RC111 MarApr 2024 - Magazine - Page 17
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levels and continues to work on reducing the gap.
Similarly, the District of Oak Bay, B.C., has taken steps to
close its annual funding gap, but in half the time. In 2018,
the district began substantially increasing annual infrastructure funding from $3.7 million, or 31 per cent of replacement
costs. By 2023, it had reached $10 million, or an estimated
75 per cent of annual infrastructure replacement costs. This
strategy has spurred capital spending, and the district is
forecasting a new capital spending record for the 昀椀fth year
in a row. It has optimized spending, too. Sta昀昀 are now
empowered to invest in proactive maintenance and reduce
lifecycle costs. This contrasts with the approach of deferring
capital maintenance to keep short-term tax rates low.
Long-term 昀椀nancial planning has had a massive impact
on intergenerational funding equity in these communities.
The objective of funding equity is to ensure that all generations of capital service users pay a similar amount for a
similar service. In Oak Bay, the aggressive e昀昀ort to close the
funding gap has added more than $630 million to infrastructure replacement funding over the next 100 years.
One relevant factor is the growing desire among 昀椀nancial
professionals for infrastructure replacement costs to be formally disclosed in 昀椀nancial statements. This would enable
RENEWCANADA.NET
the public to better understand and judge funding equity.
Currently, 昀椀nancial statements report the value of assets
at historical cost (the cost when acquired or constructed).
However, for long-lived assets in high-in昀氀ation environments, this value does not provide a relevant prediction of
future replacement costs.
The City of Rossland, B.C., for instance, is considering
voluntary disclosure in its 昀椀nancial statements. Justin
Brogan, a Chartered Professional Accountant with the
City, was quoted in the December 2023 edition of the Government Finance O昀케cers Association of British Columbia
newsletter as saying, “I believe this issue is one where it
is crucial to get the narrative right and ensure users are
provided with better information to understand pending
asset replacement costs. When it comes to how this might
look in a voluntary disclosure, we’d like to borrow from
the approach many jurisdictions are using with respect
to natural assets disclosures, which have been focused
on providing users with basic, unaudited information to
acknowledge a fundamental risk and opportunity communities face.” This intention is supported by the City’s Tangible Capital Asset Policy, which calls for the disclosure of
replacement values in the City’s 昀椀nancial statements.
After fully
investigating the
long-term financial
implications of a
proposed park, the
City of Prince George,
B.C., has put the plan
on hold while they
further investigate
the project’s annual
lifecycle costs.
MARCH/APRIL 2024 – RENEW CANADA 17
