO Canada LLP (BDO) to review the staff analysis of a single tier governance model. The Executive Summary of BDO's review is attached (Appendix B), and identifies that the City's calculations and analysis are correct. Since the City's analysis is an internal review, BDO also recommend a value for money analysis. This may be considered in the future based on the Province's willingness to consider the City's request for a single tier governance structure. Revised Single Tier Governance Analysis City staff have undertaken a further review of the costs associated with the single tier model, including discussions with potential partners around specific service delivery. These figures have been added to the analysis to provide a more accurate representation of how the single tier arrangement could financially benefit the City. The analysis has also been updated to reflect the changes to the FVRD requisition and user Report No ~ CM26-2011 Page 3 of 5 fees in 2011. The attached summary table (Appendix C) shows the services provided by the FVRD and the costs to the City for these services in both 2010 and 2011. The table also provides updated costs and savings of the single tier governance model, comparing with the amount paid by the City in 2010, and showing the further savings this model offers over the amount to be paid in 2011. Recent changes implemented by the FVRD have reduced the annual amount collected from Abbotsford by approximately $620,000 over the amount collected in 2010. The single tier model offers further annual savings in the range of $760,000, for a total savings of $1.4 million over the amount paid by the City in 2010. E911 and Fire Dispatch E911 and fire dispatch are important components of the emergency telephone and response system, which also includes police and ambulance dispatch. The system is required for emergencies, and is expected to respond in a unified manner. As such, staff have further reviewed how E911 and fire dispatch would be delivered under a single tier model. This included obtaining costs from other providers who can deliver the high quality service level that Abbotsford receives through the existing system. While the contract cost for these services is known, there are other aspects to consider before a final recommendation can be made. The City contributed a total of approximately $980,000 to the FVRD for these services in 2011, and received approximately $543,000 in revenue for the PSAP contract. While the costs included in the updated analysis are sufficient to move forward, a further review of these two services is recommended to determine the most effective and cost efficient option. Fraser Valley Regional Hospital District Staff have also completed additional work on the impacts that a single tier model will have on the Fraser Valley Regional Hospital District (FVRHD) board, including a review of the funding history of regional facilities and the impact on Abbotsford by leaving the regional district. Regional hospital districts (RHD) provide the administrative framework for the local share of funding for hospital capital costs, including construction and shareable capital equipment expenses. Prior to 1995, the three former regional districts that now make up the FVRD each had their own RHD, each with its own debt. The debt was combined, with Abbotsford's portion compriSing approximately 24% of the total. The combined debt has now been retired, with Abbotsford contributing an estimated 49% of the repayment. Since amalgamation, the FVRHD has accumulated reserves to fund the Abbotsford Regional Hospital and Cancer Centre (ARHCC), the Chilliwack General Hospital Redevelopment, and the future Mission Community Health Centre. Based on the census data, Abbotsford has contributed an estimated 49% of these reserves, while approximately 42% has been used for the ARHCC. In summary, Abbotsford's contributions to reserves, new debt and debt retirement have exceeded the estimated benefits of original debt retired, reserve funding and new debt for the ARHCC. If the Province were to consider a single tier governance model for the City, the preferred option would be for Abbotsford to take its share of the existing RHD debt and form its own hospital governance board rather than remain with the FVRHD. Abbotsford Report No. CM26-2011 Page 4 of 5 currently contributes approximately 49% of the RHO funding, and it would likely take a similar percent of the debt. As of December 31, 2010, the FVRHD's long term debt balance was $58.4 million, and Abbotsford's portion would be $28.3 million.
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