THE CORPORATION OF THE DISTRICT OF WEST VANCOUVER

ENDOWMENT FUND BYLAW NO. 3699, 1991

A bylaw to create and operate a reserve fund

to be known as the West Vancouver Endowment Fund.

The Council of The Corporation of the District of West Vancouver,

in open meeting assembled, enacts as follows:

1. In this bylaw "Threshold Value" means for 1992 the sum of $15,000,000 and
for each subsequent calendar year the product of the previous calendar year's
Threshold Value and the percentage change over the previous calendar year in the
Vancouver, All Items, Consumer Price Index for December, as determined by
Statistics Canada, or such other body or index that replaces the same.

2. A fund to be known as the "West Vancouver Endowment Fund" (the "Endowment

Fund") is hereby established.

3. All monies from the following sources shall be deposited to the credit of
the Endowment Fund:
(a) amounts from existing funds as directed by bylaw;
(b) net proceeds from the sale of real property owned by the Municipality,
except as otherwise directed by bylaw relating to the disposal of
specific real property;
(c) net rentals from the lease of the 320 Taylor Way property as specified
in the Lease Agreement dated 1988 May 25 or as it may be amended;
(d) if provided for in Council's Annual Budget Bylaw, net rentals and net
concession fees from all other lands leased by the Municipality after
deducting the cost of capital improvements carried out in respect of
rental or concession properties, including net rentals from
municipally-owned properties on Argyle Avenue; and
(e) all income earned by the Endowment Fund.

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4. Monies in the Endowment Fund may be held and invested as provided for in
Part 7 of the Municipal Act (financial investments), including deposits with a
chartered bank.

5. Monies in the Endowment Fund may be held or expended by Council to acquire

real property as provided for in Part 12 of the Municipal Act provided:
(a) the requirements of the Municipal Act for such actions are met;
(b) the real property shall not be subject to a financial encumbrance after
acquisition;
(c) the real property shall not be for highway or park purposes; and
(d) the real property shall not, after acquisition, be reserved, dedicated
or conveyed to the School Board, as provided for in sections 532, 533
and 534 of the Municipal Act respectively.

6. Monies in the Endowment Fund may be expended by Council in loans to the

Municipality or expenditures for the Municipality, including expenditures for
local improvements under Section 381 and Part 16 of the Municipal Act, subject
to the requirements of the Municipal Act provided that provision is made for
repayment terms as determined by Council at market interest rates. Each loan or
expenditure under this paragraph shall be fully repaid to the Endowment Fund
within ten years of their approval by bylaw.

7. All disbursements from the Endowment Fund for purposes described in

paragraphs 5 and 6 above, shall be authorized by bylaw and shall conform with
the following:

(a) at the time of real property acquisition under paragraph 5, the total
market value of real property held in the Endowment Fund plus the real
property being acquired shall not exceed the lesser of:
(i) 75% of the Threshold Value; or
(ii) 75% of the market value of the Endowment Fund at the end of the
preceding year;
(b) at the time of a loan or expenditure under paragraph 6, the total
current book value of all monies loaned or expended under paragraph 6,
plus the current book value of all deposits made with the
Municipality's banker under Section 364 (1) of the Municipal Act that
relate to previous transactions under paragraph 6, plus the amount of
the loan or expenditure being assented to, shall not exceed the lesser
of:
(i) 30% of the Threshold Value; or
(ii) 30% of the market value of the Endowment Fund at the end of the
preceding year.

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8. Payments under paragraph 9 from the Endowment Fund, other than as provided
for in paragraphs 4, 5 and 6, shall not be made until the total market value of
the assets of the Endowment Fund equals or exceeds the Threshold Value.

9. When the market value of the assets of the Endowment Fund exceeds the
Threshold Value, payments may be made from the Endowment Fund by bylaw for the
following purposes:
(a) to pay for capital projects for the use and enjoyment of citizens of
the Municipality including leisure and cultural projects and parks;
(b) acquisition of real property for municipal purposes; or
(c) reducing municipal debt for real property purchases,

provided that the total market value of the assets of the Endowment Fund is
maintained at or above the Threshold Value after the authorized payment by
bylaw.

10. Separate accounting records shall be kept with respect to the Endowment Fund
and it shall be shown as a separate and distinct fund on the annual financial
statements of the Municipality.

11. This bylaw may be cited for all purposes as "Endowment Fund Bylaw No. 3699,
1991".

PASSED by the Council on 1992 February 03.

RECONSIDERED AND ADOPTED by the Council on 1992 February 10.

MAYOR

MUNICIPAL CLERK

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 DISTRICT OF WEST VANCOUVER
750 - 17th Street
West Vancouver, B.C. V7V 3T3

M E M O R A N D U M

DATE: 1992 February 5 File No.: 0910-11

TO: J. Douglas Allan, Municipal Manager

FROM: George Horwood, Director of Finance

RE: Endowment Fund Bylaw - Letter of Understanding

(as amended for the final Bylaw 1992 February 13)

The attached Bylaw is forwarded to Council for their consideration and has been
reviewed by the Advisory Finance Commission, Paul Wilson, Dunwoody & Company and
the Ministry of Municipal Affairs staff. Their memos are attached. The Bylaw
reflects very closely the principles and concepts recommended by the Finance
Task Force in their 1990 report. The Bylaw establishes the West Vancouver
Endowment Fund and is the final version adopted by Council.

The balance of this memo will
the basic principles and how
memo may be used as a "letter
are interested in the Bylaw
Council's final decisions.
review the Bylaw paragraph by paragraph outlining
they are accomplished therein. Hopefully, this
of understanding" for those who, in future times,
and its fund. It has been updated to reflect

ORIGINATING PRINCIPLE

The Municipality of West Vancouver is not "land rich", by having ownership of

land, as are many other municipalities. Some other municipalities have a land
bank from which they can draw funds to either finance essential services or
extra niceties for their community.

West Vancouver has one major property, 320 Taylor Way. This property is now
generating a significant cash flow through the pre-paid front-end lease. This,
plus other revenue generated from property rental could be used to create an
Endowment Fund, the revenue of which would be used to "maximize the return from
these lands over a long period of time to benefit current and future residents".

PARAGRAPH 1: Definition of Threshold Value

The Finance Task Force recommended a "Threshold Value" below which the
Endowment Fund should not decline. Until the Threshold Value is achieved,
all earnings will be re-deposited into the fund rather than being used for
specific projects. The initial proposed $20 million Threshold Value was
somewhat arbitrarily set considering other communities' endowment funds,
sources of funding and potential uses. The Threshold Value is to grow
annually by the CPI so that the relative value of the total Endowment Fund
is maintained in perpetuity. Accordingly, only the earnings in excess of
the inflationary amount would be used to "benefit the residents" through
civic projects.

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DATE: 1992 February 5
TO: J. Douglas Allan, Municipal Manager
FROM: George Horwood, Director of Finance
RE: Endowment Fund Bylaw - Letter of Understanding
(as amended for the final Bylaw 1992 February 13)

However, the reality of the numerous capital facility projects facing

Council in the mid to long term, plus the desire to have the present
community realize some benefit from the 320 Taylor Way property, prompted
Council to set the initial Threshold Value at $15 million. This also
recognized the reduced primary fund sources (see paragraph 3).

It is noted that the revised estimates project $2.6 million will be

available beginning in 1996 for Council's use (see the attached schedule)
and $1.1 million 1997.

PARAGRAPH 2: Establishment

This establishes the West Vancouver Endowment Fund.

PARAGRAPH 3: Revenue Sources

This paragraph identifies the source of the funds which will be deposited
into the Endowment Fund. Initial seed money for the fund is to come from
the proceeds from the lease of the 320 Taylor Way property (c). Also,
originally proposed was the use of some existing reserve fund assets:
equipment replacement reserve, land sale reserve and a portion of the local
improvement reserve (a). Only the land sales funds were ultimately
transferred to the Endowment Fund.

Funds from the other reserves were transferred to the "Capital Facilities
Fund" to meet anticipated facility funding needs. In part, this reduced
funding caused Council to reduce the Threshold Value to ensure the benefits
from the Endowment Fund were realized at the earliest possible time.

In addition, the Finance Task Force recommended that proceeds from all sales
of real property be deposited to this fund. Clause (b) provides for this;
however, a specific circumstance may dictate that the proceeds have an
alternative use and that they should be diverted to that use. For example,
the sale of a municipal facility, such as fire hall, golf course, recreation
centre, day care, etc., may be undertaken with the provision that the
facility be replaced elsewhere. Accordingly, the funds from the sale of the
property would be required to replace that facility.

Therefore, clause (b) provides for that exemption but the bylaw disposing of
the property would have to specifically direct that the proceeds be used for
other than the Endowment Fund.

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DATE: 1992 February 5
TO: J. Douglas Allan, Municipal Manager
FROM: George Horwood, Director of Finance
RE: Endowment Fund Bylaw - Letter of Understanding
(as amended for the final Bylaw 1992 February 13)

Properties currently owned by the Municipality would not form part of the
initial Endowment Fund but the proceeds from any disposal of properties
would be credited to the Endowment Fund. This would meet the requirements
of the Municipal Act for proceeds of property disposal and provide for the
utilization of those proceeds in an orderly manner as prescribed by this
Bylaw.

The Finance Task Force also recommended that all net rental and concession
revenues be deposited in one fund. While this may be desirable, the Council
direction was to utilize these funds only if an individual Council decided
to transfer the funds in a specific budget bylaw. Clause 3 (d) provides
therefor. A future Council that decides to direct the rent and concession
revenue to the Endowment Fund on a regular basis may wish to consider
amending the Bylaw to remove the conditional transfer.

It is noted that for 1992, rentals and concession fees (c) totalling
$225,000 would have been transferred out of the annual budget into the
Endowment Fund.

PARAGRAPH 4: Investment of Fund Assets

The Finance Task Force's recommendation to invest the funds to "maximize the
revenues" provided the most significant challenge for creation of the Bylaw.
They recommended that funds be used for:

(a) standard financial investments (paragraph 4),

(b) purchase of land for resale (paragraph 5), and
(c) interfund municipal loans (paragraph 6).

The financial investments provided in paragraph 4 are the standard

investments provided for in the Municipal Act and include short and long
term deposits and bonds in the Government of Canada and the Provinces, as
well as their guarantees, the Municipal Finance Authority, chartered banks,
etc. It should be noted that investment in stocks, real estate and
mortgages are not provided for in the Municipal Act (Section 364).

The use of the word "investments" is specifically used in this Bylaw and
refers only to use of fund assets for financial investments.

PARAGRAPH 5: Property Acquisition of Endowment Fund Assets

The Municipal Act does not provide for municipalities to "invest" in land.
However, the Municipality may "...acquire for municipal purposes any real
property...". The essential feature here is that a realistic municipal
purpose is required. While a simple investment is not appropriate, land
required for development or to control development or many other purposes or
several purposes together would be appropriate. Nothing could prevent any
of those purposes from changing over time or no longer being relevant. At
that point property could be resold.

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DATE: 1992 February 5
TO: J. Douglas Allan, Municipal Manager
FROM: George Horwood, Director of Finance
RE: Endowment Fund Bylaw - Letter of Understanding
(as amended for the final Bylaw 1992 February 13)

It is essential that the municipal purpose be identified and be the primary

purpose; this is a condition of property acquisition in the Endowment Fund.
The purpose should be specified in any expenditure bylaw used to acquire
municipal property for the Endowment Fund.

The question of whether the Endowment Fund should acquire parkland,

especially the Argyle properties, as an Endowment Fund asset was thoroughly
considered by both the Finance Task Force and the Advisory Finance
Commission. The conclusion was that the assets of the Endowment Fund should
be capable of liquidation to provide flexibility for the fund and to provide
ultimate utilization of the asset for West Vancouver residents. Since
parkland was reserved or dedicated, it is no longer liquid and since it is
asset value does not tend to appreciate, it or any similar asset would not
be appropriate as a holding as an Endowment Fund asset.

Council has directed that property acquired and held for the Endowment Fund
should not be encumbered by debt. This will provide greater financial
security for the fund. Hence, paragraph 5 provides that property for parks,
roads or school purposes should not be permitted as one of the base assets
for the Endowment Fund. This principle was unanimously agreed to by both
the Finance Task Force and the Advisory Finance Commission.

The phraseology "expended" is specific in this paragraph and is not to be

confused with "invested".

PARAGRAPH 6: Loans of Endowment Fund Assets to the Municipality

The Finance Task Force felt that it was unfortunate that the Endowment Fund,
for example, could invest its asset at a 10% interest return while the
general fund pays 12% or 13% interest expense for borrowed monies. This
"spread" is the normal financial market difference between borrowing and
lending rates. There was obviously an opportunity to save money for the
municipal taxpayer overall by utilizing the Endowment Fund assets for
municipal borrowing and avoiding the "spread".

While this may be logical, the Municipal Act has no provision for such
"interfund loans". However, there are two reasonable and legitimate means
of accomplishing the same thing.

The first method is by the expenditure of Endowment Fund money, by bylaw,

with an agreed upon repayment requirement. This is used in several British
Columbia municipalities with a council resolution that specifies the
repayment terms.

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DATE: 1992 February 5
TO: J. Douglas Allan, Municipal Manager
FROM: George Horwood, Director of Finance
RE: Endowment Fund Bylaw - Letter of Understanding
(as amended for the final Bylaw 1992 February 13)

This is not a preferred route because a resolution of council is not an

ironclad guarantee that repayment would be made to the Endowment Fund.
However, this paragraph does contemplate and provide for this type of
transaction should it be necessary in the future.

The second method to accomplish all interfund loans is to use a single

financial institution as a third party lender and borrower: the Endowment
Fund would make a cash account deposit with the financial institution who,
in turn would lend money to the general municipal fund, through a separate
corporate account which was in a debit balance. These transactions may be
accomplished through our corporate banker within our current corporate
account structure. We have confirmed with the Royal Bank that there would
be no additional administration or interest charges for this service. All
parties who have reviewed this method, including the Ministry of Municipal
Affairs staff, find it quite acceptable.

The loan to the Municipality would have to be formalized under one of the
standard borrowing sections for leases, mortgages, etc., thus forming a
legal, binding commitment to repay the Endowment Fund. It is contemplated
that this method would be used for the acquisition of municipal property and
for normal lease contracts thus providing a very real savings to the
Municipality.

This type of transaction is not specifically referred to in this Bylaw

except that the investment by the Endowment Fund would be made under
paragraph 4, financial investments. It is a normal operating transaction.

The phrase "at market interest rates" ensures that a fair interest return
will be made by the Endowment Fund. The determination of the interest at
the time of a loan or expenditure transaction has been left flexible but it
is intended to generally equate to the three to five year mortgage rate of
the Municipality's banker with any marginal benefit accruing to the
Endowment Fund.

This Bylaw effectively provides for a situation where future amendments to

the Municipal Act would allow for direct internal loans within the
Municipality.

The word "expended" is used in paragraphs 5 and 6 to refer to disbursements

of Endowment Fund monies for the assets of the Endowment Fund as opposed to
the "payments" in paragraphs 8 and 9 which refer to the use of fund assets ,
in the post threshold period, for community projects to "benefit the
residents of West Vancouver".

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DATE: 1992 February 5
TO: J. Douglas Allan, Municipal Manager
FROM: George Horwood, Director of Finance
RE: Endowment Fund Bylaw - Letter of Understanding
(as amended for the final Bylaw 1992 February 13)

PARAGRAPH 7: Composition of Fund Assets

While the Finance Task Force did not recommend any specific composition of
the fund assets or caps on any portion thereof and the Advisory Finance
Commission suggested Council's consideration thereof, the writer realized
that some caps may be of value to Council in controlling and administering
the Endowment Fund. Considerations include the concerns that property may
be an attractive asset and it would be prudent to not have all the "eggs in
one basket".

As well, Council may wish to have the facility to provide the internal
financings as noted in paragraph 6 but would not likely want to be too
heavily balanced in these internal loans.

The percentage figure provided for the caps are somewhat arbitrary
reflecting possible asset compositions that Council may wish to have the
fund eventually achieve. Several options have been presented to Council for
their final determination of the caps. The overall cap 7 (c) is designed to
provide some liquidity in the fund to allow for eventual payouts when the
threshold value is achieved. While this clause virtually negates the need
for 7 (a), the latter is retained for clarity.

PARAGRAPH 8: Restriction on Use of Endowment Funds

This section provides that funds will not be paid out ("payment") until the
threshold value of $15 million in 1991, indexed, is achieved. This ensures
that the fund growth will not be impaired by payments for projects until the
overall ultimate objective level of the fund is reached. The $15 million
again is an arbitrary figure and could be varied.

PARAGRAPH 9: Ultimate Use of Funds

This paragraph states the original intended purposes for which the Endowment
Fund has been created and for the use of the Endowment Fund revenues once
the threshold value is reached. They are stated here to emphasize the
intention of the Council establishing the Bylaw, so that in future all
others considering the Bylaw will understand implicitly that intention.

The market value of the asset (rather than the book value) is used to value
the fund for determination of the amount available for "payments" out of the
fund. Book value (the cost of an asset) would be usable except where real
property is held.

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DATE: 1992 February 5
TO: J. Douglas Allan, Municipal Manager
FROM: George Horwood, Director of Finance
RE: Endowment Fund Bylaw - Letter of Understanding
(as amended for the final Bylaw 1992 February 13)

It is readily apparent that if land was held for a period of years, then the
book value (the original cost) could significantly understate the real
current value of the fund. This would inappropriately restrict the use of
the funds for the established purpose. Conversely, the property values
could decline producing a fund value below "book value" and Threshold Value
from which it would not be prudent to dispense funds. Both the Finance Task
Force and the Advisory Finance Commission agree with the use of market
value.

This paragraph also provides a second provision to assure that the threshold
value will be maintained and not reduced by "payments" from the fund.

The phrase "payments" is specific and applies to the ultimate disbursement

of those fund revenues over and above the threshold value for the original
purpose for which the Endowment Fund was set up.

It should be further that any amendment or repeal of a reserve fund bylaw

requires the approval of the Minister of Municipal Affairs.

PARAGRAPH 10: Reporting

The Endowment Fund will be shown as a separate fund in the corporate

financial statements as was proposed by the Finance Task Force. Since the
Endowment Fund is, in essence, a public trust and will likely be a most
visible municipal asset, it is also proposed to annually disclose in a note
to the financial statements both the current threshold value and the year-
end market value of the Endowment Fund.

OTHER: Amendment

A goal of the Finance Task Force was to ensure that the Endowment Fund
concept was entrenched to be as fixed as was legally possible. This was
strongly endorsed by the Advisory Finance Commission. While it was not
possible to "create the Bylaw in stone", the initial Bylaw suggested a two-
thirds (2/3) vote requirement for repeal or amendment. However, Council in
finalizing the Bylaw, following considerable discussion, ultimately agreed
to the Municipal Act requirement for only a simple majority to apply for
amendments or repeal. This would ensure that the "hands" of a future
Council "should not be unduly tied" when economic conditions change,
emergencies arise or during the extended absence of one or two Council
members and changes to the principles of the Fund were necessary.

1699FINANCE2

cc: Margaret Warwick for Council

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