Victoria Amalgamation - Grasshoppers and Ants.

Amalgamation is back in the news today, the polls look supportive, but is data, ignorant of the financial consequences useful or actionable?

I’m a data guy, and when it was suggested that Victoria put a question to voters: “Are you in favour of reducing the number of municipalities in Greater Victoria through amalgamation?”  I thought about the issue and realized I had no information on which to base that decision.

Amalgamation is a super complex subject — Victoria has 13 regional governments plus the CRD, a lot of redundancy and as evidenced by the Sewage issue, problems making decisions that don’t boil down to not-in-my-backyard. Amalgamation could be hugely helpful here, and would tend to bend my thinking to the YES side of the question, but then there’s this nagging question in my head. WHAT WILL IT COST?

I sought to answer that question. I pulled in all the favours from all the data agencies I could think of. Apologies to the Data BC team, and Citizen Services as I requested and FOI’d data from the province — which it turns out they don’t even track. I had a simple question to solve:

What is the financial position of each of the 13 municipalities in Greater Victoria?

Turns out, no one, not even the province can answer that question - and I have the negative FOI response to prove it.

All municipalities are required to submit an annual report to the province, and that includes data about debt, reserves, income, etc… it even has some data on non-financial assets (those things like sewers and roads that municipalities are principally responsible for) … but, and here’s the rub, the data is historical — how much they spent, and how much the spend depreciated. An old city like Victoria with its aging infrastructure looks a lot smaller than it is on paper because so much of the infrastructure was installed in the early 1900’s. So wheres the financial position really sitting? Is the value of a city its assets as classically understood, are its liabilities really just financial instruments, spends and depreciation — or is the liability really the fact that the city has to maintain its infrastructure service level? We cant turn off sewers, water mains, or stop maintaining bridges and roads.

There’s a surprising lack of sophistication in tracking that liability, and it has led to a phenomenon known as ‘borrowing from the pipes’ wherein a municipality defers critical maintenance to pay for politically popular amenities. Its certainly hit the Greater Victoria region, and hit it hard over a number of councils and is generations away from being fixed — this is a long term problem that requires long-term solutions.

I set out to answer that question though, what is the financial position of the 13 regional municipalities? — and I’ve started to get answers, but only via very time consuming FOI requests. No one has studied this, and the poll-accessible public has no idea what this amalgamation thing will cost them.

Amalgamation supporters suggest that studies come after the question — but for me the question is unanswerable. I would support amalgamation if it were a philosophy, but not if my Dads household (Saanich residents) taxes go up, while services go down to cover off municipalities that have failed to maintain their assets.

Aesop’s Fable of the Grasshopper and the Ant come into play here. While the ant dutifully toils all summer to put away food for winter, the grasshoppers just sung and played. When winter came, the grasshoppers were banging at the ants door for food only to be given a hard lesson in planning for the future. This region's municipalities range from ants to grasshoppers.

Not one to take no for an answer, I have begun to FOI the region's municipalities for data on this ‘borrowing from the pipes’ question. City of Victoria was the only municipality to proactively publish the information on their website — and I now have 3 other FOI responses, from Saanich, Esquimalt and Oak Bay.

The data’s up at Google Docs forgive the formatting as its a transitory dataset and will be cleaned up when I’m done.

Here’s the 30 second version; You take the book value from the annual report (what the municipality considers the financial value of the assets in the ground) and divide it by what it will cost to replace when its useful life is up (the replacement cost figure)…. This gives you a ratio — lets call it the McArthur Infrastructure Ratio. This isn’t a perfect measure, and there’s been lots of problems pointed out with it (inflation and appreciation of fixed assets being the biggest issues)… but we can factor out most of these as they are comparable between cities. On a per-city basis the ratio isnt particularly informative, but when compared to its neighbours, it tells a story.

So far the ratios in Victoria break down like this;

City - McArthur Infrastructure Ratio (Book Value : Replacement Cost) [Future Liability R-B]

Saanich - 39% ( $758,105,520 : $1,946,400,000 ) [$1,188,294,480]
Esquimalt - 34% ( $77,312,184 : $219,560,000 ) [$142,247,816]
Victoria - 18% ( $342,756,413 : $1,708,000,000 ) [$1,365,243,587]
Oak Bay - 10% ( $49,548,291 : $485,039,900 ) [$435,491,609]

I’m working on getting all 13 prior to november, but FOI is a slow process.

What this tells us is that Saanich is full of Ants — prudently paying for their infrastructure as it ages and deferring amenities until they can be afforded. Oak Bay, not so much. Lots of happy singing and heel chirping coming from that region. Victoria sits in the middle. Most importantly, there are billions in future infrastructure liability for our next generation.

So with that in mind, what does the Amalgamation question look like? Well, it looks like Saanich residents are going to get a pretty raw deal — they bring over double to the table when compared with Victoria on a financial basis, 4x as much as Oak Bay. They will certainly lose in an amalgamated structure. Oak Bay on the other hand, would do very well financially — and it is this fact that, that I believe is so strongly driving this agenda in the wealthier circles of town.

All of this is to say, its way too early to ask the question: “Are you in favour of reducing the number of municipalities in Greater Victoria through amalgamation?” …. I would instead ask “Do you support committing funding to study the issue of municipal amalgamation?”. That would be the democratic question. Asking for an opinion of an ignorant public is little more than ‘distraction’ and the result isnt useful. Sadly, making a case based on data doesn’t seem to be on the agenda for the pro-amalgamation lobby — and we saw that again today with this poll.