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HomeMy WebLinkAbout2003-08-14 Council Minutes11 0 0 To Gene Kiviaho From Terry Nash Date- August 14 2003 Issue Reserves Policy # 16 1 Council Agenda Item # 7f Discussion A financial reserve is an unspent dollar amount that is designated for a future purpose that extends beyond the current fiscal year This amount includes an Equity in Fixed Assets component and, also for us, an accumulated surplus component Municipalities utilize reserves to 1 Hold funds for a Capital Project This allows the municipality to retain a stable municipal taxation structure without incurring new longer term debt. 2 Hold unspent grant funding until such time as they are withdrawn to complete the project. 3 Hold proceeds received from a Developer in lieu of land being allocated as a Public Reserve parcel in a new residential subdivision 4 Hold funds set aside in a restricted Reserve until such time as certain conditions are met per a legal agreement 5 To provide cash flows and liquidity in the beginning of a Municipality's fiscal year until such time as the majority of the annual property tax levies are collected In addition to providing working capital for municipal operations, these reserves are deployed on an interim basis to pay quarterly school requisitions By retaining a sufficient amount of funds in reserves, a municipality avoids interim borrowing and related interest costs that would otherwise be incurred until the majority of its property taxes have been collected The enclosed policy establishes reserves and segregates them by their purpose, establishes a range or an appropriate amount of funds to be held in financial reserves, and provides for reporting and review of reserve balances Recommendation 1 Council receive the draft reserve policy replacing policy #16 Terry ash, Assistant CAO Gen iviaho CAO Page 61 i EW L H N DRAFT FINANCIAL POLICY #16 1 Financial Reserve Policy Purpose To ensure that surplus and reserve funds are established and managed in an effective manner Segregation of Financial Reserves The following reserves are hereby established Separate reserves to hold funds that are restricted in their use by Provincial Legislation or by Legal Agreements Planning Cash In Lieu Reserve Funds specifically committed to future programs Operating Contingiency Reserve Road Renewal and Replacement Reserve Future Asset Acquisitions included in Capital Budgets Capital Reserves by function Amount of Financial Reserves The minimum amount in reserves will be sufficient to provide liquidity and cash flows during the first part of the fiscal year until the majority of its annual property taxes are collected The maximum amount to be held in Financial Reserves is the sum of the funds that are restricted by legislation and agreements, plus those funds that are committed in the future to financing specific purposes (Reserves plus accumulated surplus should not exceed on year's operating budget Should reserves plus accumulated surplus exceed on year's budget, Council will review the mill rate and long term expenditures.) Reserves shall not include any deposits or deferred revenues for which funds have been received before the corresponding services have been received before the corresponding services have been provided Page 62 DRAFT Council Approval is required for. The establishment of and purpose for new reserves The closure of reserves that are no longer required The transfers of funds to and from reserves via the annual budget review process Long term plans to draw funds from reserves in conjunction with approving longer term operating and capital plans Individual reallocations of funds held in reserves that are not included in Annual Operating or Capital Budgets Allocations of unspent funds from one fiscal period to the next period via accumulated surplus Review of Uncommitted Reserve & Accumulated Surplus Balances Council will annually complete a formal review of uncommitted reserves and accumulated surplus balances and determine how each year s annual operating surplus will be designated for future use Assurance of Reserve Liquidity At each year-end the municipality shall attempt to retain a total amount of Cash, Investments and other net liquid assets that is sufficient to fund its reserve balances This liquidity factor is to be monitored to ensure that Reserves are supported on an ongoing basis by real available dollars that can be readily drawn upon Page 63 Council Agenda #7g QUARTERLY REPORTS FAXED Page 64 - 80 r �J