Providing Improvement Districts with Equal Access to Grants (2018)

Year: 
2018

The financing and delivery of services such as water, fire protection, street lighting and lake level control are important issues for rural residents and businesses in British Columbia. Across the province, improvement districts, a form of local government (Bish and Clemmens, 2009, p. 70 and Statistics Canada, 2011b) deliver these services to approximately half of the 609,363 people that live in rural areas by.

Government of British Columbia policy, outlined in the Ministry of Municipal Affairs & Housing’s Improvement District Governance: Policy Statement, restricts improvement districts from accessing sewer and water infrastructure grants (British Columbia, 2006, p. 12). However, both municipalities and regional districts have access to these grants. This policy aims to shift jurisdiction of improvement district systems to regional districts so that “at some point in time all improvement districts will be under municipal or regional district jurisdiction” (BC Government, 2006, p. 10).

Improvement districts rely on user fees and taxation of property owners who access services to generate capital funds. To access public funding, improvement districts must ask their regional district to apply for funding for infrastructure upgrades, for example to rehabilitate water and sewer systems. If the application is successful, ownership of the system shifts to the regional district.

Some improvement districts across the province find this policy objectionable. The burden this policy places on the residential and business tax base within improvement districts is also of increasing concern to the citizens and businesses in the communities served by improvement districts.

Background
Improvement districts were first created in the Okanagan Valley of British Columbia in the 1920s under the Water Act, with oversight from the Department of Lands (Bish and Clemmens, 2009, p. 68). Improvement districts are different from other forms of government being “specially incorporated, limited-purpose local government that undertakes one or more local services” (p. 69). Until 1965 - 1968, when regional districts were created, most British Columbians living outside of municipalities relied on improvement districts for their local public services (p. 68). In 1979, the legislative provisions relating to improvement districts were removed from the Water Act in recognition that improvement districts had more in common with local governments than they had with private water utilities. Responsibility for all improvement districts was transferred from the Ministry of Environment to the Ministry of Municipal Affairs.

In 1990, the Task Force on Rural Services and Governance created the Rural Service Delivery and Governance in BC report, which was released internally but never published. As an outcome of the report, the ministry started limiting the incorporation of new improvement districts and started a practice of “actively encouraging existing improvement districts to restructure instead” (Local Government Structure Branch, 2000, p. 9). The focus would now be on “reinforcing the role of regional districts as the primary local government for rural areas” (BC Government, 2006, p. 5). This approach also recognized that “both the province and local governments would benefit if the province remained actively involved in local government restructuring processes” (Local Government Structure Branch, 2000, p. 15). An outcome of the rationale for the recommendation to focus on regional districts would later become the government policy around access to funding that “Regional districts have access to grant programs for study and capital cost purposes. Improvement districts do not have direct access to these grants” (British Columbia, 2006, p. 5).

In 2006, the then Ministry of Community Services created the Improvement District Governance Policy which directly references the 20-year-old practice of restricting access to funding as a means of shifting ownership of Improvement Districts to the Regional Districts.  However, there were 240 Improvement Districts in the province when that report was written over a decade ago. In April 2017, there were still 211 improvement districts operating across British Columbia, many struggling with rapidly increasing capital cost demands.

Current Situation

Rural and remote property owners served by improvement district pay taxes in return for services. They have an interest in access to funding given the millions of dollars across the province that improvement districts are prevented from accessing for capital repairs and upgrades. In the case of drinking water or fire protection, rural and remote property owners are affected by diseconomies of scale compared to those serviced by regional districts or municipalities. This is due to the infrastructure requirements of their systems and small tax base to draw from for the entirety of their revenue. From a public safety perspective, rural and remote property owners are also affected by funding deficits for capital upgrades that may make drinking water unsafe or fire protection ineffective.

The Government of BC has maintained its policy of encouraging improvement districts to restructure through the restriction of grant funding for capital costs for over two decades. This is a policy issue that the Ministry of Municipal Affairs & Housing is charged with administering and maintaining. The policy argues that improvement districts are not held to the same standard of financial accountability as regional districts. They also do not have the same transparency requirements for the election of trustees. Also, the spectrum of accountability in improvement districts varies. However, some improvements are very sophisticated and voluntarily meet the same requirements around financial reporting and elections as regional districts and municipalities. The provincial government could modify or eliminate its improvement district policy without changing the current legislation. However, legislation changes would be required to increase the statuary accountability of improvement districts in the areas of financial transparency and electoral process.

Regional Districts and Municipalities have their own priorities and infrastructure needs. For example, in 2013 the Hagensborg Waterworks District asked the Central Coast Regional District (CCRD) to consider an application through the regional district for Community Works funding to address their aging infrastructure. The CCRD replied on February 13, 2014 that this request was denied as the regional district had “so many significant regional district infrastructure issues of its own” (Blake, personal communication, 2014).

The Thompson Nicola Regional District (TNRD) states that any water systems that wish to be acquired “must be financially viable with sufficient revenue to cover ongoing operating costs and future improvements. The reason is to ensure that the water system is financially self-supporting and sustainable for the long term” (TNRD, p. 4).  Consequently, improvement districts struggling to operate financially or meet the capital costs of infrastructure repairs or upgrades are ineligible to dissolve into the regional district under this policy. This leaves the improvement district with no alternatives without grant funding other than to increase rates to levels that may not be sustainable, not complete the required improvements, or walk away from the system.

Recommended Approach

There is no published research to support that service or cost efficiencies will be improved by amalgamation. A comprehensive review of the effect on rates when improvement districts merge with regional districts would provide specific and credible data to inform those improvement districts contemplating whether to voluntarily dissolve into a regional district or municipality. The research would determine whether there are positive or negative effects on user rates and whether (and where) conversion is desirable or likely to improve efficiency and service quality.

Second, some improvement districts have voluntarily met the same increased standards of public accountability and fair elections as regional districts. These improvement districts should no longer be restricted from applying for sewer and water infrastructure grants and be permitted to compete on an even basis for funding with regional districts and municipalities. To support this process, an eligibility list would be created by the Ministry of Municipal Affairs & Housing that identifies those improvement districts which seek funding and have voluntarily met increased standards of public accountability and fair elections. In the alternative to voluntarily meeting these requirements, a legislative change may be enacted to create another form of improvement district with the statutory requirement to meet increased thresholds of accountability and transparency in finances and elections.

Conclusion
The BC Government’s long-term objective to eliminate improvement districts as a form of local government will take more than a generation to complete. However, there is also a strong likelihood that it will never be fully successful. The policy is over 20 years old, has not received a comprehensive published review since 2006 and improvement districts across the province are seeking change. It is time to conduct a review to determine the policy’s relevance and if objectives are still being met.

Furthermore, improvement districts, with their volunteer structure and high level of business representation on the boards, do not form an additional costly bureaucratic layer of government. In fact, they are an efficient means to deliver a critical infrastructure service that supports local economies. As a specialized form of local government, improvement districts have less hierarchy and bureaucracy which leads to more efficient focus on service delivery.

Research demonstrates that unit costs in small communities tend to be significantly higher than in large ones. This places an unfair burden on smaller improvement districts to deliver essential services at a comparable cost to municipalities or regional districts. Furthermore, municipalities and regional districts have access to grants such as the federal gas tax transfer which improvement districts do not. This puts rural and remote residents of BC served by improvement districts at a disadvantage.

 

THE CHAMBER RECOMMENDS

That the Provincial Government:

  1. Conduct a comprehensive review of the effect on rates when improvement districts merge with regional districts; and
  2. Create an eligibility list for improvement districts that have voluntarily met the same standards of public accountability and fair elections as regional districts to compete without restrictions for funding.

 

References

 

 

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