Friday, December 1, 2023

The Budget Logistics of the city's financial instrument of Legacy


"Legacy has already saved our butt ... 
you can't kill the goose that's laying the golden egg" -- Councillor Barry Cunningham at Monday's Prince Rupert City Council Session

The City of Prince Rupert's Legacy financial Instrument began with the windfall of money received courtesy of Exxon/Esso from the days of enthusiasm over some, but not all, LNG Development in the Prince Rupert area at the tail end of the Jack Mussallem  Mayoralty

The financial use of the instrument has served as the foundation it seems to guide City Council through the years of Budget Making since its creation in April of 2014.

The thirty one pages of the articles of its creation provided a look at the mechanics of the financial instrument.

Monday night, the somewhat mythical at times pool of money,  once again made for a good portion of the Council discussion surrounding the 2024 budget and its call for a 7.7 percent tax increase.

Its introduction as a topic of conversation has been an annual thing when Council members take to their month long engagement on the budget process. 

The Financial instrument then something which for the most part fades from their discussion list for the remaining 11 months of a year.

As part of this year's Budget process, CFO Corinne Bomben's opening presentation on November 6th provided a slide show that included how the City planned to use dividends and finances directed by Legacy.

This year's Final discussion prior to adoption of the Budget by the Council membership saw Legacy introduced as conversation starter a number of times through the fifty minutes or so of Budget discussion.

The first mention of Legacy or dividends from it came from Councillor Teri Forster who sought some clarity over how the monies could be used.

  "I did have a question about ... potential funding for the stairway. I understand that dividends come as one time payments, so they're not supposed to be things that would be ongoing, they would be a one time thing.

I'm not certain I understand why if we were to go with the stairway it would be taxation versus a dividend, unless it's simply just because there's not enough money to pay for it from a dividend?"

The City's CFO Corrine Bomben, noted that the 250,000 dollar ask of the dividends for the stairway plans were not considered as they did not benefit the entire community.

"As far as the dividend goes, the answer is yes, it wasn't considered ... 250,000 dollars is a big amount, there's already quite a bit that's going to be dividended for 2023, that's a really long and awkward word. 

And then of course there's about 4 million dollars worth of dividends that is proposed, the annual revenues on Watson Island through Legacy is 4 million dollars. 

So it was just one of those items, that it didn't benefit the entire community, instead of one segment to seemed like that we could possibly get some grants for."

Councillor Gurvinder Randhawa who voted against the tax increase as he has pretty well since taking office, noted of its use of Legacy for capital spending and debt reduction, once again advocating to use the instrument towards a break on the 7.7 tax increase.

"I saw the budget and understand inflation we have to keep up with that and other expenses. Thankfully we have the Legacy Fund and we have money there and we are using that money for capital projects ... and the debt. So that's great, but on the other hand we have people struggling with loss of jobs and other expenses. 

I was wondering if we have any room to pay for capital projects from legacy fund this year to give a little break on tax increases, like 7.7 percent is a huge amount ... that's people's money too, 7.7 so if we could deliver more money from that side, Legacy Fund to give a little more break"

That was a proposal not well received by many around the Council Chamber, with Mayor Pond noting of the limitations at the moment for the use of Legacy.

"My sense was that at this point in time we have tapped out what is reasonable to take out of Legacy"

Ms. Bomben followed up with some further background on the theme, noting of her presentation of November 14th.

"As great as it would be to be able to utilize if there was anymore money in Legacy to offset tax increases. 

I did do a presentation on the last Council meeting on November 14th that shows that if you do subside a tax increase with outside monies, then if that money runs out, it means that the following year, the taxpayers of that year will have to make up money that was subsidized the year before, plus any increases that occur in that one particular year.

So if you're facing a 3 percent, a 3 percent,  a 3 percent and you start subsidizing in year two at 3  percent, the next year isn't a 3 percent increase anymore, it becomes a 6 percent increase.

So using outside funds to pay for regular operations is actually a bit of holiday for the people that live there in the community in one year, but the following year the people that are there will have to pay.

And that is not really fair, it is much fairer and easier for people to understand if regular operating increases are paid for each year in a smooth way, instead of jagged ways.

So that is why Legacy is being used for Capital increases, because capital increases are those jagged spikes that would occur if we didn't have funding coming from Legacy from Watson Island.

So in that respect we are actually quite fortunate, because if you think about how much money Legacy is contributing towards the Capital operation here, it has kept those spikes from being even bigger spikes than what we've experienced this year and what we're proposing for 2024 as well.

Mayor Pond added some further perspective to the overview.

"Just further to Councillor Randhawa's question, you know it's my understanding that in reviewing what was safe I guess from a business perspective for Legacy to put forward, that we're drawing the max that is recommended to pull out of Legacy this year and for 2024 ... so the practical answer is you would have to cancel some kind of capital project in order to impact, regardless of where it came from, there's no more money to pull out Legacy"   

Councillor Randhawa returned to the theme of using capital project funding towards a break on taxes based on Inflation. 

The Mayor observed on how that would impact on capital spending.

"Anything is possible, but what would have to happen is you would have to propose what it is that we won't do in order to free up that money that's all and if Council supports you ...  there is no more money from Legacy to be had. 

All the money that could be withdrawn from Legacy has been withdrawn so the only answer is to not do something that is in this budget, and that's a legitimate thing. You could not buy a fire truck, you could not buy you know whatever.

Mr. Pond then turned to CFO Bomben to advise if the city was holding back any money from Legacy, her reply provided a synopsis of some of the loan payments that Legacy is servicing.

"No, but I will mention that there is funds from Legacy that is paying for loans that the city took for the dam and took for McBride Street Emergency repairs ... there's other funding that is coming from Legacy to pay for those types of debt"

Councillor Barry Cunningham observed over how the Legacy instrument has benefited the community.

"Legacy has already saved out butt, it's paying in the last budgets and things we did there, we agreed that they would be paying off loans and other things. We passed those motions and now it's getting maxed out, you can't kill the goose that's laying the golden egg you take too much money out of Legacy and it collapses. And then like Corinne says there's a bigger increase"

Councillor Skelton-Morven directed a question to the CFO asking what the tax rate would be without the use of Legacy.

In reply, Ms. Bomben observed how the savings from Legacy impacted on the tax request.

"This year alone there's 3.71 percent in savings that Legacy has provided for, so you just add that on and it would be over ten percent total if we didn't have Legacy paying for some of the capital items ... and that's excluding the utility fees which is a 16.67 percent saving"

You can follow along with the flow of the Legacy conversation on Monday from the City's Video archive starting at the 23  minute mark of the Monday conversation.

Clearly from the Monday night conversation, not all of the council members are fully in sync on the use of Legacy; nor seemingly aware as to the many ways towards how it is used. 

So it shouldn't be a surprise that the public is even less in the loop about the way the Civic administration has been allocating those dividends through Legacy and Watson Island.

That would suggest that a more informative campaign by Council and staff towards this key financial instrument is needed.

Perhaps as they ring in a new year in 2024, Council can make a New Year's Resolution to invite the City Manager and CFO to provide a full public review of Legacy and how it is used, what is considered a proper allocation of the money and where they believe it should not be used.

As was noted on Monday night, tied into Legacy is Watson Island, another instrument for the city that has seen few public updates provided over the years as to the work to turn the former pulp mill site into an Industrial site. 

As the two are so closely aligned, providing some information on the evolution for that industrial island would likely be welcomed by the public as well.

The two signatories to the original creation of Legacy, Mr. Long and Mr. Mandryk are long gone from the municipal scene; so some guidance as to who at City Hall has the final say on how to spend those dividends and who offers them advice towards it might be beneficial to more understanding  of the instrument

As well, providing a published list of each and every time the dividends or funding from Legacy has been put to use since its creation in 2014, as well as guidance towards the current level of the fund compared to the it was created, might also give the Council members and the public a better understanding as to the focus for the instrument.

Something that may allow the public to form an opinion as to whether Council and staff's priorities for the use of Legacy, mirror priorities that residents may have.

More notes from Monday's Council Session can be reviewed from our Session archive.

We have been tracking the month long odyssey by Council towards their Budget vote of Monday night through our archive page here.

As we noted, there have been few mentions of the Legacy Financial instrument during the course of the year, our Legacy Archive offering a bit of a testimony as to how few times the instrument has made for public conversation around the Council Chamber


  1. Mr Long and Mr Mandryk are not really long gone from the municipal scene. As of this morning they are both listed as directors of the municipal company CityWest. It would be interesting to know who is on the board of Legacy Corp at present, best not to assume.

    1. It is time CityWest started paying more to the city. Mr. Long was installed as CityWest boss to raise the payments to the city. We are still waiting.