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Purpose
1.
Planning today and saving incrementally for unexpected future events will help
mitigate the financial impact of major, non-recurring or unforeseen expenditures
on the Town's annual operating budget, as well as take advantage of unexpected
opportunities to leverage external funding programs.
2.
The Town of Bridgewater is committed to establishing and maintaining an
Operating Reserve Fund under the Town's Reserve Fund Policy #21.
3.
The target level of Operating Reserve Fund will be at least twenty per cent (20%)
of regular general fund operating expenses.
Objectives
4.
The purpose of maintaining adequate levels in the Operating Reserve Fund is to
mitigate current and future risks and to ensure stable tax rates. Operating
reserves are a significant consideration in long-term financial planning and
management.
5.
In addition, Operating Reserve Funds will provide the Town with a budgetary
option that can help mitigate the need to cut services or to raise taxes.
Principles
6.
The minimum target for the Operating Reserve Fund balance will be
approximately 20% of the Town's general operating expenditures.
7.
The annual General Operating Fund surplus will be transferred to the Operating
Reserve Fund as Unrestricted unless otherwise determined by Council.
TOWN OF BRIDGEWATER
POLICY
OPERATING RESERVE FUND
Policy No.
107
Approved:
January 24, 2022
Resolution #:
22-023
8.
Any Restricted Fund within the Operating Reserve Fund created by the Town will
have their purpose clearly defined in a Reserve Business Case. The Business
Case must also include the source and application of funds, the expected
timeline and any appropriate maximum amount, and projected annual
contributions, withdrawals, and balances as required in Reserve Fund Policy
#21.
9.
All reserve fund transactions should be transparent to the public. Amounts to be
placed in the Operating Reserve Fund should be included in the annual budget
or by resolution of council.
10. The Operating Reserve Fund may be invested at a financial institution.
Investments will be subject to the Town's Investment Policy (#108).
11. It is intended that Council can revisit this policy in the future to amend the
minimum balances as required.
Uses
12. The Operating Reserve Fund may be used to smooth significant fluctuations in
operating expenditures and/or revenue loss which cannot be anticipated and are
beyond the control of the Town. Council can use the fund for both operating and
capital purposes
13. Council may apply funds from the Operating Reserve Fund in the normal course
of operations, but maintain the minimum approved balance, as follows:
a. Applied in the Annual Operating Budget.
b. Applied in the Annual Capital Budget.
c. Applied to other funds as part Operating Reserve Fund Budget.
d. Applied as an approval of Council by resolution to apply funds after
approval of the Annual Operating Budget.
14. Council may apply funds from the Operating Reserve Fund which lowers the fund
balance below the minimum approved balance, in an emergency situation, such
as the following:
a. A protective services emergency, such as a flood condition, snow
situation etc.
b. A required property purchase under an agreement.
c. A transfer of service/costs to the Town that could not be reasonably
budgeted or foreseen.
d. A required payment under existing legislation that could not be
foreseen, such as pension funding liability.
e. An emergency requiring repairs to a Town asset or to an asset
supported by the Town.
f. A major revenue shortfall that could not be predicted.
15. The assumption under these situations is that there is no other funding source
available, or other sources are ruled out. This also assumes that a review of the
existing budget to take cost cutting measures in other areas will not have
sufficient impact to mitigate the costs of an emergency situation.
16. In order to bring the Operating 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, if
applicable.
Interest Earned
17. Interest earned by the operating reserve fund 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 and
reserve fund budgets as approved by council.
Application
18. This policy applies to the Operating Reserve Fund of the Town of Bridgewater.
Repeal
Policies A, B & C are hereby repealed.
A. Waste Water Reserve Policy #95
B. Reserve for Liability Claims Policy #83
C. Snow Clearing Reserves Policy #76