Reserves and Reserve Funds are a critical component of the Township’s long-term Capital and Financial Planning. They are similar to savings accounts, but for specific municipal purposes. This section will help you understand the terminology, types and groups of funds held by the Township. Here is the recent statement of balances of our Reserves and Reserve Funds.
The distinction between Reserve Funds and Reserve accounts: Reserve Funds hold balances and earn and keep their respective investment income like a separate bank account, while Reserve accounts only keep their balances. Reserve accounts balances earn investment income, but to the credit of the operating (tax) budget. Other than this technicality, often reserve accounts and reserve funds are collectively referred to interchangeably as “reserves” or “reserve funds”. Reserve funds are allocated funding from annual operating budgets and other sources and are used primarily for the funding of approved capital or special projects.
There are two types of Reserve Funds:
Obligatory Reserve Funds: Obligatory Reserve Funds are those funds that the Township is required to establish to meet legislative requirements or funding agreements with other entities, such as the Federal or Provincial governments. The Township must collect and segregate the specified revenues. The available funds must solely be used for the purposes prescribed for them under legislation or agreement; they cannot be reallocated by anyone for any other purpose. Reserve fund account balances earn and retain interest income to the credit of the reserve fund. Obligatory Reserve Funds are considered as unearned revenues and are shown in the liabilities section of the municipal financial statements.
Discretionary Reserve Funds and all Reserve accounts are those reserve funds established by the local Council by by-law. The Township has discretion in the establishment of this type of reserve fund, and funds can only be used to meet the purposes established within the by-law, which may include options for Council to transfer funds to other reserve funds. Reserve fund account balances earn and retain interest income to the credit of the reserve fund. Discretionary Reserve Funds are considered as allocations of accumulated municipal surplus, and Council may reallocate funds between discretionary reserve funds to be used for other urgent purposes.
Reserves and Reserve Funds are grouped by the Township into three categories:
Reserve Funds for Infrastructure Sustainability – These reserve funds have different sources of funding (i.e. tax revenue dollars vs water utility dollars) and specific purposes for their use. They are intended as funds set aside specifically to repair, replace and refurbish existing infrastructure assets of the Township, including fleet, roads, pipes, lighting, parks, facilities, and other assets. Contributions to these accounts are normally allocations from the tax budget, and the utilities budgets of the Township.
Reserve Funds for New Infrastructure – These funds support growth related initiatives, such as extending a sewer pipe to a new development area. These funds include all Obligatory Development Charges reserve funds (tracked by category) paid by developers, as well as discretionary reserve funds for growth infrastructure, to assist in paying the portions of growth projects that are not eligible to be funded by development charges.
Reserve Funds for Special Purposes – These funds are grouped into two sections: Stabilization funds and Other Special Purposes funds. Stabilization funds are intended to offset unforeseen expenditures, cyclical costs (such as elections) and/or loss of revenue during a fiscal year. They also serve as a mechanism during the budget process to bridge temporary gaps in funding, such as phasing in the costs of operating a new community center. When sufficient balances develop, these funds could be accessed by Council mid-year to address special projects or issues which have arising between budgets. Other Special Purpose Reserve Funds have been established by Council for unique purposes.
The Township’s Reserve Fund Bylaw sets out the purposes of each reserve and reserve fund of the municipality.
Recent Reserve and Reserve Fund Statement
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