Burnaby's $1.2B capital reserve 'basically exhausted.' What happened and what's next?
Burnaby homeowners can expect increased taxes after changes to how developers contribute to the city
Burnaby has long been the envy of neighbouring cities for its hefty capital reserves while being one of the few major cities in B.C. with zero debt — but now the city's "golden age" of surpluses is coming to an end.
The reasons are twofold: skyrocketing construction costs have depleted the city's reserves of more than a billion dollars faster than expected, and provincial legislation has recently limited the city's ability to replenish the money through its traditionally successful model of density bonuses.
"We added up all that investment and, by the end of 2024, it had basically exhausted a lot of our … reserves," said Coun. Sav Dhaliwal, who is also chair of the city's financial management committee.
The city has approved more than $1.2 billion for almost 20 community amenity projects and affordable housing initiatives, including the Burnaby Lake Recreation Complex, Cameron Community Centre and Library and a new RCMP detachment.
But construction cost increases have meant five major projects are currently $281 million over their original estimated budget, based on documents provided by city staff to council earlier this year.
It means the city's capital budget won't stretch as far as originally planned. Council has already cancelled the $240-million Confederation Park Community Centre due to a lack of funding, and plans for a new city hall were pulled back in 2023 and still await a new clear direction.
The city says future projects are essentially on hold indefinitely until it can generate funds through a new provincially mandated funding tool, one it has repeatedly criticized.
Colleen Jordan, a former city councillor and frequent critic of current mayor, Mike Hurley, said Burnaby was in a tough spot as a result.
She doubts residents are happy with the delays to major projects like the one at Confederation Park.
"But it's not the city that they should be blaming, it's the province," she said.
Burnaby's density bonus policy
City officials have complained that the new provincial tool, called amenity cost charges or ACCs, has limited Burnaby's previous policy that generated more than $1 billion from developers over the last decade.
Burnaby's stockpile came from a policy called density bonusing, in which developers paid cash to the city in exchange for the right to build taller condos in places like its growing Metrotown and Brentwood city centres.
The density bonus policy was "very successful," according to Coun. Sav Dhaliwal, who noted that in some years, the city received more than $300 million from developers.
The province's new funding tool requires municipalities to charge developers a certain amount of money based on the number of units built.
But Dhaliwal said the tool is more restrictive and also requires taxpayer money to fund a portion of a new amenity.
As a result, the city introduced a 1.9 per cent infrastructure levy on homeowners this year — on top of the regular property tax increase — in order to collect for the ACC fund.
Jordan said the city will now have to decide whether to wait to build the amenities or borrow money.
"And I don't think the citizens of Burnaby are particularly very favourable to borrowing money, so I guess they have to wait."
Dhaliwal estimated it could take 10 years to build up the city's ACC reserves and get started on the Confederation Park Community Centre.
An issue for many cities
Trish Mandewo, the president of the Union of B.C. Municipalities, said construction costs are growing at three times the rate of inflation.
"Local governments have to look at the projects that they have in line, and sometimes they're having to make hard choices," she said.
She said municipalities had reserves and were planning for the future, but escalating costs "way beyond" the consumer price index have made it difficult to meet budget expectations.
"It's going to be difficult for local governments to really meet the mandate when it comes to our infrastructure that we had planned," she said.
In a statement, B.C.'s Ministry of Housing said ACCs will replace lengthy negotiations over charges with an upfront planning process that gives a "more transparent understanding of costs associated with a housing project from the start."
It argued that Burnaby was already experiencing shortfalls before the introduction of ACCs.
"This predictable process will improve on Burnaby's previous amenity contributions program that experienced an unexpected $175 million shortfall in 2023, which staff indicated put major projects at risk," it wrote.
City promises follow-through
Burnaby's chief financial officer, Noreen Kassam, said she's "very confident" the city can still complete the committed projects within the expected budgets.
"We will deliver on them," she said, while acknowledging the city will be developing fewer projects than hoped.
She called the density bonus program "instrumental" in funding the city's major projects over the last decade.
"It is maybe a bit alarming that it is depleting, but … it is delivering on what the funds were collected for, which is all these large major amenities that are going to benefit citizens now and into the future."
Mayor Mike Hurley also criticized the province's new funding plan, but he wouldn't commit to taking on debt.
"It's not something that I would ever want to do," he told CBC. "I think we just have to find different ways and come up with a different business plan. Burnaby's motto has always been pay as we go, and hopefully we can stay that way."
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