[0:03] Oh, thank you to the uh welcome to the finance and audit committee meeting uh

[0:08] dated Thursday, September the 10th, 26. Uh thanks everybody for attending. And

[0:14] uh before we get going, I'd like to acknowledge that we begin this meeting

[0:17] by acknowledging that we are gathered on the traditional ancestral and unseated

[0:20] territories of the Inca Capm and the Silks people. Uh item number two,

[0:26] adoption of the minutes from last year, which was October 16th, 2025.

[0:31] Any questions or concerns?

[0:37] Can I have somebody uh move to accept them?

[0:47] those two uh councelor Baxter and councelor Olgan.

[0:54] Moving on to unfinished business. There isn't any unfinished business. Point

[0:58] number four, uh new business policy reserve update. Can I uh hand that over

[1:04] to you, Mr. McN?

[1:10] How do you pronounce your last name? >> CFO. Yeah. CFO. Okay.

[1:18] How do I turn your mic on?

[1:24] There we go. Thank you, chair. So, the intention of

[1:29] today's meeting is to take stock of some of the improvement that we've made over

[1:33] the last three years and provide some foundation and reference for a new

[1:38] 4-year council term that will begin here shortly. So since 2023, we've focused on

[1:45] compounding continuous improvement as it relates to our reserve position. So as

[1:50] we may recall in 2023, we started with half a million in the sewer reserve and

[1:56] water, fire, transportation, parks, wreck, etc. were all zero.

[2:03] In 2024, we focused on adding contributions for water, uh, sewer,

[2:09] uh, and fire into the financial plan. In 2025, we added contributions for parks

[2:16] and wreck. We increased that base contribution for the fire reserve, and

[2:20] we also began reserving any surplus funds within protective services.

[2:26] The actions across those two years yielded and supported a 239% increase in

[2:32] reserve contributions and we leverage that into 2026 by

[2:37] focusing on a contribution for asset management. So we looked at the

[2:42] opportunity to have any development uplift or non-market change allocated

[2:47] between an infrastructure contribution and a lowering of the taxes on the

[2:52] existing rate payers. So these actions have made progress in

[2:58] improving our reserve position. However, when we look at the replacement values

[3:02] in our asset management plan, which I think we're about 350 million, you know,

[3:07] we have a ways to go and we don't have the ability to service uh liabilities to

[3:14] cover all of that infrastructure deficit. So, we need to continue to see

[3:18] compounding improvement year after year in our reserve position.

[3:23] So the policy updates an opportunity to provide that base of reference for that

[3:29] hopefully continuing on of the journey that we've started over the last three

[3:32] years into this next four-year council term.

[3:38] So as it relates to the actual policy, we can certainly walk through reserve by

[3:43] reserve or there's comments and questions that the committee have, we

[3:47] can have some focused conversation on those.

[3:56] Go ahead. Thank you. So I like what I see. Um I understand where we started

[4:02] and where we are right now. Um my only comment would be we are talking about uh

[4:09] 5 7.5 million asset requirement right so

[4:15] and we are contributing only 2.9 million. I would like to know where the

[4:21] the the difference is coming from. So are we talking about taxes and utilities

[4:25] or where are they coming from to to meet that 7.5?

[4:29] » So it will be a combination of those two things. So if there is any surplus funds

[4:34] generated within water sewer from utility revenues we can definitely look

[4:38] at reserving any surplus there but the bulk of this will come from taxation

[4:43] revenues. So this is a infrastructure deficit gap that will have to continue

[4:47] to progress. You don't we can't do it all in one year. We know what that would

[4:53] look like in terms of a property tax increase, but the intention would be

[4:58] that we continue to make progress every year doing better than we did the prior

[5:03] year trying to narrow that gap over a 10 plus year period.

[5:10] Can I just ask uh if when you were go back to what you were saying when we had

[5:15] x number of dollars in the reserve but you didn't have enough to cover

[5:18] liabilities. What do you mean by that? >> So when we look at funding

[5:22] infrastructure over time we're generally looking at a combination of grants, debt

[5:28] and reserves. So our liability servicing capacity is restricted by the province

[5:33] to a certain percentage of our revenues. So we are not able to physically borrow

[5:38] everything that we might need to fund infrastructure over time. So it's

[5:42] essential that we have accommodation of reserves and savings on our own and

[5:47] hopefully some grants and other transfers from more senior local

[5:51] government to help close that deficit. So it'll be a combination of those three

[5:55] funding sources that tries to narrow that.

[6:00] » Anybody else? Well, castor organ

[6:07] something was feed

[6:12] back.

[6:16] » Okay. Uh, anybody else have any comments?

[6:21] » I do. I would just like to Am I on? I would like to know uh your suggestions

[6:27] on how you think we can in increase the reserves other than getting the money

[6:32] from the government and taxation.

[6:36] » Well, that is unfortunately where that is going to come from. So, the only

[6:41] recurring funding that we receive for infrastructure is our gas tax which is

[6:47] about 384,000 a year. And we do reserve that money. We do use that to fund

[6:53] projects across the community primarily in the water and recreation space

[6:58] because we didn't have that reserve or savings position to start with. So while

[7:04] we identified projects over the last few years that needed a funding source, that

[7:09] is what stepped in to fill that gap. But that's the only contribution that we can

[7:15] rely on from more senior levels of government.

[7:18] » Do we use that up every year? So we don't we have been building that up and

[7:23] then we've been drawing that down as we're trying to plug funding gaps for

[7:28] certain projects. >> So if we think about projects that got

[7:32] approved at the civic center, we're investing in the roof and the siding.

[7:35] That million dollars is coming from those funds that we've built up.

[7:39] » Thank you, Council Edard.

[7:44] » No, I like [clears throat] what we see here. I mean, we had a struggle to get

[7:47] to having the established reserves with what we can do and uh hopefully we can

[7:52] see some new commercial revenues coming in through development and hopefully

[7:58] make better planning for future um because I mean right now if we see the

[8:03] 2.9 with some of it coming from interest at least that's an improvement over the

[8:08] either nothing or deficit position. I noticed that this year it had a negative

[8:11] 384 um on the bottom line for our reserve.

[8:16] Was that because of sale of lands? Because I I noticed the 15.9 less

[8:20] 384,000 in the one attachment there. >> You got me to where you're looking.

[8:25] » Um looking at the attachment where it had

[8:28] » Yeah. >> Well, it had Yeah.

[8:31] » Yeah. So I'm trying to give council or the committee a sense of before it gets

[8:35] to council what the reserve activity has been during the year before we get to

[8:40] year end financial statements. >> Yeah.

[8:42] » So we have collected property tax revenues. We have some prescribed

[8:45] savings built into the financial plan. So the column for year-to-ate

[8:49] contributions. >> Yeah.

[8:50] » Reflects those things that were built in to our plan. We've also had capital

[8:55] projects that have been in execution since January. Yeah. That we are

[8:59] penciling funding against even though those entries get booked at your end.

[9:04] » So I'm simply showing that mid year as of July we have used some of the money

[9:10] that is included in our reserve balances.

[9:12] » Yeah. >> To fund our capital program during the

[9:14] year. >> That's what I thought but I thought well

[9:17] I better ask just to clarify it. Okay. And so if if you're seeing that on the

[9:22] unrestricted side, it means that we didn't have a dedicated funding source

[9:26] for those capital projects. We have no choice but to use those funds to cover

[9:32] it. That would have been premised in our financial plan. So there's areas such as

[9:37] drainage, transportation, the cemetery, whole host of areas across the city

[9:42] where we don't have that dedicated source yet. So that is one of the areas

[9:46] that steps in to fill that funding gap. >> Yeah. Because I think in your report you

[9:50] mentioned that the cemetery expansion would come out of the unrestricted. Is

[9:54] that right? Correct. >> Okay. Yeah. Thank you

[9:59] councelor Holden. >> Yeah. Thank you. So um I feel like we

[10:02] need to understand that the city has large future infrastructure costs. So

[10:09] and we need to understand if our savings plan that we have in place is going to

[10:15] meet that demand. that is very very important. So uh in the past prior

[10:22] council uh they were utilizing some of the reserves that's something that this

[10:27] council changed instead of utilizing withdrawing money from the reserves we

[10:31] are able we have been able to put money aside but my biggest concern is that if

[10:36] that money aside is going to be enough you know when we consider a future cost

[10:41] it's again it's difficult to understand what is going to be the future cost for

[10:45] this specific infrastructure but the the better that we get the right and the

[10:51] accurate amount the easier is going to help us to set up a goal to meet that

[10:56] goal. So it's like >> that's money right? So we have to move

[10:59] around be able to uh save where we can and and try to not to spend when we are

[11:05] not.

[11:09] » So the asset management plan does reveal that annual requirement being about 7.5

[11:14] million. it doesn't fully factor in the true cost of the wastewater treatment

[11:19] plan. So that implementation project is currently ongoing within the

[11:23] infrastructure team. I expect that number to be even higher than that 7.5

[11:28] million by the time the full cost of that plant is reflected. So the journey

[11:33] that we've been on is every year trying to do better than the prior year as we

[11:38] try and narrow that gap. So yes, we know that we need to be somewhere north of

[11:43] 7.5 million at a certain point in the future.

[11:48] As you can see in the graph, you know, we were starting with basically saving

[11:52] the gas tax. So that point4 reserve contribution in 2023 is the gas tax and

[11:58] nothing. We've increased that to 1.9 to 2.5 to

[12:04] 2.9 every year trying to do better than the prior year. Keeping in mind that

[12:11] some of these years also had doubledigit tax increases. We didn't have the

[12:15] ability to exceed or go beyond contributions that we saw here. So yes,

[12:23] there is a gap that we need to continue working on over time every year trying

[12:29] to increase that contribution rate getting closer and closer to the seven

[12:33] and half. >> Thank you uh Mayor Gats.

[12:40] Uh Kevin, can you explain how the EMCR money comes in for flood mitigation? I

[12:47] know we don't get it all at once. I think we get it as we return in our

[12:50] receipts and stuff like that, but sometimes it comes in in a chunk. How

[12:53] does that all play into uh it work? Do we do we put it in an account where we

[12:58] can gain interest off it as it sits there? And I'm curious, are we allowed

[13:02] to take interest off something like that or is there rules against that? So

[13:06] there's a myriad of complex agreements as it relates to funding that entire

[13:11] program and they're all a little bit different in terms of you know what is

[13:15] prepaid and what has to be claimed and reimbursed to the municipality. There

[13:20] are a few sizable chunks that have come in that we do earn interest funds on and

[13:26] every year end I come before council with resolutions to place the interest

[13:32] funds into reserve. So, if you're looking at the chart in the staff

[13:38] report, there's a non-recurring contribution section that I've kind of

[13:41] penciled out. So, some of the interest funds would have been included in that

[13:48] non-recurring piece, and those don't get booked until year end. So, I'm kind of

[13:54] focused on the base contributions for the rest of the city's infrastructure.

[14:00] We are saving some of the interest funds on those monies that will be needed for

[14:06] some of the projects coming up that might have a city contribution that we

[14:11] have to come up with. So that will come before council at some point here in the

[14:16] back half of the year. Um that that currently is in progress and

[14:22] conversation with province. We anticipate some projects requiring a

[14:27] city portion and hopefully being able to use some of that interest money that we

[14:31] have saved towards those projects.

[14:37] » What projects might those be? I don't know if we're wanting to get

[14:43] into I'm looking at the CAO to see, you know, we're we're kind of in early

[14:47] reviews of some of that framework that's being discussed like overall projects or

[14:52] are we talking projects in particular? So, the ones in particular in which we

[14:58] have a draft agreement. >> Yeah. And I think there's still lots of

[15:02] work being done on schedule and that and >> so you're unable to release that. Well,

[15:07] I don't think it's all complete yet. And when when is

[15:11] » I'm not asking for explicit details. I'm just thinking in what areas are we

[15:15] considering those projects in like is it infrastructure? Is it dyking? Is it

[15:20] » be dking infrastructure? >> Okay.

[15:23] Thank you. Anybody else have any comments?

[15:26] » If I may. >> Yes, you may.

[15:28] » Um, thank you, chair. the I believe the last asset management plan probably

[15:33] identified if I recall a similar gap in funding and more to your question of are

[15:39] there other sources of funding. Um, yes, taxation grants are sort of the basic

[15:45] things, but the other way to would tackle this is very much like you would

[15:48] in your own home where you put some sweat equity in the things and we're

[15:51] having good success, you know, last year in a couple of projects being the

[15:55] removal of the bridge and the lineup for the Nicola Reservoir with Shana Alley

[16:00] water main. Those projects by us putting our hands on them and thinking outside

[16:04] of the box to deliver them are going to create some very significant cost

[16:08] savings over the original standard budget and standard way of delivering

[16:12] the project. We're also doing the same thing with the water meter project.

[16:16] We're trying to switch a four $4 million project into a $3 million grant and

[16:22] we're doing some of the work ourselves and and trying to find ways to economize

[16:27] and make some better decisions on how it goes instead of just send it out to a

[16:31] contractor pay an extra million dollars over top of the grant. So I think

[16:35] overall when we talk in the future the other way to handle it is to find ways

[16:41] to economize how we deliver projects in a lot of lot of cases and some of the

[16:45] good theories on that are challenge the status quo on how they get tendered and

[16:50] delivered. It's also a challenge the status quo on whether or not we need

[16:54] contractors to do them or is it something we can put together a small

[16:57] cost effective crew to just mainline some sewer pipes and things like that

[17:02] that you know might be you know 40 50% the cost compared to full contract. So

[17:08] lots of things we can do and we'll have to consider that side of it as well as

[17:12] other sources of money and that's going to make make it successful in the long

[17:16] term. >> Thank you.

[17:24] Just to clarify, I'm not hearing any changes that might need to be made

[17:27] before this goes in front of council for broader consideration. Overall, the

[17:31] committee's comfortable taking into >> I think so. Yeah.

[17:36] » So, ideally, we'll get this in front of council before the new four-year term

[17:39] starts.

[17:43] » So, these are the the main areas u under minimum and maximum balances.

[17:49] asset category, replacement cost. Those are the main um areas of our reserve

[17:56] that we're focusing on. So, I've tried to just give some context for each

[18:00] reserve as to how to think about planning in the financial planning

[18:05] process or saving some funds. when we include some of those longer

[18:10] term planning benchmarks, it's not that we're going to necessarily be able to

[18:14] accumulate that much in the reserve given our starting position and and

[18:18] we're not trying to have unrealistic expectations that we will be able to do

[18:22] so. But we should have notional ideas of how much is required for water, sewer,

[18:27] transportation, and other areas. So that when we're deciding things like the

[18:31] parcel tax uh increase for the year, for example, we can decide, you know, the

[18:37] prior year we did a $20 increase. Can we do a 25 or a $30 this year in that

[18:42] spirit of continuous improvement? Or are there other challenges within the base

[18:48] budget for the city that don't allow us to consider that? That'll continue to be

[18:52] a council decision as we go through the budgeting and financial planning

[18:56] process. But hopefully in that spirit of continuous

[19:00] improvement, we can try and make decisions that provide that

[19:04] year-over-year sequential improvement that will compound over time to

[19:09] something that, you know, narrows that infrastructure deficit. That's the goal

[19:13] and intention. >> Okay. Are you are you wanting this

[19:16] committee to make recommendations in certain areas? No. Okay. No, it'll still

[19:21] be all of council that'll decide that in the financial planning and budgeting

[19:24] process. Okay, that's good. >> More so that you agree that this is a

[19:29] reasonable base to reference and provides foundation for decision making.

[19:34] » Yeah. Yeah. Do anybody else have any comments?

[19:42] Councelor. Um, I just think given where we've come from, I mean, in 2021,

[19:48] we hoped to have a reserve policy set up where we had reserves, but unfortunately

[19:52] the budget had to be redundable about five different times that year due to

[19:56] the flood. So, um, I think given the circumstances that we've been fortunate

[20:00] enough to make [clears throat] it this far without I don't even want to jinx

[20:04] anything by saying it, but because we haven't had the major, you know,

[20:08] pandemic or disastrous flood so far. Um, so yeah, that um it's not what even

[20:17] though we're not at the 7 and a half million that we should have every year,

[20:19] at least the 2.9 is the start, at least we're halfway

[20:23] there. And I think that um leaving this for the next council to kind of improve

[20:28] on would probably be the best course. And maybe some of us will be there,

[20:32] maybe not. Who knows? >> But I appreciate the work that you put

[20:35] in >> and

[20:38] » overall, I think it looks good the way it is. Thank you. I would tend to agree,

[20:42] but good work.

[20:46] I don't know what else to do. I think that's it.

[20:51] » Pardon me. >> Read the recommendation. Oh, yes. The

[20:55] recommendation is that the audit and finance committee recommends that the

[20:59] city of merit reserve policy be forwarded to council for consideration.

[21:04] Council Edart. Councelor Olen. Thank you. All in favor?

[21:09] Gary >> termination of meeting.

Finance and Audit Committee - September 10, 2026

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