The next time you’re sitting in traffic or waiting for a bus and wondering what the city has done with all the money it gets each year, see if you can spot a bank. That’s where a big chunk sits.

In recent years, BC’s cities and towns have had to deal with natural disasters, a pandemic, and surging numbers of residents. Despite those challenges, though, the bank accounts of BC’s municipalities have never been more flush with cash.

An analysis of the balance sheets of municipalities in the Fraser Valley and across BC shows that over a span of five years, the province’s cities and towns have banked far more of their surplus revenue than they have spent. Much of the money has come not from residential taxes but from developer contributions tied to eventual infrastructure upgrades. But cities have been slow to spend the money, allowing them to earn huge sums in investment revenue even as the value of their tangible assets have declined.

It’s easy to think that all modern governments operate in debt. Like many humans—and businesses—Canada’s provincial and federal governments tend to operate in the red, borrowing money that they then spend to grow and provide services and value to their constituents.

Economists suggest that such activity often makes sense for governments, so long as debt is kept to a manageable level and is used to fund investments in long-term growth and infrastructure. Humans often operate in a similar way: a person who takes out a mortgage on a house may have negative financial assets that are more than offset by the increasing value of their property and home.

Municipalities operate differently for political, legal and logistical reasons. A city or town lacks the financial heft of a province. And the roads, buildings, and other assets it buys, while still having a tangible value, are not as liquid as a person’s home—your local municipality doesn’t really have the option of selling off its roads if circumstances demand it.

So municipalities tend to have far more cash (or cash-like investments) than debt at any one time. (Municipalities are not allowed to plan to run a deficit in any one year, though they are allowed to run a deficit if they accidentally end up in the red in any one year. But capital spending doesn’t factor into that calculation because building something isn’t an expense on a balance sheet; it’s just the conversion of a financial asset to a non-financial asset.)

Not every municipality has played it safe. Abbotsford’s financial managers still talk of the time, a decade ago, when the city had negative financial assets, meaning its debts outweighed the amount of cash (and cash-like investments) it had in the bank.

But in general BC’s municipalities have usually operated with a nice, safe financial cushion to fall back on.

In recent years, though, bolstered largely by unspent money from developers, that cushion has become a fluffy mattress stuffed with cash, as municipalities have stashed money in the bank, rather than using it to pay for more infrastructure and facilities for their residents.

(Audited financial figures for 2023 are not yet available, so it’s unclear if that has already begun to shift as municipalities adjust to increasing population pressures.) Municipal financial statements from 2017 and 2022 paint a clear picture of how the province’s cities and towns—including many that frequently ask senior levels of government for more funding—have bolstered their bank accounts over the five most recent financial years on record.

Across the province, the net financial assets of BC’s municipalities increased by 86 per cent between 2017 and 2022, while the non-financial assets—the value of actual roads, sewer pipes, recreation facilities, cars, and buildings—rose by just 19 per cent.

In 2017, cash and investments accounted for 10 per cent of all the assets owned by BC’s municipalities. Just five years later, financial assets accounted for 15 per cent of all the assets of cities and towns.

The trend is clearest when one factors in inflation and population growth.

Between 2017 and 2022, the value of municipal financial assets per capita—so, compared to their population—rose by 54 per cent. But the per capita value of the actual, tangible assets owned by cities and towns declined by one per cent. That means that while cities and towns had far more money in the bank, the quality and quantity of infrastructure shared by their residents actually declined over those five years.

The money and investments in the bank aren’t just all sitting in one account to be used for whatever local politicians want. And unlike taxes, which generally go towards a municipality’s operating expenses, most of it is designated to specifically be used to finance capital projects of one kind or another. (This is why municipalities have continued to raise taxes even as their cash stockpiles have increased.)

Such money is generally held in “reserve” funds that a city can draw upon for a variety of uses.

A municipality generally has multiple reserve funds, depending on the source of the money and the cash’s eventual destination. By law, municipalities must assign certain types of cash to certain uses. For instance, contributions from developers that cities receive upon rezoning a plot of land must only be used to create infrastructure to meet demand created by the new housing project. So $100,000 in development fees stemming from a new apartment building must be used for infrastructure that will help address challenges arising from a new development. (Most frequently the money is used to address traffic or pedestrian concerns on a nearby stretch of road, or addressing demand for recreational amenities.) Similarly, water and sewer fees end up in accounts that are then used specifically for water and sewer infrastructure.

This process means the construction of projects meant to address growth usually takes place after new homes are built and new residents arrive. Because there is only so much a municipality can do with contributions from developers, cities and towns prefer to wait for the cash to arrive to build vital pieces of infrastructure, rather than spend money out of unrestricted reserves to meet forecasted demand.

A city might plan to build new sidewalks along a certain road that is seeing new homes go up, but it won’t get the money to use for those sidewalks until the construction takes place. If it builds the sidewalk using its own unrestricted funds, it might find itself with a bunch of developer cash, but relatively little useful ways to spend it.

In other words, the legal handcuffs placed on cities’ and towns’ use of developer cash inevitably create a delay between when certain infrastructure is needed and when it is built—and thus when a “financial” asset becomes a “non-financial asset” on a municipality’s balance sheet.

But that reason can also sometimes operate as more of an excuse. The balance sheets of different BC municipalities show there are dramatically different approaches to how much money they leave sitting in the bank—and those figures show that BC cities can survive and prosper with smaller bank accounts.

In 2022, BC cities and towns had, on average, $2,243 in the bank for every man, woman and child.

But that figure is far from equally distributed.

The City of Burnaby has more than $8,500 sitting in a bank for every one of its residents. Langley Township, meanwhile, has less than $1,000 for every person on hand. And some have even less.

The last five years have seen municipalities—including many facing the same pressures and starting with similar bank accounts—take different spend-versus-save strategies.

That’s especially clear in the Fraser Valley, where some municipalities have spent their cash as quickly as it came in, while others have socked it away, letting it accrue interest while making long-term plans (or watching older plans die bureaucratic deaths). Tomorrow, we’ll look at the Fraser Valley’s eight municipalities and reveal which ones are builders, and which are bankers.