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POLICY
1. Statement
Planning today and saving incrementally for unexpected future events will help mitigate the
financial impact of major, nonrecurring or unforeseen expenditures on the Town's annual
operating budget, as well as take advantage of unexpected opportunities to leverage external
funding programs.
The Town of Shelburne is committed to establishing and maintaining an Operating Reserve
Fund. The level of Operating Reserve Fund will be at least ten percent (10%) of regular
general fund operating revenues.
2. Objectives
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.
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.
3. Principles
1) The minimum target for the operating reserve will be approximately ten percent (10%) of
the Town's operating revenues.
2) All operating surpluses will be transferred to the Operating Reserve Fund.
3) Any additional reserves by the Town will have their purpose clearly defined in a 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.
4) 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.
5) The Operating Reserve Fund will be invested at a bank that the Town does business with.
6) It is intended that Council can revisit this policy in the future to amend the minimum
balances as required
TOWN OF SHELBURNE
Operating Reserve Fund Policy
POLICY
4. Uses
1) The operating reserve 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 organization. Council can use the fund for both operating and capital purposes.
2) Council may apply funds from the Operating Reserve Fund in the normal course of
operations, but maintain the minimum approved balances, as approved by Council during
budget deliberations.
3) 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 service emergency, such a flood condition, snow situations, etc.
b) A required property purchase under an agreement
c) A transfer of service/costs to the Town that could not be reasonably budgeted for
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.
4) The assumption under the situations in 4.3 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.
5) In order to bring the Operating Reserve fund back to the minimum balance, the amount of
the shortfall is to be included in the draft budget for the following fiscal year. During budget
deliberations, Council can approve, amend or develop a phased-in approach to balance the
Reserve over a number of fiscal periods.
5. Application
This policy applies to the Operating Reserve Fund of the Town of Shelburne.
Passed by Town Council: December 2nd, 2019