Plastic money, renovations boost Bank of Canada operating costs by 23%

The Bank of Canada is seen in Ottawa on Sept. 6, 2011. (Sean Kilpatrick / THE CANADIAN PRESS)

OTTAWA -- The cost of printing plastic money is contributing to a 23 per cent jump in operating costs at the Bank of Canada this year, but the institution says the investment in more durable bills will pay off in the long run.

The central bank's second-quarter report released Thursday shows operating costs ballooning by $114 million to almost $606 million this year, compared to 2012.

Almost half the difference -- or just above $50 million -- is due to the increased cost of producing the new polymer bills, even though the bank is not making as many as it initially planned.

As well, the bank says it anticipates additional costs as it embarks on major renovations to its downtown Ottawa office complex, which will involve the temporary relocation of most of its 1,200 employees.

The Bank of Canada began printing the new plastic money, starting with the $100 denomination, in 2011, explaining that the notes would be more difficult to forge, were more durable and would last longer. After also rolling out $50, and $20 notes, it is expected to complete its run by introducing new $5 and $10 bills later this year.

It has earmarked $166 million for the 675 million polymer notes in 2013, less than it had anticipated, but more than the 580 million it made last year.

Still, the bank points out that the plastic money is expected to last 2.5 times longer than the previous cotton-based notes.

In an explanatory note, the bank said that it is at the beginning of a new three-year strategic plan, and that costs were expected to be higher in 2013.

"The bank will make investments to refocus and reconfigure some of its business models and operations to achieve future savings," it said. "In 2014, as the bank begins to realize the benefits of these investments, operating expenses are anticipated to decline from their 2013 levels."

The central bank also reported that its total income for the second quarter was $393.6 million -- $5.1 million higher than for the same period last year. On a year-over-year basis, income increased by $12.2 million.