BC Budget

brandon ma, audit partner, kpmg

On February 18, 2020, Carole James, Minister of Finance, delivered Budget 2020: A Balanced Plan to Keep BC Moving Forward. The balanced budget has an updated forecast surplus of $203 million for fiscal 2019/2020 and estimates a surplus of $227 million for fiscal 2020/2021. Notable general budget highlights include a new tax bracket for the top 1% of income earners of 20.5% for taxable income exceeding $220,000 and PST changes to eliminate PST exemptions on sugary beverages (pop) and new PST registration requirements for software and telecommunications companies. The budget stays within the government mandated commitments of Making Life More Affordable, Services British Columbians Count On, and Building a Strong and Sustainable Economy that Works for Everyone. These commitments and underlying investments may result in additional access to funding, grants, and development opportunities for local governments. A summary of the potentially most impactful elements of Budget 2020 for BC local governments is as follows:

1. Transportation Investment Plan • The Province will continue to make transportation investments, working alongside federal and local governments, with $9.2 billion invested over the next five years in transportation infrastructure. • There are numerous significant investments named in the budget including Pattullo Bridge Replacement, Broadway SkyTrain line to Arbutus Street, Accelerated four-laning on Highway 1 to the Alberta Border, Highway 1 HOV lanes between 216th Street and 264th Street, and Highway 91/17 and Deltaport Way Upgrade. • In addition, Budget 2020 discusses the launch of a South Island Transportation Plan and Fraser Valley Integrated Transportation and Land Use Plan, both assessing the multi-modal transportation strategy in these two geographies and involving engagement with local governments.

2. Housing investment and homelessness initiatives – potential funding opportunity • Housing continues to receive capital investment from the Province. The Province had previously announced an investment of $7 billion over 10 years in its 2018 budget. • $56 million in new capital funding is provided for fiscal 2020/2021 for the development of 200 new units of modular housing for people who are homeless or at risk of homelessness. This new funding is incremental to previous supportive modular housing investments made. • In total $1.1 billion is provided in capital funding to support housing and homelessness over three years. • $118 million over three years is included for housing and homeless initiatives supporting the Homes for BC plan, with a new investment of $50 million over three years.

3. CleanBC investments and potential funding opportunities • New investment of $419 million over the fiscal plan is added to support CleanBC, which is BC’s climate action strategy, bringing the four year total to $1.3 billion. • Electric car charging stations includes $5 million for incentives to install home and workplace charging stations and $2 million for new public fast charging stations.

4. Policing investment • $23 million in new investment towards public safety and crime prevention programs, including police services and First Nations policing for rural communities amongst other items. • $71 million in additional budget over three years to enhance public safety and support services.

5. New municipal tax rate flexibility on designated port properties • Beginning in 2020, municipalities will have flexibility under the Ports Property Tax Act (the Act) to create a new distinct municipal tax rate for designated port properties. This new tax rate will apply in situations where the municipality’s major industry tax rate is below the upper tax rate threshold specified in the Act. • Generally, the Act’s property tax rate cap will not change and will remain at a maximum of $27.50 per $1,000 of assessed value and $22.50 per $1,000 for new investment. • This new tax rate also cannot be higher than the local government’s 2017 major industry tax rate.

6. Auditor General for Local Government (AGLG) • Estimated appropriations for the AGLG has decreased from $2.6 million forecast for fiscal 2020 to $1.8 million budget for fiscal 2021. • Subsequent to the budget release, on February 24, 2020, Minister Selina Robinson (Municipal Affairs and Housing) announced plans to close the AGLG office within a couple of years.

7. Wildfire and emergency management • Wildfire and emergency response, management, and prevention received new annual funding of $65 million, split between $35 million for fire management and $30 million for emergency program. The total budget is $519 million over three years.

8. Home Owner Grant administration • Currently, home owner grants are administered at the local government level. • The budget discusses a measure to centralize the administration of the home owner grant and confirms that the Province will be working with local governments on this. 9. Employer Health Tax (EHT) • There were no changes in regards to the EHT regime and full elimination of MSP premiums effective January 1, 2020. Local governments should continue to incorporate the impact of EHT in their budgeting and financial forecasts.

10 | GFOABC.CA 10. Other • Due to forecast lower than budgeted spend on contingencies from the 2019 budget, excess capacity may be used for accelerated payments in fiscal 2019 to local governments for projects under the Investing in Canada Infrastructure Program. Accelerated payments made will result in corresponding reduced payments in the next two fiscal years. • Real GDP growth is projected to increase from 1.8% in 2019 to 2.0% in 2020, and decreasing to 1.9% for both 2021 and 2022. • Property tax revenue earned by the Province is expected to increase by 4.4% each year over the fiscal plan resulting from assumptions relating to housing starts, non-residential investment, and inflation. • BC’s share of the federal cannabis excise tax is expected to increase to $50 million in fiscal 2021 and to $70 million for fiscal 2022 and 2023. New additional budgeted costs of $18 million have been provided for over these next three years to enable safe implementation of cannabis legalization. • $11 million is provided to fund the public inquiry into money laundering with BC Supreme Court Justice Austin Cullen appointed as the lead commissioner. • Estimated funding for the Ministry of Municipal Affairs and Housing has decreased from $828 million forecast for fiscal 2020 to $650 million budget for fiscal 2021. The decrease largely relates to Local Government related expenditures decreasing from $308 million to $110 million, with Housing expenditures indicating a modest 4% increase from $486 million to $506 million. •

BRANDON MA is an Audit Partner with over 12 years of experience providing assurance and business advisory services. He is passionate about making our clients’ businesses and organizations better. Brandon’s experience spans a broad range of industries, with a focus on all subsectors of the public sector, notfor-profit and technology industries, as well as consumer markets, food processing, and professional associations. He led implementation of the Audit Innovation agenda nationally leads deployment of Lean and Technology in the Audit for the Enterprise practice in the GVA. His diverse experience is an asset to clients in delivering high audit quality and providing valuable data-driven insights.