Dollars & Sense P e r s p e c ti v e
Issue #112 • September 2020
Virtual Boot Camp The Staycation Economy Practical & Tactical Asset Management
p r es i d e nt ’ s m es s ag e in this issue President’s Message 2 Executive Director’s Message 3 I Survived the First Virtual Boot Camp 4 Committee for Canadian Issues 5 MFA’s Corner 6 Economic Outlook Q3 8 Practical & Tactical Asset Management 12 Going Out to Market For Your Group Benefits Plan 15 What Do You Mean? How to be Sure Your Readers Understand You 17 What Your Local Government Should Know and Do in a Hard Insurance Market 18 Does Automation Complete the Finance Solution Puzzle? 20 Collectors’ Corner 22 Quarterly Question 23 Thank You Exhibitors 25 Thank You Sponsors 26
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nother newsletter already! Looking back on the last few months…. I would have rather hit fast forward. I suspect some good will come of this pandemic, perhaps more emphasis on innovation, alternative service delivery models, working from home and work life balance. I suspect many of you are also suffering online meeting fatigue. While it is great to see faces, logistically it is difficult to have efficient meetings. Recent meetings have reminded me of the level of support that municipalities receive from different organizations and how well they work together. Admittedly, I visited their websites to explore the resources I was unaware of and I encourage you to do the same. The session, hosted by LGLA and MIABC, included panelists from BCAA, CivicInfo, LGMA, MFA, MIABC, UBCM and GFOABC. I have also been reminded of how much talent and dedication the GFOABC Board members bring to the table. Many volunteers, companies and organizations add value to our communities through supporting financial excellence. I am appreciative that in local government we not only look to serve the citizens of our communities, but also work together to strengthen the systems and organizations that support each other to better serve.
We have seen property tax collection and liquidity concerns diminish, but are still monitoring 2020 operating impacts and implications to financial reserves. Focus is turning to the 2021-2025 budget, with continued uncertainty, pressure on tax increases, increase in service costs and questions about capital spending. Workplaces and society in general are becoming increasingly concerned while focusing on mental health. With pandemic related funding ending or being reduced the strains and stresses on businesses, families and support systems will become apparent. Interesting times. Comforting to know that you are all there for your communities and each other. Trevor Thompson, BBA, CPA, CGA Director of Finance
Board of Directors President Trevor Thompson Vice President Lorraine Coughlin Secretary-Treasurer Nyla Attiana Past President Genelle Davidson Staff Kala Harris, Executive Director Kisha Pellerin, Manager, Operations and Member Services Gerilee McBride, Graphic Design
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n the lead up to our first virtual conference in June, it was increasingly clear that the “new normal” brought on by COVID-19 would be virtual. Every year, immediately following our annual conference, we quickly turn our attention to Boot Camp. This year was no different except of course that we had the added task of finding a way to virtualize this intensely interactive 5-day residential program. Like the annual conference, the transformation needed to be undertaken without hesitation. In “normal” years, we would welcome attendees to the program at the University of Victoria, it would be sunny and warm. Attendees would spend the early hours of the program getting to know their teammates, getting an overview of the program, and learning about the important role of the local government finance officer. Usually by Property Taxation day, everyone is settled into the rhythm and rigor of Boot Camp’s long days followed by late nights—sometimes later than required by the program, but I digress. By this time, everyone has grown accustomed to the many luxurious amenities that university dorm life has to offer and are well on their way to competing for the coveted Golden Boot. From my vantage point things played out very much the same way for Virtual Boot Camp in many respects as we all became a little more familiar with the intricacies of the Zoom platform. By Property Taxation day, attendees were zooming in and out of the breakout rooms with ease, they were fully in on decorating their virtual team tables with colorful and imaginative backgrounds representing
team colors and sometimes over the top characters, Joe Exotic and a burgeoning bromance. We had glimpses into the lives of a few attendees with cameos of kids, pets, and someone in pajamas, who will remain nameless. Attendees stayed engaged right to the very end thanks largely to the Financial Accounting & Reporting dream team, Chris Paine, Mario Piroddi and Carolyn Gillis. Feedback from attendees was overwhelmingly positive. Congratulations to the Red Team, this year’s Golden Boot Camp winners and this year’s Deb Humphrey Scholarship Award winner, Ryan Carter, Director of Finance for the Northern Rockies Regional Municipality. And a big thank you to this year’s Boot Camp class for rising to the challenge of a virtual Boot Camp! Thank you to the faculty and guest presenters who shared their knowledge and expertise with this year’s Boot Camp cohort and took the added time to strategize the virtual delivery with us. A big round of applause for this year’s faculty presenters: Nyla Attiana, District of Tofino; Kevin Bertles, City of Armstrong; Myriah Foort, Comox Valley Regional District; Carolyn Gillis, Regional District of Kootenay Boundary; Shelley Hahn, MFA; Lauren Kerr, MFA; Rianna Lachance, Capital Regional District; Jennifer Lockhart, City of Victoria; Chris Paine, District of Oak Bay; Mario Piroddi, BDO; Talitha Soldera, Cowichan Valley Regional District; Doug Stein; Farouk Zaba, City of Port Coquitlam. And lastly, thank you to my colleagues Kisha Pellerin and Lya Iglesias for their assistance in delivering this year’s program. Kala Harris Executive Director SEPTEMBER 2020 • DOLLARS & SENSE PERSPECTIVE | 3
I Survived the First Virtual Boot Camp
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y peers in the North Okanagan lauded GFOABC Boot Camp as essential training for Financial Officers. I, on the other hand, was quite skeptical when I found out that it was to be a virtual presentation because of COVID-19 restrictions. Being a relational person, I couldn’t fathom how logistically the interaction between instructors and attendees would result in a high degree of success for education or networking purposes. I just would have preferred to interact with my cohort on a personal level. I was pleasantly surprised that I could engage with a screen for that many hours a day. It was exhausting yet exhilarating. The instructors utilized the technology famously and the moderators encouraged contributions from all participants. The virtual platform was actually very effective and the comprehensive scope of information, although overwhelming because of the information overload, will be indispensable to me in my role as a Finance Officer. Fortunately, participants receive excellent documentation in the form of guidebooks for each session and if there was something not covered in the material, links were provided to other resources. That in itself was absolutely invaluable. Presentations were made on the fundamental roles of a Finance Officer including; budgeting, financial planning, property taxation, sources and uses of funds, financial accounting & reporting etc. A broad range of individuals such as; expert CFOs, seasoned auditors, and representatives from various Ministries, BC Assessment, MFA and CivicInfo BC delivered these sessions. Virtual break-out rooms were available to teams for discussion, assignments and networking. Throughout the whole Boot Camp there was a fierce competition between the teams to secure the coveted Golden Boot. My Red Team were prolific posters on the social media walls and worked diligently at garnering all the extra points we could muster. Leading in points throughout
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the daily grind Red did fail miserably at our skit, and watched from the back of the pack, as the Yellow Team’s rendition of “Yellow Submarine” swooped to win all the accolades of the judges. Ultimately, we did prevail and were awarded the Golden Boot for the class of 2020. Overall, Boot Camp was a fabulous experience that I can confidently, highly recommend no matter what delivery method GFOABC decides to use. My binder of Boot Camp documents is already well worn and will be utilized regularly throughout my tenure as a Finance Officer. •
DORI ALGER joined the Village of Lumby as the Manager of Finance/Financial Officer in early October of 2019. Previously, she spent two years as the Controller for School District 60 in Fort St. John and ten years at the City of Prince George as a Budget Analyst and Fleet Administrator.
Committee for Canadian Issues: What is the CCI You Ask?
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s some of you may know, I was elected to the Executive Board of the Government Finance Officers Association of the US and Canada (GFOA) in May 2020. I am honored to fill this position as one of the two representatives from Canada. After the election, our President, Marion M. Gee, appointed me as chair of the Committee for Canadian Issues (CCI). What is the CCI you ask? I have been sitting on this committee for three years and we have been asking ourselves the same question! The CCI is made up local government finance representatives from each Province or Territory along with the Executive Directors or their alternates from each of the Provincial/National Associations – GFOABC (which we are all familiar with), Alberta GFOA, Municipal Finance Officers’ Association (MFOA) in Ontario and the Canadian Association of Government Finance Officers (CAGFO). The CCI has spent the last couple years working on a strategic plan and determining how the different organizations can work together to be able to best serve the local government finance staff across the country. While I am hoping to finalize this work in our virtual committee meeting in October, I would like to share with you what direction we are looking at. The GFOA has a clear mission to advance excellence in public finance.
The CCI supports that mission with a Canadian focus and strives to ensure the local government finance staff have access to the training, networking opportunities and resources they need to serve their organizations and communities. Some provinces including BC, Alberta and Ontario are well served by their provincial organizations. But there are many issues facing all local governments that transcend provincial boundaries and call for sharing of information, training or resources. CCI is working to not only to bring the groups together to share that information, but also determining how we can get that information out to others that don’t have a readily accessible resource like GFOABC standing by to help them! Difficult times like the COVID-19 pandemic have highlighted our similarities and shared struggles whether you are in Lake Country, BC or West Hants, NS. The CCI has some work to do in this term and I am excited to get going. GFOA also offers access to training, networking and resources. Please visit their newly re-designed website at gfoa.org to look at the Fiscal First Aid resources, best practices, register for upcoming webinars and consider becoming a member. GFOA also has opportunities to join targeted task forces and are always looking for a Canadian perspective on various issues.
My time with GFOABC and the connections I have made has been instrumental in not only my election to the GFOA Board but also continues to drive my desire to give back to the profession. Local government finance may not have started as a preferred career choice for many people but has become a calling for those committed to making a difference in their communities. If you are interested in learning more or getting involved with CCI or GFOA, please contact me! •
TANYA GAROST accepted the position Chief Financial Officer for the District of Lake Country in 2016 and is now the Deputy Chief Administrative Officer as well. With 18-years in local government finance, her past positions include GM of Finance and Corporate Services for the City of West Kelowna, Director of Finance for the Thompson Nicola Regional District and Revenue Manager for the City of Kamloops. Tanya has been involved with the Government Finance Officers of British Columbia since 2009, starting out by teaching courses and then sitting on the Board and eventually becoming President in 2017. Tanya now sits on the Executive Board of the Government Finance Officers Association of United States and Canada and is the Chair of the Committee on Canadian Issues.
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m fa ’ s c o r n e r When Analyzing My Investments, How Do I Categorize MFA?
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ver the past several months, we spent a lot of time developing a sample Local Government Investment Policy. As part of that process, we considered what were logical and prudent constraints for a local government investment portfolio. Like the policy we developed, a well-crafted policy includes limits on credit ratings, issuers, types of issuers, and sometimes specific investments. From that perspective, it is key to understand how an investment is classified. Commonly we are asked, “How do we categorize MFA?” The answer is essentially two-fold. First, you must distinguish between bonds issued by MFA (Bloomberg ticker: BCMFA) and Pooled Investment Funds (PIFs) offered through MFA. Although a local government may purchase BCMFA securities (generally in the secondary markets, through a broker) – it is very uncommon. BCMFA is classified as a AAA-rated ‘Municipality’ (or alternately a ‘Public Sector Funding Agency’). However, local governments are more likely to purchase PIFs offered through MFA. MFA Pooled Investment Funds contain dozens to hundreds of securities from a variety of issuers
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– which provides instant diversification. When you buy units of MFA PIFs it is not a single security nor exposure to BCMFA, but rather a very large number of securities which have varying characteristics (credit/issuer-type). You may be asking, “In that case, how do I categorize MFA Pooled Investment Funds?” It is fairly straight-forward to calculate your credit and sectoral (issuer-type) exposures using two documents: (1) your latest MFA Pooled Fund Statement, and (2) the latest monthly Pooled Fund Performance Results document available on our website. To calculate your credit and issuer-type exposures when holding MFA Pooled Investment Funds, you will need to complete a simple weighted-average calculation. As illustrated below:
If you need assistance with this calculation, we have developed simple calculators to help complete this assessment. Please feel free to contact me or anyone on the MFA team if you have questions about this process. Lastly, a similar question may be, “What about Pooled High-Interest Savings Accounts (PHISAs) offered through MFA?” MFA offers two PHISAs – one through National Bank and the other via CIBC. Those are exposures directly to those financial institutions and their associated short-term credit ratings (R1-M and R1-H respectively). Accurately categorizing MFA and completing a simple weighted-average calculation of your Pooled Investment Fund holdings provides a local government investment professional with a clear view of their portfolio’s credit risk and sectoral concentration. This information is important to ensure the risks you are taking are commensurate with the yield you are receiving. •
KYLE DERRICK is the Credit & Economic Analyst at MFABC. He is a MBA graduate from Royal Roads University. Further, he earned an undergraduate degree in Business Administration (finance) and holds a Certificate in Economics.
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e c o n o m i c o ut lo o k q 3 The Staycation Economy
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here did you spend your 2020 summer vacation? Here’s a guess — it wasn’t far from home. If you fled to a cottage, a campground, or your own backyard, you were in good company. That’s all owing, of course, to the fear of flying, the barriers to driving somewhere more distant, or cancelled events during the pandemic. For Canada’s hospitality sector, that represented a deep shock to demand, particularly from the loss of US and overseas tourists during the peak summer season. Depending on the timing of vaccine approval and deployment, that hit could stick around for summer 2021 as well. Make no mistake, this will, overall, be a negative for the economy, such an obvious point that the nearterm damage is not really our focus here. But there are some other twists that will play out in this story that will provide a partially offsetting silver lining to these economic clouds, tied to the spending power of those still working who would have taken more costly vacations. And there may be some new factors in terms of how quickly travel rebounds relative to past recessions.
year level in April and May. By July, the numbers should look better, since an easing in social distancing rules allowed for a bit more activity. Still, there were barriers to cross-province travel, some official, others from social pressure, and many tourist attractions were still closed in the summer.
Fear of Flying, Difficult Driving Some of the data for this summer’s tourist season is still forthcoming, but what’s available paints a dramatic picture. The number of tourists entering Canada was down 97% in April and May from year ago levels; Canadian tourists returning from visits abroad were down 96% (Chart 1). Not only were road borders shut tight, but despite reassuring steps by airlines and airports, many either feared flying or didn’t want to put up with quarantines at their planned destinations. Those destinations would have included locations with shuttered attractions, or cancelled events. The overall tourism industry didn’t see quite as large a drop as cross border travel, but the GDP of the accommodation sector was still running at only a third of its prior
Diverted Dollars While tourism is an important sector at home, Canadians still spend a lot more abroad than foreign visitors spend here (Chart 2), so there’s a potential silver lining for the trade and current account when travel shuts down. The trade deficit in tourist spending has lightened up in recent years, as indebted Canadians and a weaker currency depressed our travel abroad, against continued growth in inflows. Still, in 2019, Canada ran a deficit of over $10 bn (or roughly 0.5% of GDP), as a nearly balanced picture in the summer is trounced by the deficit in the winter quarter. That’s a big contrast with other major economies, particularly parts of Europe and Australia, where a two way travel freeze will entail losing a major net surplus.
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some of the funds that would have been spent on travel will end up, for now, not being spent. But a higher savings rate and less consumer debt being accrued during the pandemic will leave a reserve of spending power for when COVID-19 isn’t a threat; including funds that might have been spent outside of Canada had the pandemic not hit.
The travel deficit accounted for almost a quarter of Canada’s overall 2.0% of GDP current account deficit last year, so narrowing it is a plus for the Canadian dollar. That said, the overall current account is likely to remain well into deficit as imports delayed by pandemic bottlenecks arrive at our ports in the coming months, while the value of exports is held back by softness in oil prices. In the winter quarter, the travel trade gap balloons to 1.0% of GDP, including Canadians spending 2.3% of GDP outside the country. If those dollars get diverted to spending at home, that could be a significant lift to the Q1 growth rate. While a January day in Winnipeg or Toronto might not seem to be a close substitute for Florida’s beaches or Arizona’s golf courses, much of that spending diversion could come simply from snowbirds who normally winter in the south opting to stay at home. They will be buying their gasoline and groceries here, keeping the heat running full blast in their Canadian homes, and purchasing other essentials. There could even be modest spillover benefits to Canada’s tourism sector, offsetting some of the drop in visitors from abroad, if families take the kids skiing locally rather than on a school break trip south, for example. To be clear, that’s still not going to make 2020/21 a winner for Canadian tourism and related activities. That said, Canadians have also been paring back consumer borrowing and increasing their savings. The combination of limited options for “experience” spending, high debt levels and concerns over job security suggests that
Plans in the Works The winter season is still months away, but the lack of sufficient progress on the virus in key US winter travel destinations (Florida and California most notably) suggests that Canadians, particularly retirees, will be wary, even if the border is reopened by then. Uncertainties about health insurance coverage or medical care standards could have some also shying away from non US destinations abroad. Some European countries are reinstating cross border travel restrictions in the wake of upticks in virus case counts. The data still lean towards a major constraint on travel ahead, particularly across borders. Its notable that Americans, who have the option of leaving their home country for destinations with much lower infection rates, are reporting an even greater reduction in travel intentions abroad than at home (Chart 3). Perhaps that’s due to the need to get on a plane, or simply the recognition that other countries, including Canada, might not welcome them in the next six months. According to a Destination Canada Survey, only 10% of Canadians would welcome the idea of seeing foreign visitors in their communities (Chart 4).
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for years, but should have no more of an impact on travel than other low-odds exposures or risks that travelers always assume. But will travel demand then come roaring back? Typically, household discretionary spending like travel comes back with a lag after a recession (Chart 6), taking longer to recover than overall consumption. That’s due to the loss of incomes during the slowdown. Travel is, after all, to some extent a luxury. But there are a few reasons to be more optimistic about the recovery path after this pandemic recession.
Canadians are also not rushing to get in the travel spirit. Airline booking data is a forward-looking indicator of future passenger volumes, and thus far Canadians are showing little inclination to venture onto planes. That said, domestic travel is showing more of an improvement than flights abroad, reinforcing our view that some foreign travel will be diverted to local spending (Chart 5). Note that according to Destination Canada, domestic travelers already represent 78% of the country’s tourism sector, although much of that would be in the summer.
The Aftermath Progress towards a vaccine continues to give us hope that, by 2022, or sooner if an effective therapy is found, COVID will become much less of a constraint to travel. A very slow trickle of cases of this disease might remain 10 | GFOABC.CA
For one, the labour income rebound is going to be quite steep compared to past recessions. That’s partly, of course, simply due to the depth of the unemployment trough, but also due to the fact that an all-clear on COVID19 could see a nice snap back in activity and jobs in sectors where underlying demand would have been better if not for health restrictions on supply. As well, the strains on household finances during the crisis, while material, were better cushioned relative to past recessions due to extraordinary levels of government support through programs like the CERB and wage subsidies for employers. Second, in the case of leisure travel, we’re looking at an activity that, pre-COVID had been growing faster than GDP across the globe. In that, households were showing what economists call their “revealed preference” for devoting more of their consumption towards “experiences” over goods, and there’s no reason to believe that tastes have changed.
Third, and most important, the trough in travel demand in this year’s recession differed from that of past downturns. In addition to the hit from weaker incomes, travel activities were curtailed for those who were willing and financially able to travel, but prevented from doing so due to health restrictions or fears. That’s a source of pent-up demand that would not have been building in past recessions, when those still working and financially able would have continued to travel. They might now be dying to go on vacations again, but for now, are not willing to risk actually dying for their vacation. Post COVID, we expect those frustrated travelers to quickly return. We’re therefore skeptical of a Bank of Canada survey that came to a different conclusion (Chart 7), with Canadians saying they intend to hold back on travel even when the current situation “normalizes”. For one, such surveys of spending intentions, or even survey data on actual spending, often fail to square with the aggregate data. That could reflect a well-known bias in surveys, in which respondents lean towards giving what they see as the more prudent answer rather than what they actually do, claiming they eat fewer calories, exercise more, and after a recession in particular, avoid spending on non-necessities like travel.
failing to consider what savings they might have piled up while they aren’t travelling. One part of the travel sector might not, however, return to its full former glory. According to Statista, business travel accounts for nearly 40% of the GDP contribution of tourism in Canada. Some of that is devoted to meeting key customers, touring facilities, and activities that have significant value added. Zoom has been around for nearly a decade and even so, virtual conferences were hardly dominant. We’re very much looking forward to seeing our clients in person when COVID is no longer a threat. But the use of technology to substitute for traveling to intra-company meetings might linger as a cost saving measure now that it’s successfully been put to the test during the pandemic. Travelling to meet your own employees face to face might be seen as more of a luxury in the years ahead. • Sources: Bloomberg, Statistics Canada, Bank of Canada Alberta Treasury Board of Finance, CMHC, CREA CIBC World Markets Inc. JAMES HOBSON, CFA, PM, First Vice-President, Portfolio Manager, Investment Advistor & Chairman’s Council Member 403-2600574 james.hobson@cibc.ca
CHARET CHAHAL, CIM, Portfolio Manager, Investment Advisor & Chairman’s Council Memeber 403-260-0440 charet.chahal@cibc.ca
Second, respondents might not have interpreted the key phrase in the question, “when the situation normalizes”, to understand that they were being asked what they will do when COVID has been fully vanquished, or
This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2020. CIBC Wood Gundy is a division of CIBC World Markets Inc., a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. James Hobson and Charet Chahal are Investment Advisors with CIBC Wood Gundy in Calgary The views of James Hobson and Charet Chahal do not necessarily reflect those of CIBC World Markets Inc. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor. Clients are advised to seek advice regarding their particular circumstances from their personal tax and legal advisors.
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Practical & Tactical Asset Management: The Benefits of an Asset Management Strategy
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ecent events have once again reminded us of the challenges faced by municipal practitioners as they juggle their numerous responsibilities. The introduction of asset management is intended to create efficiencies, yet it initially requires a lot of time and organization to develop a comprehensive asset management program. Far too often, one or two staff members from a single department are tasked with the development of an asset management program when it should be a corporate-wide effort. An asset management program can involve several different components – staff and resources, data collection and centralization, business processes and policies, to name just a few. However, a key document that is often neglected may be the solution to building a holistic asset management program with cross-department initiatives: The Asset Management Strategy. The Asset Management Strategy develops a clear direction for the corporation with coordination across the entire organization. It helps advance maturity through an analysis of the seven core asset management elements as seen in the figure below. With these core elements in mind, an organization can take three key steps to develop an Asset Management Strategy. The first step 12 | GFOABC.CA
Strategy & Planning
Financial Strategies
Organiza0on & People
Levels of Service
Asset Data & Informa0on
Risk Management
is to assess the current state of asset management within the organization. With all the key players from each department identified and brought together – perhaps in the form of an asset management committee – you can begin to identify the gaps within your asset management program. Reflecting on the seven core elements, gaps can be identified in missing strategic or planning documents, processes, protocols, policies, etc. The second step is to define a practical and achievable future state of maturity. Based on a review of best practices from other similar organizations, the team should be
AM Decision Making
able to identify meaningful changes that can be made to achieve feasible goals. The participation of members from across the organization will help create a consensus about what goals are realistic. The third and final step is to develop a strategy with specified initiatives, tasks, timelines, and ownership. Once the team has identified the feasible goals, they can begin to define the initiatives with specific tasks assigned to staff members with reasonable timelines. A comprehensive strategy can be developed with a thorough and continuous analysis of corporate maturity within each core asset management element.
Several critical initiatives, under each core element, can emerge from an Asset Management Strategy that can be aligned through a coordinated project timeframe to ultimately provide a roadmap that will develop, establish, and maintain an effective asset management program. As an example, the City of Port Coquitlam took a structured, and sequential approach to developing its asset management program, beginning with an asset management strategy. A key initiative that came forward under the “Asset Data and Information” core element was a thorough improvement of centralization of asset data through standardized field data collection techniques. To move this forward, PSD developed customized data collection templates along with technical and qualitative condition assessment guidelines for each of Port Coquitlam’s asset groups. The templates and guidelines allowed the City’s own staff to collect pertinent asset information and close identified data gaps. This has led to a more complete, streamlined asset register, with essential asset data that includes valuation, attributes, and field condition. With this data, the City’s projected asset investment needs have also become more accurate and credible. Staff continue to use the templates and guidelines to collect asset data. Following the completion of the data collection and refinement exercise, the City will continue to work with PSD to develop comprehensive asset management plans for each of its service areas. The development of an Asset Management Strategy for any municipality will require good communication and participation from key players across every department, honest and comprehensive identification of gaps, and realistic and achievable goals. The three steps outlined above, define how an entire organization can create a suite of tactical and practical initiatives as part of a holistic strategy to bring a higher level of maturity to their asset management program. Such efforts ensure that assets continue to provide value to a community today and for future residents. •
ERIN ORR, MA, is a Research Analyst at the Public Sector Digest. She completed her master’s degree with Western University in Political Science, specializing in Canadian Policy and she is completing a certificate in Climate Change Policy and Practice from University of Toronto’s School of Continuing Studies. In her role at PSD, Erin’s research focuses on municipal sustainability as it relates to climate change adaptation and asset management. Recently, Erin led the research for a case study series on the integration of climate change and asset management in Canadian local governments in collaboration with CWN, CWWA, and FCM.
JOHN MURRAY oversees the development and implementation of asset management programs and plans for local governments and other public sector organizations across the country. As a leader in asset management, he facilitates knowledge exchange and collaboration with municipal experts and industry leaders, both nationally and internationally. Previously, John was with the City of Hamilton’s Public Works department for 20 years and has extensive experience in infrastructure management practices and computer information systems. John represented the GTA and Hamilton on sustainable infrastructure issues as part of an expert panel for discussions with the Organization for Economic Co-operation and Development (OECD). He is the Past President of the Canadian Network of Asset Managers (CNAM) and is currently a member of FCM’s Municipal Asset Management Program (MAMP) Technical Working Group. John has completed his certification in Asset Management from the Institute of Asset Management (IAM).
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Going Out to Market For Your Group Benefits Plan
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onsidering Going Out to Market for Your Group Benefits Plan? – Look at Pooled Arrangement Not happy with your current renewal rates?! When it comes time to renew your employees’ benefit plan, an unreasonable increase in premiums might have you wondering whether or not you are better off going out to market and changing your insurance company. What no broker and/or insurance agent is going to tell you is that this will almost always end up working against you by the second year. Changing from one insurer to another, changes nothing – it just may make things worse for you as an employer – no insurance company is in the business of losing money for an extended period! There are many factors that go into a renewal, the biggest of which are claims experience, insurer trend and utilization, as well as claims reserve, administration expenses, demographics and credibility. Each insurer and/or advisor have their own way of setting renewal rates and addressing these factors that is why it is important to avoid treating each of these factors individually. They must be considered together. As an example, one insurer might have a lower administration expense than another, but a higher trend factor, which may lead to a higher overall position. So, what are some of the longer-term solutions to this problem? Advantages of Belonging to a Pooled Arrangement Many employers that UBCM have spoken with are not aware about the advantages of a “pooled option” when going to market to purchase an employee benefit plan and how it can often be the better option. The concept of a pooled arrangement is that a group of similar organizations support each other during high and low claiming years to keep premiums stable and affordable because not everybody has high claims at the same time. Insurance is about risk sharing, the risk being an
unexpected financial loss. The larger the group, the more predictable the loss and therefore the lower the risk. There will always be winners and losers. It’s kind of a fundamental principle, but chances are that today’s winners will be tomorrow’s losers. The key is to find a well-managed pool where risks within the pool are prudently managed. Members with high claims should be managed and should pay more over time. Better Plan Designs and Elevated Service Standard The UBCM pooled arrangement has dedicated resources, meaning participating groups and their employees enjoy quicker issue resolution and innovative administrative advantages both at the insurance company and agent level. Also the increased economies of scale and the ability to spread the risk ensures that insurance companies provide employers in pooled arrangements the ability to offer their employees better coverage and plan design options that they could not obtain on their own. The UBCM Group Benefits Plan combines all our local government employers into a single unit creating a very large buying group which is able to obtain better rates, and is better represented by insurance experts that negotiate pricing and plan design on their behalf. Look At Your Target Loss Ratio The larger the group the more bargaining power for lower premiums and higher loss ratios. When a competing insurance agent tries to attract your business, they will always lead with very low premiums, usually secured with a guarantee for at least a year, or even more. What they don’t tell you is that it will always lead to higher premium increases in subsequent years. It’s great to get that cheaper deal the first year, but once you start making claims the insurance company will want to recover that lost money as soon as possible and you’re the one that will be paying in years 2, 3, 4 and so on. SEPTEMBER 2020 • DOLLARS & SENSE PERSPECTIVE | 15
As an example, let’s say you paid a total of $10,000 annual premium for your Extended Health Benefit and had $12,000 in claims. You could be faced with a 30% increase in premiums with your current insurance company simply because they lost money on your plan. If you moved your employee benefit plan to another company and the annual premium becomes $8,000 while you are still making $12,000 worth of claims, your benefit premium increase could be as high as 50%. Where they cut upfront, they make up for on the back end later. By pooling your group benefits (as under UBCM Group Benefits Plan) you lower the expense factor that the insurer charges. That is, the amount of administration costs in order to administer and underwrite your plan is reduced through economies of scale. The metric that is used to measure this is called a target loss ratio (TLR), and it represents the amount of your premium that is used to pay claims, with the remainder being used to pay your insurer and/or agent. Any amount in excess of the TLR will result in the insurance company losing money and you can expect a premium increase at your annual renewal. When trying to gain your business, one thing many insurance agents would definitely keep their distance from discussing is the target loss ratio of your group plan. Many insurance companies do not disclose it in the quote to the agents – the agent will need to ask for it. Let’s say you spend a dollar in premiums for extended health claims and perhaps due to your small size the insurance company wants 30% for administration costs, agent commission, premium tax and a percentage for profit. It is expressed as a 70% TLR. So for every dollar you pay in premiums you can only spend 70% on claims, the insurance company keeps the rest. A small company paying $5,000 a year in premiums can only spend $3,500
16 | GFOABC.CA
on health claims after which you would see an increase in premiums. If an agent tries to convince you to buy solely on price, their only interest is to get you in the door without taking any consideration of your specific needs or claims history. A professional agent will give you an employee benefit plan that works for you and your staff so you can avoid any unpleasant surprises at renewal time. In summary, if you are going out to market you should consider all your options including potential advantages of joining a group pooled arrangement. Remember UBCM is always available to answer questions and provide advice even if you are not a member of the UBCM Group Benefits Plan because we advocate, support and represent all local governments and members in the Province. •
As Manager, Member & Association Services at UBCM for over 15 years, ANNA-MARIA WIJESINGHE is best-known as UBCM’s expert and ‘go-to resource’ for the UBCM Group Benefit Programs.
As Chief Financial Officer at UBCM, KATHLEEN SPLALEK’s professional career spans over 20 years in strategic, financial and corporate management.
What Do You Mean? How to be Sure Your Readers Understand You
C
ommunicating is difficult at the best of times. When our topic is complex and, let’s be honest, boring, the job is even harder. In this article, we will tackle one very useful technique for ensuring the readers of your financial reports and budget books understand what you are attempting to convey.
Readability Readability is the degree that the prose you write can be understood. Readability is influenced by: • word length, • use of conventional or unique words, • sentence length,
“The single biggest problem in communication is the illusion that it has taken place.” — George Bernard Shaw
• number of clauses in each sentence, • number of syllables in each sentence, A common, but bad habit for writers is to prefer longer, wordier, and more complex text. In almost all cases, this is a mistake. When trying to communicate complex information, as is often the case for finance and budget officers, focus on simplicity. Simplicity makes understanding easier and faster for your reader. After all, who has not abandoned reading an article because it was too long or too hard to follow? Some tips to consider and to improve the readability of your text:
As we have discussed in previous posts, text is one of the three essential tools at your disposal when trying to communicate non-verbally. Recall, the purpose of text is to:
• avoid jargon and acronyms,
• introduce a topic, a problem, a business process, or other item that the reader might not be fully conversant in,
• consider the reading level of your audience.
• explain a graph or a table so the reader does not miss any nuances, • highlight or call out a particular point in a table or graph, • label a specific data point in a graph or columns or rows in a table, • recommend appropriate next steps or actions. When using text, however, not all words or the sentences they create are equal.
• omit unnecessary words, • use shorter sentences,
Testing Readability If you want to improve readability, test your text. There are numerous readability-formulas and tools you can use. One popular formula is the Flesch-Kincaid Grade Level. It attempts to measure the approximate grade level required to understand the text. There are numerous tools that will use this and other formulas on your text. From tools that only test the Flesch-Kincaid Grade Level (ReadabilityFormulas.com) to broader tools that also assess grammar more generally (Grammarly & Readable) there are many options to choose from. The results of testing your text can be surprising. SEPTEMBER 2020 • DOLLARS & SENSE PERSPECTIVE | 17
An Example Imagine you are drafting an introduction to your budget book. Your goal is to explain to the reader some of the high-level goals of the organization. You want them to understand the principals that lead to designing the budget council adopted. Here is the first paragraph you initially write: “The City’s annual budget is created to reflect the Mayor’s priorities and address community needs each year. The budget process takes place over a five-month period, during which agencies propose new or expanded programs and investments to better serve the public and meet the goals set out by the City. The Budget & Management Office staff assess proposals for their merits across a collection of considerations, with the first among them being the Mayor’s Strategic Framework. This framework, shown in the graphic below, illustrates Mayor Smyth’s dynamic priorities as it relates to creating a world class city where everyone has access to a home, a job, and a content future. The following pages outline key strategies and investments for priority areas and the metrics used to calibrate success.” 18 | GFOABC.CA
The score of this text:
The score of the revised text:
• 128 words
• 75 words (decreased 53 words)
• Average word length is 5.2 characters
• Average word length of 5.6 characters (increased slightly)
• 5 sentences
• 7 sentences (increased by 2)
• Average sentence length is 25.6 words
• Average sentence length is 10.7 words (decreased by approximately 15)
• Reading time: 30 seconds • Flesch-Kincaid Grade Level: 14 (college level)
• Reading time: 18 seconds (decreased by 12 seconds) • Flesch-Kincaid Grade Level: 9
This scoring may not immediately cause you concern. If you consider the average level of education in your community, however, you will see the problem. First, only 61.8% of Canadians aged 25 to 34 had either college or university qualifications. Secondly, most people prefer to read a few levels below their absolute maximum comprehension level.
This second version of the text reduced reading time by 40% and made the content understandable to more of our potential audience. Evaluate the readability of your text and make it as easily comprehensible as possible. Improving readability is one essential and easy step to improving your communication. •
A second draft of the paragraph revised to improve readability: “The City’s annual budget reflects the Mayor’s priorities and addresses community needs. First, agencies propose new/expanded programs. Budget & Management Office staff then assess these proposals for their merits. This process takes five months. The graphic below illustrates Mayor Smyth’s priorities to create a world-class city where everyone has access to a home, a job, and a future. The following pages outline strategies for priority areas. They also provide the measures used to determine success.”
JAMIE BLACK is President of F.H. Black & Company Incorporated. For the last 20 years, he has consulted and trained finance officers, auditors & accountants in government, higher education, and corporations throughout Canada and the U.S. His work focuses on increasing finance department efficiency & effectiveness through the implementation of technology & best practices
What Your Local Government Should Know and Do in a Hard Insurance Market
L
ocal governments have come a long way following the insurance crisis of the mid-1980s. Since then, they have become more appealing to insurers with their attention to risk management, asset management and loss control practices. Despite this, the economic downturn paired with the increase of catastrophic losses worldwide has decreased the capacity many insurers have to take or keep risks, creating a hardening of the market that has driven premiums up dramatically. While the citizens in your communities are facing large premium increases for their strata and automobile insurance, local governments are being hit with significant increases when it comes to their commercial property insurance. Whether you are looking to renew your insurance policy or buy a policy to cover a new risk, you may face the following challenges: Premium increases: Many insurers have multiple lines of business and insure areas outside of British Columbia. While a local government property portfolio may be performing well with no losses, in a hard market, large claim payouts in other geographic areas or lines of insurance may have an affect on your insurance rates. Limited Options: Some insurers are withdrawing from certain markets, leaving fewer insurers available to cover the risks. While insurance brokers actively advocate to provide the best premiums and coverage for their clients, it may be that there are just not enough options available. Coverage Restrictions: What once was covered, may not be going forward. Insurers will be looking beyond just risk and may want to limit their exposures to loss generally. This means imposing much more stringent criteria in offering policies, adding exclusions to policies, or including conditions that a local government must comply with to get coverage. In a hard market, it is important to have conversations with your insurance broker in advance of your renewal, and to help them help you by getting them the
information they need. Consider doing the following to minimize the impact of increased premiums: Highlight New Loss Control Measures and Upgrades: Has your local government installed new signage, sprinklers or anti-theft devices? If so, point that out. These changes may make you more attractive to underwriters. Review Coverage and Limits: Ensure that you are paying for what you actually need. Many policies include coverage you may not need. Adjusting coverage and limits may provide some cost savings. Review Deductibles and Consider Self-Insuring: A hard market is a good time for local governments to evaluate how risks are managed and whether it can absorb smaller losses and increase deductibles. Ask your insurance broker to give you deductible options so you can assess whether the cost savings of a higher deductible outweigh the financial consequences of self-insuring for one or more potential loss below your chosen deductible level. Whether you are shopping for a new insurance policy or looking for support in navigating the hard market during the renewal process, a good broker is always in your corner. Reach out to the MIABC or your broker to see how they can assist. •
MARINA SEN was appointed to the position of Insurance Services Coordinator when the MIABC’s Insurance Department was created in April 2014. She has played a key role in the development and implementation of the MIABC Property and Ancillary Insurance Program, and the establishment of the MIABC’s brokerage arm, Civic Risk Insurance Solutions. As a licensed insurance broker, Marina provides broker services to the MIABC’s membership, ensuring that all their insurance needs are met. Marina speaks regularly on risk management and insurance topics at various local government conferences and MIABC events and webinars. SEPTEMBER 2020 • DOLLARS & SENSE PERSPECTIVE | 19
Does Automation Complete the Finance Solution Puzzle? Increasingly, automation is helping CFOs reshape how they do business and manage their finances. The missing piece Automation - together with AI and big data-completes your finance transformation puzzle. Completely integrating your finance functions and bringing complete oversight to every aspect of the organization. This is why they’re essential for tomorrow’s CFOs. The question is, how can they put them into practice?
your experience and knowledge to talent acquisition to help manage talent as an asset. Analytical thinking will become essential, as you’ll be expected to find new growth opportunities. Or asked to deliver insights into performance and innovation. But how can you do this and: • Easily control data analytics • See the big picture • Keep track of the economic and regulatory environment
Today’s CFO stagnates CFOs are continually battling evolving challenges and changing costs. Struggling to find ways to control everyday operations and completely reimagine their role in the world. Engaged, data literate, and demanding greater transparency, your communities expect higher levels of citizen services.
• Engage your c-suite
New challenges need new solutions To adjust to this new focus, more and more CFOs are looking to systems for a solution. Because many current solutions struggle to:
Why automate? End-to-end, fully digitized finance solutions can make business management and planning simpler. Instantly giving you a big picture view. And letting you control project management, forecasting, admin, and business performance all from one place. Though this isn’t the whole story. Automation will let you take your finance solution beyond traditional finance functions. Finally freeing you to become the CFO of tomorrow. This is because automation slots into place across all your key technology functions:
• Track and manage resources • Plan and coordinate projects • Forecast with accuracy • Find insights and information fast And for public sector organizations like yours, with a lot of moving parts and stakeholders, this is a big problem. But can a new solution really do anything differently? Or will you be stuck with the same problems tomorrow? Tomorrow’s CFO automates The CFO’s role is growing more complex, more strategic every day. In the future, you’ll transition into a strategic leadership position, working to keep your organization’s finances accountable. Even involved in bringing 20 | GFOABC.CA
• Eliminate silos • Create a broader strategic vision All while still managing your finance’s day-to-day functions?
• Robust reporting functions and data visualizations to put data in front of decision-makers quickly • Real-time financial and performance data lets you change course quickly • Advanced analytics and AI to uncover hidden growth opportunities and remove inefficiencies Automations work across all functions, eliminating
manual tasks and improving processes. Automation processes and manages vast data sets behind the scenes. Bringing together deep learning, AI, robust reporting and data visualizations to help you do more and simplify decision-making and planning.
Metro Vancouver transforms services for 2.5M citizens
Beyond automation Automation removes many time-consuming and stressful tasks including: • Routine bookkeeping tasks • Invoicing and accounts receivable • Accounts payable • Tax compliance and reporting • Payroll • Expense management But the benefits of automating go beyond simply taking tasks away. Automating your reporting and analytics frees up time and lets you focus on forecasting and strategy. And eliminating half of your financial tasks substantially boosts your capacity and people power. Think bigger Automation can help you build an innovative mix of tools to closely track KPI progress. Intuitive, real-time reporting enhances forecasting and visualizations, allowing you to manage resources, plan ahead, and spot opportunities. Automation like AI and advanced analytics support decision making and strategy planning. The full power of automation goes beyond efficiencies, letting you transform how finance operates, giving you the freedom to focus on the work that matters. •
“Unit4’s digital capabilities, self-service reporting, flexible functionality and user-friendly screens best met our needs.” Linda Sabatini Finance Operations and Systems
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SEPTEMBER 2020 • DOLLARS & SENSE PERSPECTIVE | 21
c o l le c t o r s ’ c o r n e r A New Age of Customer Service in Local Government
I
n the March 2015 GFOA Newsletter Collectors’ Corner I wrote an article entitled “Customer Service in Local Government”. In that article I wrote, “One of the many ways that local government staff excels is giving excellent customer service.” Front line staff are the faces of the municipality who deal with real people and indeed provide excellent customer service to the taxpayers they serve. For many businesses, organizations and government agencies, providing excellent customer service means providing people online access - eMail, eApplications, eBilling, ePayments, etc. While this is also true in local government, for front line staff, giving excellent customer service is still all about the individual person. But two things happened this year: COVID-19 and the Province took over the administration of the Property Tax Deferment program. Next year the Province is taking over the administration of the Home Owner Grant program. COVID-19 is having a significant impact on customer service for businesses including local government. Some municipal halls have been closed to the public, new processes and procedures due to COVID restrictions and new legislation
22 | GFOABC.CA
have been implemented, some are working from home and technological and software changes have been made. The Province taking over the Property Tax Deferment and Home Owner Grant programs has been very well received by the collectors and will take a tremendous burden off the finance department. On the one hand, having the ability to renew their Property Tax Deferment online, apply for their Home Owner Grant online, pay their taxes online - all in the convenience of their living room or kitchen – wow – that’s great! Online self-service! But on the other hand, are the days of face-to-face customer service with a real person at the front counter a thing of the past? Now taxpayers have to rely on their iPhone, iPad, laptop, desktop or do a live chat or phone in (expecting to be put on hold) or wait for a response by snail mail. But what if a taxpayer has a question or a problem? It’s all on the website! And if that fails, they can phone for assistance (I always have an eBook handy while I’m on hold). As a last resort, they can go to City Hall - like they used to - and talk to a real person who took an active interest in trying to help them with empathy and an understanding of
their situation. But they might hear “I’m so sorry but the Province now administers that program. Here’s the number to call.” Yes, a new age of customer service in local government is here. But I have no doubts that local government staff will continue to provide excellent customer service to real people in their respective communities. And, as George Burns said “I look to the future because that’s where I’m going to spend the rest of my life.” •
DOUG STEIN has worked in municipal finance for over 30 years. In 2011 he retired from his position as Manager of Revenue Services for the District of Saanich. Doug leads the Collectors’ Forum, is a GFOABC Life Member, and a CPA, CMA.
CIVICINFOBC CIVICINFOBC
q u a rte r ly q u estio n
Pandemic Support and Recovery Survey for CFO s How are Local Governments Coping? n July, eight of British Columbia’s key local government organizations* collaborated on a “Pandemic Support and Recovery Survey for Chief Financial Officers”. The survey was created to collect information about how the pandemic has affected local government finances, internal operations, and public services across BC. The survey also sought to understand how the province and supporting agencies might better assist local governments. The survey was completed by 50% of all British Columbian local governments during the month of July. Respondents ranged in size from some of our smallest, remote communities to our largest, urban centres. The challenges faced vary in nature, but there is one challenge shared by most respondents: the climate of uncertainty. The looming question remains, “when–and how–will we return to normal?” Both demographic and economic structures affect the vulnerability points of the crisis. The extent to which a municipal budget depends on certain revenue sources, along with reserves and commitments, play a significant role in the financial impact on a community and the risks associated. For example, communities that rely less on income from fees and charges, are facing less uncertainty than those that do.
I
Property Tax Due Dates and Deadlines: Many local governments chose to extend penalty deadlines and delayed tax sales to ease the burden on taxpayers.
Property Tax Expectation on Collections: The extensions above may ease the burden for some but many local governments expectations remain cautious of collections being made prior to the penalty period.
Property Tax Collected to Date: At the time of the survey, with just over 40% of municipal governments reporting, an average of 73% of residential taxes had been collected for individual municipalities with a median of 80%. Note: The penalty period had not yet lapsed for all municipalities reporting.
Beyond Property Tax: Some of the pandemic-related financial pressures communities are experiencing result in a permanent loss of revenue, rather than a timing difference, and include: • Loss of casino revenues • Loss of recreation revenues SEPTEMBER 2020 • DOLLARS & SENSE PERSPECTIVE | 23
• Loss of transit revenues • Other lost fees such as parking, conference centres, landfill fees • Increased dependency on local government by local non-profit organizations Airports have experienced decreased operations or closed completely amid the pandemic, which has resulted in: • Lost revenue to the local government • Potential for long-term closures, resulting in lost future tourism and business opportunities • Financial burden on local governments resulting from loans at risk of non-collection New Cost Pressures: Due to the pandemic, local governments are also finding they are encountering increased costs:
Conclusion: The COVID-19 pandemic has significantly impacted local government operations and planning. It has directly impacted finances, internal operations, and public services across BC. If you would like to receive a copy of the data collected in this survey, please contact our office at info@civicinfo.bc.ca. *Participating organizations were: CivicInfo BC, GFOABC, LGMA BC, Ministry of Municipal Affiars and Housing, Municipal Finance Authority of BC, Municipal Insurance Association of BC, UBCM, and BC Assessment.
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quarterly question the next Quarterly Question:
• Increase cost of bylaw enforcement and security in tourist destinations as local governments combat crowds and attempt to ensure proper physical distancing
property tax 2020…what was the outcome?
• Increased need for personal protective equipment (PPE) and additional cleaning protocol for staff and customers
APLEASE USE THIS LINK TO BE A PART OF THE RESULTS SEPTEMBER 15TH QUARTERLY QUESTION. YOUR PEERS WILL THANK YOU!
• Increased cost of service delivery and restart costs Response to Financial Uncertainty: In addition to preparations for borrowing and deferring capital spending, some governments have instituted hiring freezes to reduce operating costs.
The survey should only take about 2–3 minutes to complete. The responses to this question will be profiled in the next GFOABC Newsletter. If you have a topic for a future quarterly question, please contact the office at office@gfoabc.ca or 250.382.6871
If you would like to learn more about this free service, contact CivicInfoBC at info@civicinfo.bc.ca 24 | GFOABC.CA
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next newsletter publication is december Please contact us if you would like to submit an article or suggest a newsletter topic. office@gfoabc.ca • 250.382.6871
SEPTEMBER 2020 • DOLLARS & SENSE PERSPECTIVE | 25
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