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Purpose
1. Planning today and saving incrementally for future capital expenditures will help address
some of the long-term funding strategies for the Town and to ensure good financial and
cash management for ongoing financial stability of the Town.
2. The Town of Bridgewater is required to establish and maintain a Capital Reserve Fund
pursuant to Section 99 of the Municipal Government Act and in accordance with the
Town's Reserve Fund Policy #21.
3. The minimum level of Capital Reserve Fund will be at least ten per cent (10%) of regular
general fund operating expenses plus amortization expenses. It is recognized that this is
a target on adoption of this policy, and it may take the Town time to achieve its target and
is not considered a minimum.
Objectives
4. The purpose of maintaining adequate levels in the Capital Reserve Fund, in conjunction
with investment and debt management policies, will inform decisions relating to long-
range financial planning for capital projects to minimize debt servicing costs.
Principles
5. The minimum target for the capital reserve will be approximately 10% of the Town's
operating expenses plus amortization expense.
6. All reserve fund transactions should be transparent to the public. Amounts to be placed in
the
Capital
Reserve
Fund
should
be
included
in
the
annual
budget.
TOWN OF BRIDGEWATER
POLICY
CAPITAL RESERVE FUND
Policy No.
106
Approved:
January 24, 2022
Resolution #:
20-023
7. The Capital Reserve Fund will be invested at a financial institution subject to the Town's
Investment Policy.
8. It is intended that Council can revisit this policy in the future to amend the minimum
balances as required.
Funding
9. Section 99 of the Municipal Government Act requirements are as follows to be placed in
the capital reserve fund:
a. funds received from the sale of property;
b. the proceeds from insurance resulting from loss or damage of property that is not
used for replacement, repair or reconstruction of the property;
c. any surplus remaining from the sale of debentures that is not used for the
purpose for which the debentures were issued;
d. the surplus remaining in a sinking fund when the debentures for which it was
established are repaid;
e. any capital grant not expended in the year in which it was received;
f. proceeds received from the winding up of a municipal enterprise as defined in the
Municipal Finance Corporation Act;
g. the current fiscal year's accrual for landfill closure and post-closure expenses;
h. amounts transferred to the fund by the council; and
i. balance in tax sale surplus account twenty years after the tax sale (Section 147).
10. The monies received as part of the Canada Community-Building Fund (previously Federal
Gas Tax Fund) are to be recorded in the Capital Reserve Fund. As the monies are spent,
they are to be transferred to the Capital Fund. Any unspent monies are to remain in the
Capital Reserve Fund.
Uses
11. A withdrawal from the capital reserve fund shall be authorized by Council, by resolution
and may only be for:
a. capital expenditures for which the municipality may borrow;
b. repayment of the principal portion of capital debt; and
c. landfill closure and post-closure costs.
12. Council may borrow from the Capital Reserve Fund, by resolution, if the resolution
prescribes the terms of repayment, including interest, at a rate not less than the interest
rate that the municipality would pay to borrow the funds for a similar term from another
source.
13. Funds authorized to be withdrawn and used to acquire physical assets are to be
transferred directly to the Capital Fund into which the purchased assets are to be placed.
14. Expenditures relating to landfill closure and post-closure costs may be allocated from the
Capital Reserve.
15. In order to bring the Capital Reserve Fund back to the minimum balance, the amount of
the shortfall is to be considered in the draft budget for the following fiscal year. During
budget deliberations, Council can approve, amend or develop a phase in approach to
balance the Reserve over a number of fiscal periods.
16. Council may apply funds from the Capital Reserve Fund which lowers the fund balance
below the minimum approved balance, in an emergency situation, in accordance with
Section 11 above.
Interest Earned
17. Interest earned by the Capital Reserve Fund (other than the portion relating to landfill
closure and post closure costs) must also remain in that fund unless there is a special
resolution of council which allows the interest to be taken into the general operating fund
or as approved in the general operating, capital or reserve fund budgets.
Application
18. This policy applies to the Capital Reserve Fund of the Town of Bridgewater.