Reserve and Reserve Funds

The Town of Amherstburg sets aside funds as part of the annual operating budget for reserves and reserve funds. Reserves ensure that Town of Amherstburg can “weather the storms” and sustain critical infrastructure over the long term without significant fluctuations to the tax rate.

Established by Council or legislation. Reserves and Reserve funds can be established by municipal councils through by-laws, resolutions, or budget allocation.  Provincial legislation can also require municipalities to establish reserves for specific types of revenue. The Tax Rate Stabilization Reserve Fund; Water, Wastewater & Stormwater Reserve Funds; Development Charges Reserve Fund, and Parkland Dedication Reserve Fund are a few of Town of Amherstburg’s reserves.

Reserves are established for operational purposes, established through Council allocation, and are not restricted by legislation. They are typically part of an overall strategy for funding operating programs and projects. These funds help offset unexpected expenses or revenue shortfalls. Money in reserves can come from budget surpluses, property tax levies or other revenue.

Reserve Funds are established for specific purposes (Capital projects or project-based) or may be required by legislation (Development Charges), by-laws, or agreements (donations).

Discretionary and Obligatory Reserves and Reserve Funds

Both Reserves and Reserve funds are either obligatory or discretionary.

Discretionary reserve funds are set by municipal councils, by council resolution, for specific purposes and Councils can have flexibility to decide how the money is used.  These funds can be invested based on the Town’s Investment Policy, with the caveat that any potential return on investment is of secondary important to the safety and liquidity of principal.

Obligatory reserve funds are mandated by provincial statutes or contractual agreements and can only be used for their intended purpose as they have provincially mandated restrictions on the municipality may use them. These funds are not considered municipal funds until they have been used in accordance with agreements and legislation. Examples of these types of funds are funds raised from Development Charges (DCs) and grant funds received from other levels of government for specific programs or projects.

Important Financial Management Tools

Reserves and reserve funds are also important tools for a municipality’s long-term financial sustainability. Setting money aside for unavoidable events (like floods) and for capital projects (like road repairs) reduces the need for long-term borrowing or imposing sudden tax increases on current or future taxpayers.  

Examples of how they can be used are as follows:

  • For use in uncontrollable but often predictable events like floods, forest fires and pandemics.
  • To provide one-time or short-term funding for special purpose.
  • To give municipalities the flexibility to deal with fluctuating cash flows.
  • To align with long-term asset management plans to ensure municipalities can invest in important infrastructure projects for the community as Municipalities are responsible for 2/3 of Canada’s Infrastructure but only receive 10% of the tax bill.  Municipalities must plan for repairs and upgrades.
  • To integrate with and facilitate long-term debt financing strategies.

In Summary

A properly balanced approach to establishing reserves and using reserve funds is good financial management and is a key consideration for credit rating agencies.

Using reserves for their intended purposes is a financial best practice and can assist as follows:

  • In case of emergency, tax rates and user rates can remain relatively stable. Taxpayers are not burdened by significant increases.
  • Money can be saved for major capital projects that benefit communities.
  • Municipalities can continue to practice long-term financial sustainability, and better plan and budget for the future.

If reserves are used for unintended purposes:

  • Adequate funds may not be available to cover emergencies.
  • Property taxes may need to increase to cover any unexpected losses.
  • A lack of funds to maintain a state of good repair for capital infrastructure may lead to decreased service levels.
  • There will be a funding gap for projects for which funds were set aside. Projects will be at risk in the event of economic shocks.

A listing of Reserve and Reserve Funds for the Town of Amherstburg can be found in the Audited Financial Statements Schedule 3 (2024).  More Information about the Reserves and the Reserve funds can also be found in the Appendix to the Reserve & Reserve Fund Policy.