The pros and cons of how B.C. municipalities figure out their finances

If you go to Coquitlam’s statement of financial information for 2022, it will say in five different places that the city had an “annual surplus” of $233.6 million last year. 

It’s not the only municipality with a massive surplus last year: in Vancouver it was $552 million while in Surrey it was $479 million.

Even in mid-sized municipalities, annual surpluses of $5 to $50 million are fairly common. Combined, B.C. 's 161 municipalities had a record high $3.4 billion “annual surplus” in 2022, according to data gathered by the provincial government.  

It may seem like a lot. But Coquitlam’s mayor has a different term for it.

“It’s just stupid, to be blunt,” Richard Stewart said.   

“What I'd like to see changed is the word ‘surplus,’ because none of this is surplus.”

Municipalities in B.C. aren’t allowed to run any yearly deficits. But at the same time, cities need to build new infrastructure — or repair aging infrastructure — all the time.  

The result for most communities is that those “surpluses” go into a complex system of various internal reserve funds and external borrowing agencies, along with various accounting for new capital assets, which takes away most of that money very quickly.  

For the level of government closest to the people, it can create an awfully opaque way of putting together a budget. 

“I've been at this for almost two decades, and every budget season I recognize new idiosyncrasies about the way in which municipalities are required to keep their books,” said Stewart. 

At the same time, the combination of complexity and caution has benefits, as evidenced by the fact very few B.C. municipalities have had financial crises in recent decades.

“I hope taxpayers recognize how important those reserves are,” said Stewart.

“It really is the most prudent thing for taxpayers, to see their local government pocketing those reserves and financial assets that we need, in order to make sure development pays for the cost of development.”

These facts bear mentioning as B.C.’s local budget season begins in earnest, and politicians have to consider the tradeoffs of all sorts of fiscal choices. 

In every season there are people who argue that their city doesn’t do enough with their fiscal capacity, and that they could (or should) be bolder, embrace deficit spending, and push for greater reforms.

But don’t expect Stewart to be one of them.

“It's kind of like democracy,” he said of how municipal finance works in B.C. 

“The worst system in the world, except for all the others.”