Government Exemplary in Teaching "Smoke-n-Mirrors" Technique

The technique has no better instructor.
Proof is the following June 11/14 story from The Province.

"Annual municipal spending reports reveal all", by Dermod Travis, executive director of Integrity B.C.

It's that time of year again, when local governments across B.C. grit their teeth and post their annual statements of financial information for all and sundry.  Depending upon your perspective, they're either a veritable treasure trove of news stories or a minefield of PR disasters waiting to happen.

While many news reports will focus on municipal salaries, as they say about most things in life, "it's all in the fine print."  And in financial statements much of that fine print is found in the notes and schedules.

It's where ratepayers will learn that a funding deficit of $1.37 billion emerged in B.C.'s Municipal Pension Plan at the end of 2012.

In a message to municipal employees, the chair of the trustees preferred to write that the plan was "96.5-per-cent funded."  No need to cast a pall over summer with words like debt, underfunded, liability or deficit.

So it was undoubtedly with the purest of actuarial intentions that the copy provided to local governments for use in their 2013 financial reports referred to it as a "$1,370-million funding deficit."  However, even that wording seems to have led to some confusion.

Abbotsford, Fort St. John and other municipalities simply copied and pasted the boilerplate paragraph into their financial notes.  No harm, no foul.  (Coldstream's cut-n-paste is found on page 45, section c; other than to state ' there is no consistent and reliable basis for allocating the obligation, assets and cost to individual employers participating in the Plan...which has about 179,000 active members, approx. 71,000 retired members.  Active members in the District of Coldstream--in the Definited Benefit Contribution Pension Plan--number 36.  The DoC paid $211,000...2012 was $201,834 employer contributions, while employees paid $186,625 in fiscal 2013...versus 2012 $180,328).

Vancouver, on the other hand, chose to simplify the text and in doing so reduced the deficit to all of $1.37 million.

But it's definitely one thousand, three hundred and seventy million dollars or, to be succinct, $1.37 billion.  It's why contribution rates are going up next month with an increase that works out to an additional 1.4 per cent of salary, split between local governments and municipal employees.

Another schedule to the financial statements provides ratepayers a chance to catch a glimpse of the state of labour relations at city hall.

In Abbotsford, there were six severance agreements reached with non-unionized employees in 2013.  Each received between two and 12 months of compensation.

Vancouver had six settlements as well, with between two and 13 months of pay provided in each.

West Vancouver kept it at two, but they were pricey -- 19 months of compensation in one and 21 months in the other.  (Coldstream in 2013 had 1 severance in the amount of $61,546.34, equivalent to four months).

And thanks to a Freedom of Information request filed by the Nanaimo Daily News, ratepayers in that city can put a dollar figure on severance agreements for three former city administrators.  They walked away with $648,000.

Then there's the schedule of payments to suppliers for goods and services of over $25,000.

Proof positive that everything isn't always what it seems:  the $62,417 West Vancouver spent at Mercedes-Benz wasn't to buy a new car for the mayor or a parting gift for the former chief administrative officer, but rather -- as would befit the tony suburb -- the municipality has some Mercedes-Benz trucks in its fleet.

They did, however, spend $26,838 with House Wine, and that would not be a plonk, but a wine-consulting firm.  The bill hopefully included a few bottles.

While overall expenditure comparisons between cities aren't entirely fair, since no two are a carbon copy of the other, the financial statements do provide some interesting observations.

On a per capita basis, local government expenditures came in at $3,002 in West Vancouver, $2,497 in Fort St. John, $2,167 in Vancouver, $1,898 in Rossland and $1,561 in Abbotsford. 

Abbotsford shouldn't gloat too much.  Council there still has to deal with the fallout from that city's ill-fated foray into the world of professional hockey.  The American Hockey League's Abbotsford Heat didn't generate much of it in the Fraser Valley and local ratepayers are now on the hook for losses of $12.7 million.

As Abbotsford Mayor Bruce Banman stated, "We will not be subsidizing private industry again."
No kidding.

To put these per capita numbers in some kind of perspective, in the 2012 Kitchen/Slack Report for the B.C. Expert Panel on Business Tax Competitiveness, per capital expenditures in B.C. were pegged at $1,591.

Now here's an idea local councils could consider:  create an open-data system to consolidate all of the annual statements from across B.C.  You might also consider moving up the deadline for posting the reports by a month or two."   D.Travis


Note:

The 72-page District of Coldstream annual report ending December 31st, 2013 is here. 
The Financial Section begins on page 30, and Revenue By Source begins on page 50.


"Even mirrors can burn," suggests Kia.