Taking a look at reserve funding

Times Reporter 

 

During town council meetings, it is often heard that funds are being drawn from the financial stabilization reserve. So one has to wonder:  how much of that reserve is left?

The reserve balance is in place to help pay for various projects, and there are numerous reserves such as ones for potable water, fire protection, sanitary sewer, garbage, roads, cemetery, the Family Centre, sewer conveyance and general enforcement. Each responsibility centre will often have a certain amount of reserve funds in order to meet some future or unexpected needs. When funds are drawn from the financial stabilization reserve, it is because there is not a specific reserve that the project can be allocated to or there may not be sufficient reserve funds in a particular category. 

“When an expenditure is not in the budget, in the current 2013 budget, it enables the town to carry out a particular project and have it funded out of the financial stabilization. Rather than not do a specific (project) and meet a specific need, money is set-aside for that specific purpose, to meet unplanned needs. Not every need can be planned,” said Mel Tiede, director of corporate services for the town. 

The financial stabilization balance at the end of 2012 was $2,704,000, which is taken from the audited financial statement. The total operating reserves is $5,483,000 – roughly 50 per cent of operating reserves. 

In addition to that, said Tiede, the town has approximately $3 million of capital reserves for a total of almost $8.5 million in reserve balances at the end of 2012. The financial stabilization is close to 30 per cent of overall reserves.

The town has an operating budget of $25 million for 2013, so this reserve is roughly 10 per cent of the yearly budget. 

Approximately 95 per cent or more of the needs are met by the operating budget, but there are some things that don’t fall within the scope of the budget. 

“All expenditures made by a town are to be covered by budget or funded in some way, shape or form, and if it is not in the budget, it has to come out of reserves because we can’t send out subsequent tax bills. We can’t go back to the taxpayer and say, ‘By the way, pony up another $100 because we had these unplanned expenses’,” said Tiede.

The only way the use of the funding could affect and increase taxes into the next year would be if council chose to shore up the reserve. However, they haven’t done that for a number of years.

Municipalities are required by law to have a balanced budget. If budgeting is done correctly, there should be a small surplus, which has typically happened each year. 

Tiede says that during his time with the town, council has not shored up the financial stabilization reserve. However, the reserve does earn interest because it is held in investments. Although market interest rates are only at about two per cent, Tiede says any allocated interest earned is put back into the reserves. 

“The things that they’ve voted for, taken from financial stabilization, I really have no concern about it because it’s a small percentage of our overall budget… and so if we might use several hundred thousand dollars in a year drawn from financial stabilization, and council votes that the need is needed, it’s a genuine need it should be looked after,” said Tiede.

“Council is very careful and responsible in the way it approves the expenditure of money.”