FORT ST. JOHN, B.C. – In comparison to other municipalities of similar size, Fort St. John is in a very strong—and relatively unique—financial position.
The city receives an annual report on how it compares with other municipalities in B.C. Like heart rate and blood pressure help indicate a person’s physical health, a city’s economic health is analyzed with a series of measurements.
Fort St. John’s uniqueness in a group of 12 comparable municipalities studied stems from one of these measurements: the reliance on transfers ratio.
Of this peer group, Fort St. John has the highest reliance on transfers ratio (which compares the amount of money from another government to a city’s other revenue sources) at 37.15 per cent of its total revenue.
The largest portion of these transfers comes from the Peace River Agreement (formerly the Fair Share agreement) which the province of B.C. signed with municipalities in the region originally in 1994.
The city received $32,735,566 and 37.15 per cent of it’s overall revenue in grant funding from other levels of government overall this year, the most (by a wide margin) of all compared municipalities. The next highest was Cranbrook, which received $7,965,919 (or 13 per cent of it’s revenue).
Last year, the Peace River agreement contributed $25,392,825 to the city’s revenue. The city is also proactive in applying for further grants from provincial and federal governments, resulting in a further $7.3 million beyond the agreement.
The threshold for concern is 15 per cent in this ratio for all cities in B.C. Though Fort St. John’s ratio of revenue from grants to total revenue is over twice the acceptable level, the report notes that this revenue stream is fairly reliable and has allowed the city to develop a major capital program.
Instead of risking the municipality’s autonomy by relying on other governments to fund a town’s operation—the risk attached to operating over this particular threshold— the report states that the capital program would simply be cut if that revenue is reduced.
Thresholds in this report vary for the statistics reported, but generally mark what is an acceptable level or ratio of a particular measure.
The city saw several measurements of financial health in comparison to other municipalities, including liquidity ratio, or how capable the city is of paying its bills; debt service ratio, or what percentage of revenue is used to pay interest and capital on long-term debt; infrastructure life cycles; capital investment; and HR costs. Historical trends of the city’s revenues and expenses were also included.
Fort St. John maintains an above-average liquidity ratio of 3.99—this means that the municipality maintains enough cash on hand to pay its bills nearly four times over. It is found by comparing assets of the city to its liabilities.
Though this ratio is fourth-best within the peer group studied, the city is also operating with low reserves in comparison with other municipalities. At reserves that are 88 per cent of total expenditures this year, Fort St. John was second to last on the list of twelve cities. The average percentage of reserves to expenses was 151.5 per cent.
Last year, the City of Fort St. John’s ratio of reserves to expenditures was 153 per cent.
Large projects, like the new RCMP detachment building, are funded from reserves. During Monday’s committee of the whole meeting, Councillor Tony Zabinsky noted that this was one of the reasons that the number is lower than in previous years.
Other municipalities, according to the city’s Chief Financial Officer David Joy, may be overtaxing their property owners or making plans for major projects themselves. In either case, the threshold for healthy operation is a reserve that equals 10 per cent of total expenditures. The city of Fort St. John is both well over that threshold and, according to the report, well-prepared to handle any issues that may arise.