MY RESPONSE

In Response to Questions from AbbotsfordFirst

    Many of the questions asked require assistance from staff. That can be a time-consuming task, and if an opportunity presents itself, I can pursue those answers, Having said that, I think the point here is not an answer to every single question, but evidence that there is transparency and that nothing is being concealed. In fact, I suspect this exercise is a 'smoke screen' to deflect attention from more serious issues.

1.   At the Plan A Referendum Public Information Session held in 2006 at the Matsqui Centennial Auditorium, Dan Bottrill, City Finance Manager, stated that the City of Abbotsford was projecting a Property Tax Surplus of $4 million for 2007.

Answer: Really? 2006 – you want to address issues from 8 years ago? Only 4 of the present Council members were on Council at the time. What I don’t see here, which AbbotsfordFirst still claims on their website (Fred Thiessen’s press release) even after being reminded on numerous occasions that it is incorrect, is a statement that the City was debt-free in 2006. I challenged each of the candidates as far back as August (excluding Sandy Blue), as well as Fred Thiessen, to substantiate the claim, but no one responded to my emails. In 2006, the City had a debt of $38.4m. The closest the City came to being debt-free was 2004, when the long-term debt stood at $16m. This is but a small example of knowingly misleading the public. Trust? Integrity?

1.    Debt levels at that time are unknown to the public because Financial Statements prior to 2010 are unavailable on the City web site. In fact, hardly any financial data allowing us to compare our current financial state to that of the city before Plan A is possible. If you have access to all those Statements, please allow the public to have that same access so we can compare and decide for ourselves. We can tell you that housing starts before 2009 averaged 1100 per year. After that it has been abysmal... 2009 (365), 2010 (516), 2011 (537), 2012 (371), 2013 (749). Comparing 2013, our best year in the last 5 to 2008, we see a 40% decrease in housing starts. If you've managed our local economy so favourably, where has all the investment gone? Account for this decrease in performance? (Source: Canadian Mortgage and Housing Corp)

Answer: I‘ve seen stats posted by AbbotsfordFirst, referencing Ministry sources – the same sources where you will find that information. However, my Blog does have that information, taken from the Ministry site, and you are welcome to save time and find it there.

http://councillorloewen.blogspot.ca/2014/10/the-truth-about-debt-get-one-thing.html

And with respect to housing starts, I don’t believe I or anyone else for that matter, have disputed any statements made on the subject. In fact, I don’t recall seeing statements made anywhere else, other than in this post. You are right, the world economy took a huge nose dive in 2008, and we have not resumed the performance level in place prior to the downturn.

3. Total debt - Firstly, we are unsure why you balk at $100 million in debt, but you seem to think that $78.4 is OK. Please tell us why you think so. Secondly, you are not including the $24 million internally borrowed (DCCs). Mr. Loewen claims that money is moved back and forth between City accounts all the time. Setting aside the fact that doing that anytime you want is against the Local Government Act and the Community Charter, this debt is not the simple moving back and forth of money. This money was largely spent on the 2 overpasses on Hwy 1 and those overpasses were not in the city's budget. This means we have taken money out of our DCC fund that should have been spent on other roads, infrastructure upgrades and expansions. That other work still needs to be done. This is called an infrastructure deficit. Every time you take future DCC money and use it to pay for this expenditure of the past, you are not paying off debt, you are simply paying off one credit card with another. At the end of the day, taxpayers will be burdened with this rolling liability. How will you deal with this infrastructure deficit of $24 million?

Answer:

1.     I’ve never said that any debt is ‘OK’, as you put it. In fact, our long-term debt has been reduced by 25% over the last 6 years (a 25-year mortgage at a very favourable fixed-interest rate until maturity). I should also add that the cost of servicing our long-term debt (principal and interest) consumes less than 5% of our annual operating budget. As a home owner, I would have loved a mortgage that only required 5% of my income. Today, homeowners are lucky to stay below 30%.

2.     Drawing on Reserves is not considered debt and financial statements make that clear. If you can’t accept that fact,  I suggest you take your argument to KPMG or our city manager, Mr. Murray, who I’m sure would be more than happy to provide some enlightenment.

3.     My response is clearly laid out in one of the posts deemed irrelevant. Your words,  “…none of your posts actually answer any of the questions.” The post I’m referring to is “Take Your Choice”. http://councillorloewen.blogspot.ca/2014/11/take-your-choice.htmlhttp://councillorloewen.blogspot.ca/2014/11/take-your-choice.html

4.     Reserves are like Savings Accounts, in which monies are set aside for a specific purpose. The Charter does not forbid drawing on those Savings, but does say that those funds must be restored to that account as soon as they are required for their intended use.

5.     To summarize very briefly the post referenced in #1 above, the City leveraged Savings to get $50m. of “free” money (never having to repay it), so that our infrastructure deficit, as you refer to, might be addressed without burdening taxpayers. Your objection appears to favour the latter option. I don’t know how else to interpret it.

NOTE: Since writing this article, I've been in conversation with Finance staff, and they provided what I believe is a very concise and definitive statement on this issue; City debt WAS $78m. at end of 2013. Their statement is found at the following link:

                       To the Source  -  Of Course!

6.     Additionally, the idea of paying off current DCC debt with future DCC revenue has led Council to raising DCC's to the highest rate we can find in the Valley. Our DCC rate is approximately $29,000 per lot, whereas Langley is $21,000 and Burnaby is $7,000. The result has been a huge downturn in housing starts. In 2008, we had 1285 starts. In 2012, we had 371 and 2013 we had 749. In the 2013, the City projected $18 million in DCC revenue and it only collected $3 million. How was that revenue made up? All departments set their budgets against expected revenue so when $15 million doesn't come in, something must be cut. What was cut?

Answer: Comparing Abbotsford’s DCC rates with municipalities within Metro Vancouver is difficult.  Metro Vancouver’s DCC rates have not been updated for many years and they have made a decision to fund significant regional infrastructure through user rates as opposed to DCC rates.  This means all existing taxpayers pay for growth related items as opposed to new development.  Abbotsford Council has taken the position that growth should pay for expansion of new infrastructure. 

With respect to specific rates, I am unable to provide an answer as I’m not conversant in this matter, nor is that information easily available. That doesn’t mean the information can’t be accessed, it’s just not at my fingertips.

7.     You mention a strong cash position. Any excess cash coming to the City of Abbotsford is due to "inflated" DCC's, an 80% + increase in Water Rates from 2010 to 2012, a 43% Property Tax increase since 2006. Taxing your citizens to pay for your mistakes is not strength. Can you clarify for the citizens of Abbotsford why these rate increases are so high if your stated surplus and financial position is so strong.

Answer: Of that 43% increase (assuming your figure is correct), approximately 16% was the result of the Plan ‘A’ capital projects, which residents of Abbotsford approved in a referendum. That would leave 27% over 8 years, which translates to approximately 3.5% per annum. Clearly, too high an increase, as the last two years have been at or near zero. And for the record, I don’t think I or anyone on this Council has stated that those increases were acceptable. If you are going to revisit the last 10 years, I suggest you revisit the last 20, starting with amalgamation. Councils of the first 10 years were ultra-conservative, resulting in a significant infrastructure deficit that could not be ignored. Even while the City was growing rapidly, Councils were reluctant to spend in order to meet the challenge of a rapidly growing city.

There is also an implied comment in the question that Abbotsford property tax is excessively out of line with its neighbouring municipalities. In response, I would draw your attention to the two graphs in the following post:

http://councillorloewen.blogspot.ca/2014/10/property-taxes.html

8.       You mention the city has $130 million in cash or equivalents. "Equivalents" is meaningless Mr. MacGregor...that is like saying I have $100 in cash and coupons. What matters is the cash. In the 2013 Financial Statement, on page 2, the page the Mayor signs, it clearly states on line 1 that "Cash and Cash Equivalents" equal $21 million. No line item anywhere in the Financial Statement shows $130 million.

Answer: Surplus/Reserves - $94.1m.; DCC’s - $14m.; and deferred revenue - $21.1m. 

7.    Last year when the City of Abbotsford was thinking about giving the YMCA $17.5 million, the Finance Department issued a report to Council stating clearly that they only had $14 million available, and then they offered alternatives on how to make up the difference.

8. We would like to point out that you cannot add our Statutory Reserve to this amount because you are not allowed to spend that.

Answer: With respect, under the Charter, local governments can use those funds, but must restore within stipulated time frame; see #3 above.

9. On that same page of the 2013 Financial Statement, there are also liabilities listed. You cannot exclude those from your calculations. The NET FINANCIAL ASSET for 2013 is $9 million...and this comes after 2012's $12 million NET DEBT. This is not $130 million in the bank. This is the true financial picture of the City of Abbotsford.

     Answer: As you point out, the City had a Net Debt of $12.4m in 2012, followed by a Net Asset of $9.4m in 2013. That is a $21.8m turnaround, and projection for 2014 is similar to 2013. This is the result of two years under the management of a new CAO, who has executed Core Service Reviews in most, if not all departments and made significant changes in staffing structures and found efficiencies that had eluded previous administrations. 

10. Next you seemingly change the long term debt from $78.4 million to $40 million so that you can claim we aren't being accurate? Please answer for this inconsistency in your statement. No Financial Statement by the City of Abbotsford, nor any statement by Abbotsford FIRST includes the number $40 million. Only you use this number and yet it is used to illustrate that in your tenure you've doubled our long term debt. Explain why you would attempt to represent a $78.4 million debt as $40 million to the citizens of Abbotsford?

Answer: The paragraph you refer to is a layman’s rough estimate and interpretation of reality, with respect to the countless projects completed in the last 8 years (roughly totally in excess of $200m.) against the real debt at the end of those 8 years, leaving a net increase in debt of about $40m. These are not accountants figures, nor would I expect Mr. Murray would ever refer to that activity in these terms. If you choose to take issue with our rough guesses, I for one will choose to ignore such concerns.

11. The are also questions that you and all incumbent Councillors must answer Mr. MacGregor. With one of the highest Property Tax rates in the Province of BC, with the highest unemployment rate in Western Canada, with dwindling housing starts and businesses closing every day, and a 9 year track record of nearly every major economic indicator resulting in a decline, what are you going to do to stimulate Abbotsford's economy? Please post your plans for the economic development of Abbotsford. As an incumbent, you have far more access to information and a comprehensive plan would be appreciated.

Answer: One of my Blog posts took issue with the erroneous use of “Tax Rates” as a comparator. 

http://councillorloewen.blogspot.ca/2014/10/assessed-value-taxrates-and-total-tax.html 

I’ve responded to numerous people over the years, and still, they/you don’t get it. This is not me saying this, but Finance staff with whom I have consulted. A cursory review of a few BC municipalities would make the point quite obvious to most people. There is a common sense reason why the Provincial Government does not use ‘Rates’ to compare one municipality with another. If rates were significant, then why would West Vancouver and Whistler have the lowest tax rates in BC, while far northern communities the highest? Are you suggesting that taxes in the far North are that much higher than West Vancouver and Whistler?

I will however, humour you for the moment, and accept that our “high tax rates” are a problem to address, and ask you to account for the discrepancy between the high tax rates and the fact that Abbotsford’s property taxes compare so favourably with the other Fraser Valley and Lower Mainland municipalities, including West Vancouver (highest).

http://councillorloewen.blogspot.ca/2014/10/property-taxes.html

12. The City of Abbotsford committed to giving the Abbotsford Heat $5.5 million to leave our city. Where is that money coming from? What will be cut to provide that capital? It wasn't in our budget so it is "new" money. Where will you get it from?

Answer: My recollection is that the funds came from accumulated surplus; I would have to check, because I am not certain. It should also be noted that the City's share of the revenue from Chances Gaming Centre (almost $1m annually) has been allocated to the AESC.

13. If you're answer is from the Surplus you are generating from "inflated" taxes and rates (language used by your own Finance Department in 2013), the result has been a city with one of the lowest growth rates in the Lower Mainland. How will you rectify this lack of performance and attract business, investors and jobs?

Answer: First of all, it would be proper to reference your sources, especially comments regarding language used by Finance personnel). If you were listening to the mayoral debate this week, you should have heard the Mayor reference a number of initiatives that will have a positive influence in terms of addressing the concerns you mention: DART, revised and consolidated Zoning Bylaw, and the OCP review now underway. George Murray has been doing a Core Services Review over the last 2 years, resulting in key hires, reorganization, and finding efficiencies that have resulted in observable improvements with respect to “welcoming business”. These challenges do not disappear in short time spans, but take longer for the change to become apparent.

Those reviews have also resulted in two successive years with modest surpluses of $10m. last year, and $7 - $10m this year. Those funds have and will continue to be applied to DCC funds and/or short-term debt.

I have not responded to every single question, however, I think most of them have been covered. More detail on questions regarding DCC rates, etc, are all available, however, it will take some digging, as I have done.