Reserves and Reserve Funds Policy (FC-006)

Waterloo, Ontario · adopted 2012-11-19

This is the exact embedded text of the captured official document. Snapshot d7331e7f4ddc · verified 2026-06-10 · original document · archived snapshot · unofficial consolidation, the official version is held by the municipal clerk.

Mandatory Policy, Municipal Act: No Policy Administration Team, Review Date: November 4, 2024 Corporate Management Team, Review Date: October 15, 2025 CORPORATE POLICY Policy Title: Reserves and Reserve Funds Policy Policy Category: Financial Control Policy No.: FC-006 Department: Corporate Services Approval Date: November 19, 2012 Revision Date: December 8, 2025 Author: Julie Koppeser Attachments: None Related Documents/Legislation: Municipal Act, S.O. 2001, c. 25, as amended Development Charges Act, S.O. 1997, c. 27, as amended Planning Act, R.S.O. 1990, c. P.13, as amended Occupational Health and Safety Act, R.S.O. 1990, c. O.1, as amended Building Code Act Community Benefit Charge, By-Law No. 2022-072 Development Charges, By-Law No. 2019-064 Parkland Dedication, By-law No. 2022-073 Duties of the Chief Administrative Officer, By-Law No. 2021-065, as amended City of Waterloo Official Plan Uptown Parking Strategy Financial Requests Outside of the Budget Process, Policy No. FC-002 Public Art, Policy No. A-018 Comprehensive Business Licencing Review, Staff Report No. COM2014-021 Key Word(s): Reserve POLICY STATEMENT: Council approval is required for any transactions not approved via the approved budget or individual Reserve and Reserve Fund policies that will impact a Reserve Fund or Reserve. In addition, any changes to the established policy or use of an individual Reserve or Reserve Fund requires Council approval. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 2 PURPOSE: The primary objective of the Reserves and Reserve Funds Policy is to ensure that monies are set aside for the long-term goals of the municipality and that those funds are available when needed. Reserves and Reserve Funds are important long-term financial planning tools for municipalities and are used to set aside funds for a future purpose. Many of the Reserve Funds and Reserves have funding included in the Operating Budget and are the main funding sources of the Capital Budget. There are several instances where using Reserves or Reserve Funds is appropriate, including: - To facilitate long term financial planning (Capital Reserve Fund) - To smooth tax rate impacts (Tax Rate Stabilization Reserve) - To plan for the impact and financing of major capital projects over time (Library Expansion and Rehabilitation Reserve Fund) - To absorb the cost of one-time expenses not included in the operating budget (Council's Community Priority and Contingency Reserve) - To provide for the cost of equipment or facility replacements (Capital Infrastructure Reinvestment Reserve Fund) - To fund known future obligations (RIM Park Investment Reserve) DEFINITIONS: Reserve Fund Monies set aside for a specific purpose as required by provincial legislation, a municipal by-law, or agreement. Reserve Funds receive an annual interest allocation based on the average annual balance. The City of Waterloo has both Obligatory and Discretionary Reserve Funds. Obligatory Reserve Fund Monies set aside and legally restricted by provincial legislation, a municipal by-law, or agreement. The funds are raised for a specific purpose and cannot be used for any other purpose. The main Obligatory Reserve Funds are the Development Charges Reserve Funds that are regulated by the Development Charges Act. Discretionary Reserve Fund Monies set aside for a specific purpose by Council and legislated by municipal by-law. If Council should decide to spend the money for purposes other than what it was originally intended for, then a new by-law must be passed under section 417(4) of the Municipal Act. Reserve Monies set aside by approval of Council and not restricted by legislation. Reserves can be related to projects that are of a nature prescribed and managed by approval of Council. Reserves do not receive an annual interest allocation. SCOPE: The Reserves and Reserve Funds Policy applies to all Reserves and Reserve Funds established by the City of Waterloo. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 3 POLICY COMMUNICATION: The Reserves and Reserve Funds Policy will be posted on the City of Waterloo Intranet to be available to all staff. POLICY: Under Section 417(1) of the Municipal Act, municipalities have the authority to provide for Reserve Funds in annual budgets for any purpose for which it has the authority to spend money. The following individual Reserves and Reserve Fund policies have been established with approval of Council. Council approval is required for any transactions outside of the approved budget or Reserve and Reserve Fund policies, as well as any changes to the established policy or use of a Reserve or Reserve Fund. RESERVE FUNDS: BUILDING PERMIT RESERVE FUND (BLD) (Obligatory) 860030 POLICY: The Building Code Act states that the fees collected are to be used to administer the Act; surpluses cannot be used to fund general City expenditures, and deficits should be funded from a Reserve Fund and not from the City funds. For this reason, the Building Permit Reserve Fund was established for the Building Standards division to provide for capital expenditures and revenue stabilization, as building permit activity is highly cyclical. Revenues Revenues to the Building Permit Reserve Fund are surpluses from Building Permits. Contributions and balances associated with building permits should be reviewed every 5 years. Expenditures Expenditures from the Building Permit Reserve Fund stabilize the building permit revenue line in the Operating Budget and fund Building Standards division capital expenditures. Council Approved Funding Level The Building Reserve Fund aims to maintain a target balance equal to 18 months of projected operating expenses to mitigate the sharp cyclical drops experienced or for when the economy faces a recessionary period, as well as to protect against building activity downturns. The reserve fund should not drop below a minimum of 12 months of projected operating expenses. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 4 CANADA COMMUNITY-BUILDING RESERVE FUND (CCBF) 870034 POLICY: The Canada Community-Building Reserve Fund provides funding for investments in Environmentally Sustainable Municipal Infrastructure (ESMI) Projects and Capacity Building Projects as per the Municipal Funding Agreement on the Canada Community-Building Fund. Revenues The City of Waterloo receives a semi-annual allocation of funds from the AMO on behalf of the Federal Government per the Municipal Funding Agreement on the Canada Community- Building Fund. Expenditures Expenditures from the Canada Community-Building Reserve Fund are used to support environmentally sustainable municipal infrastructure to help ensure cleaner air, cleaner water, and reduced greenhouse gas emissions. Eligible project categories relevant to the City of Waterloo include: - drinking water - wastewater - community energy systems - local roads - bridges - capacity building - fire halls - broadband connectivity - brownfield redevelopment - cultural and tourism infrastructure - sport and recreational infrastructure - resilience The Municipal Funding Agreement on the Canada Community-Building Fund sets out Eligible projects/categories as well as terms & conditions in further detail. Unused funds will be returned to the Canada Community-Building Reserve Fund and redistributed to other eligible and similar projects as approved by the appropriate authorizing officers as per policy FC-002 Financial Requests Outside of the Budget Process, for administrative ease and improved tracking. Council Approved Funding Level The balance of the Canada Community-Building Reserve Fund should not drop below $0 and should be monitored regularly to make best use of the opportunity available to the City of Waterloo. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 5 CAPITAL RESERVE FUND (CRF) (Discretionary) 860001 POLICY: The Capital Reserve Fund provides a source of financing for the purchase, construction, or development of new capital assets and studies, as defined under the Definition of Capital Policy (FC-010). Rehabilitation, refurbishment, and maintenance projects for existing capital assets will not be funded from the Capital Reserve Fund. Revenues The Capital Reserve Fund receives an annual operating budget allocation. The Capital Reserve Fund also receives an allocation of 10% of Assessment Growth. In addition, when actual Enova Power Corp. dividend/investment income exceeds budget, 50% of the surplus is transferred to the Capital Reserve Fund. This year-end surplus transfer will only occur to the extent that the City remains in an overall surplus position. Furthermore, when actual investment income exceeds budgeted investment income, the surplus is transferred 25% to the Capital Reserve Fund. Expenditures The Capital Reserve Fund provides the funding for new assets and studies. Council Approved Funding Level The combined balances of the Capital Reserve Fund and the Capital Infrastructure Reinvestment Reserve Fund are not to fall below $2 million, to provide each of these funds the flexibility to temporarily offset a greater need in the other. A target to maintain the Capital Reserve Fund balance at approximately $5 million has been established to provide flexibility to address a significant new priority, or to allow funds to be accumulated over several years towards a larger project. A maximum level of $10 million has been established for this fund. If funding levels reach this maximum, funds would be redirected to the Economic Development Reserve, provided the Capital Reserve Fund will have a sufficient balance remaining to meet the project funding requirements of the 10-year capital projection. CAPITAL INFRASTRUCTURE REINVESTMENT RESERVE FUND (CIRRF) (Discretionary) 860035 POLICY: The Capital Infrastructure Reinvestment Reserve Fund provides for expenditures associated with the rehabilitation or replacement of all existing tax-based capital infrastructure. The Capital Infrastructure Reinvestment Reserve Fund may be used to help meet the funding requirements of matching programs developed by senior levels of government for rehabilitation or replacement of existing capital infrastructure. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 6 Revenues The Capital Infrastructure Reinvestment Reserve Fund receives: - an annual allocation of 30% of Assessment Growth. - any new infrastructure revenues associated with the rehabilitation of roads or facilities from the Provincial or Federal Governments, not including Canada Community-Building Fund revenues. - a 25% allocation of property tax surplus is contributed to this Reserve Fund, as outlined in the Allocation of Surplus policy (FC-003). - 25% of dividend income/investment surplus, when actual Enova Power Corp. dividend/investment income exceeds budget. The year-end surplus transfer will only occur to the extent that the City remains in an overall surplus position. - 100% of capital overhead revenue surplus. - 25% of investment income surplus, when actual investment income exceeds budgeted investment income. - an annual operating budget allocation. Expenditures Expenditures from the Capital Infrastructure Reinvestment Reserve Fund are for the rehabilitation or replacement of all existing tax-based capital infrastructure, including facilities and equipment. Costs resulting from emergency infrastructure failure or impending failure are also eligible to be funded from this Reserve Fund. This Reserve Fund may also be used to help meet the unbudgeted funding requirements of government matching programs. Council Approved Funding Level The combined balances of the Capital Reserve Fund and the Capital Infrastructure Reinvestment Reserve Fund are not to fall below $2 million, to provide each of these funds the flexibility to temporarily offset a greater need in the other. The target for the Capital Infrastructure Reinvestment Reserve Fund is approximately $5 million. These levels will provide the flexibility to adjust project timing as priorities are updated and provide for unplanned or emergency rehabilitation or replacement. No maximum has been established for this reserve fund. CEMETERY RESERVE FUND (CEM) (Discretionary) 860090 POLICY: The Cemetery Reserve Fund provides funding for the purchase, replacement and expansion of capital items related to Cemetery operations. Revenues Revenues to the Cemetery Reserve Fund are provided through an annual allocation from the Cemetery Enterprise operating budget. Additionally, 100% of the Cemetery year-end operating budget surplus, if any, is allocated to this Reserve Fund. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 7 Expenditures Expenditures funded from the Cemetery Reserve Fund are for capital items related to Cemetery operations. This includes both replacement and expansion items. Council Approved Funding Level The Council approved funding level for the Cemetery Reserve Fund is a minimum of $50,000 to mitigate the impact of an unbudgeted or emergency capital requirement. CLIMATE ACTION RESERVE FUND (CARF) (Discretionary) 860054 POLICY: The Climate Action Reserve Fund helps facilitate projects, initiatives, and studies that support climate change mitigation, adaptation and the climate resiliency of the City's infrastructure, as well as those targeting energy and greenhouse gas (GHG) reduction in alignment with the Council approved GHG emissions reduction targets of 50% by 2030 and net zero by 2050. Revenues A one-time allocation of 2021 capital overhead surplus, a one-time allocation from capital project surplus, and a transfer of the final balance from the now closed Innovation Reserve Fund, established initial funding for the Climate Action Reserve Fund. Ongoing funding to the reserve fund is provided through: - an annual operating budget allocation - 25% of investment income surplus (when actual investment income exceeds budgeted investment income) - 25% allocation of property tax surplus (as outlined in the Allocation of Surplus policy (FC-003)) - 25% of Enova Power Corp. dividend/investment surplus (when actual Enova Power Corp. dividend/investment income exceeds budget) The Climate Action Reserve Fund may also be funded by additional ongoing or one-time contributions as approved by Council through the budget process, or other amounts designated by Council as contributions. Expenditures Examples of Climate Action Reserve Fund supported projects, initiatives, and studies could include, but would not be limited to: - implementation of the Corporate Climate Action Plan (CorCAP) and actions in TransformWR, the community climate action plan - climate change adaptation projects - corporate energy management, monitoring and strategy implementation, as outlined in the Energy Conservation and Demand Management Plan (ECDM) POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 8 - implementation of an electric vehicle charging program - upgrades to key municipal infrastructure to mitigate climate-related impacts (e.g. extreme weather, poor air quality, utility outages, etc.) - matching funding to attract Climate Action stimulus/grant opportunities through senior levels of government Council Approved Funding Level The balance of the Climate Action Reserve Fund should not drop below $0 and should be sufficient to support the associated projects identified in the ten-year capital projection. Ongoing monitoring will be required to ensure the reserve fund is adequately funded to facilitate projects to achieve the Council approved reduction targets. COMMUNITY BENEFITS CHARGE RESERVE FUND (CBC) (Obligatory) 860053 POLICY: The Community Benefits Charge Reserve Fund supports growth related capital expenditures not otherwise provided for through development charges or cash in lieu of parkland contributions, and in alignment with the City's Community Benefits Charge By-law, which came into effect on September 26, 2022. Revenues A one-time allocation of the closing balances from the cessation of the DC-Parking Reserve Fund, DC-Cemeteries Reserve Fund, and legacy Section 37 Density Bonusing accounts, established the initial funding for the Community Benefits Charges Reserve Fund. The ongoing source of revenue for the reserve fund is dependent upon overall development and redevelopment. The maximum permissible Community Benefits Charge is 4% of the appraised value of the land that is subject of development/redevelopment as of the valuation date and is imposed on buildings with five (5) or more storeys and ten (10) or more residential units. Expenditures The Community Benefits Charge Reserve Fund provides funding for the anticipated needs required to service growth related capital projects identified in the Council approved Community Benefit Charge Strategy. The allocation of funds will occur on an annual basis, in accordance with legislation under the Planning Act, and in consultation with Council and staff of the applicable service areas. During the annual capital planning process, the use of Community Benefits Charge funding will be reviewed and the capital costs associated with each eligible service and project will be confirmed and identified for approval by Council. Other services or projects not otherwise identified in the Community Benefits Charge Strategy may be considered by Council in the future and are subject to approval by resolution and POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 9 inclusion in the capital budgeting process. Further, any additional services or projects approved and funded from Community Benefits Charges will be reported through the annual Treasurers statement that summarizes the reserve fund activity. Council Approved Funding Level The balance of the Community Benefits Charge Reserve Fund should not drop below $0 and should be sufficient to support the associated projects identified in the 10-year capital projection. CONSOLIDATED DEVELOPMENT CHARGES RESERVE FUNDS (DC) (Obligatory) Summary of Combined Funds POLICY: The Development Charges (DC) Reserve Funds provide financing for growth related projects undertaken by the City as detailed in the DC Background Study and By-law. The DC Reserve Funds include 860039-Fleet & Public Works, 860040-DC Roads, 860041-DC Water & Sewer, 860042-DC Stormwater, 860043-DC Parks & Indoor Rec, 860045-DC Library, 860047-DC Fire, and 860048-DC Studies. For all Development Charges Reserve Funds: - Annual debt repayments will be made first from the DC Reserve Funds once the Capital Budget is approved by Council - DC Reserve Funds activity will be tracked quarterly and reported to ECMT - Routine projects will be reviewed to determine which projects can move forward for funding based on cumulative DC revenue collections compared to cumulative capital spending - Non-routine projects brought forward for capital funding consideration when the Reserve Fund balance is in a positive position, will only be recommended if: o there is sufficient funding and revenues are at least 75% of the cumulative target outlined in the current approved DC Background Study, or o cumulative capital spending % is less than cumulative revenues collected % as per the current approved DC Background Study - Non-routine projects brought forward for capital funding consideration when the Reserve Fund balance is in a negative position or will become negative with the project, will only be recommended if: o revenues are at least 85% of the cumulative target outlined in the current approved DC Background Study, or o cumulative capital spending % is less than cumulative revenues collected % as per the current approved DC Background Study - Projects failing to meet these requirements will be subject to a Management Review. Revenues DC legislation took effect in 1991. A charge is imposed and collected prior to the issuance of a building permit on new development and redevelopment that will result in the demand for engineered and general services. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 10 Expenditures Projects being funded from DC are restricted to those included in calculating the rate and are listed in the approved DC Background Study and By-law (comparable substitutions permitted for the same value). An eligible project can be defined as one that would benefit new development during the term of the by-law. Projects that arise during the term of the approved DC Background Study and By-law, which were not originally included, may still be eligible for DC funding. Such projects must be for growth and a Management Review is required. Council must then approve that the projects are for growth and direct that any recoveries be incorporated into the next DC Background Study and Bylaw. Council Approved Funding Level The Reserve Funds balances should cover projected expenditures and debt charges in the current approved DC Background Study and By-law. ENVIRONMENTALLY SENSITIVE LANDS RESERVE FUND (ESL) (Discretionary) 860008 POLICY: The Environmentally Sensitive Lands Reserve Fund provides for the acquisition and purchase of environmentally sensitive lands to ensure protection, preservation and conservation, in alignment with the City of Waterloo Official Plan, and the Environmental Lands Acquisition Strategy. Revenues Revenues to the Environmentally Sensitive Lands Reserve Fund are provided through an annual allocation from the operating budget, as per the capital budget policy. Expenditures Land is targeted for purchase as per the Environmental Lands Acquisition Strategy, and purchases are approved annually by Council. Council Approved Funding Level The balance should not drop below $40,000 and should be sufficient to purchase targeted lands as they become available over the 10-year capital forecast. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 11 INDUSTRIAL LAND RESERVE FUND (ILA) (Discretionary) 860052 POLICY: The purpose of the Industrial Land Reserve Fund is to provide for expenditures related to the acquisition, servicing, and betterment of the City of Waterloo's Industrial Land inventory, and to accumulate Industrial Land holdings sale proceeds. Costs incurred are to be recovered through the subsequent sale of those lands. Revenues Proceeds generated by the sale of industrial land holdings fund this Reserve Fund. Market value of lands will be monitored annually to ensure up to date land values are used in projections, however the information is only intended to provide a reasonable forecast of proceeds. Actual sale prices are subject to negotiation. Expenditures Expenditures from the Industrial Land Reserve Fund are tracked through site-specific program numbers within the Reserve Fund to ensure that costs incurred for a given site do not exceed the projected value of that land. The Industrial Land Reserve Fund provides for: - Costs incurred to acquire new industrial land - Costs incurred to service existing industrial land - Improvements to existing industrial land, such as re-grading, to increase future value Council Approved Funding Level Expenditures from the Industrial Land Reserve Fund are not to exceed the projected recovery from land sales. As costs are incurred initially, and the timing of revenues is dependent on many factors, including market conditions, this Reserve Fund is likely to maintain a negative position until the sale of lands is completed. LIBRARY EXPANSION and REHABILITATION RESERVE FUND (LXPR) (Discretionary) 860026 POLICY: The Library Expansion and Rehabilitation Reserve Fund contributes to future library expansion and rehabilitation. Revenues An allocation of 25% of property tax surplus is contributed to this Reserve Fund, as outlined in the Allocation of Surplus policy (FC-003). Also, when actual investment income exceeds budgeted investment income, the surplus is transferred 25% to the Library Expansion and Rehabilitation Reserve Fund. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 12 Expenditures Expenditures from the Library Expansion and Rehabilitation Reserve Fund are to be used for future Library expansion and rehabilitation needs. Council Approved Funding Level The balance of the Library Expansion and Rehabilitation Reserve Fund should not fall below $0 and should be sufficient to support the associated projects identified in the ten-year capital projection. PARKING RESERVE FUND (PKG) (Discretionary) 860020 POLICY: The Parking Reserve Fund was originally established in 1999 to provide for the ongoing maintenance of the City's Uptown Parkade and Surface Lots. On May 12, 2008, City Council approved the Uptown Parking Strategy, which identified the need for additional parking infrastructure and a resulting shift in emphasis from maintenance to future increased parking infrastructure, and on May 25, 2009, the Parking Reserve by-law 09-062 was established. Revenues The Parking Reserve Fund shall be funded through the following sources: a) 100% of all net parking program revenue b) any monies obtained by the City from entering into an agreement exempting an owner/occupant from the City's parking requirements pursuant to section 40 of the Planning Act, as amended; and c) any net proceeds from the sale of City owned parking lot property. Expenditures The Parking Reserve Fund shall be used for the: a) purchase and capital maintenance of any City parking infrastructure and related components, including parking-related technology; b) design and construction of new City parking infrastructure and the purchase of associated land, including financing costs; c) costs associated with parking-related studies, analysis, policy or strategy development, including those involving external consultants; and d) operating deficit incurred by the City's Parking Program, if any. Council Approved Funding Level The minimum balance for the Parking Reserve Fund is $500,000 to mitigate risk as Parking operations continues to move towards operating under an enterprise model. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 13 PARKLAND DEDICATION RESERVE FUND (PUB) (Obligatory) 860010 POLICY: The Parkland Dedication Reserve Fund provides for the purchase and development of parkland in developing areas and redeveloping areas and/or supports the upgrading of existing parks/facilities (neighbourhood, community or city-wide). This Reserve Fund is a legislative requirement of the Planning Act. A staff team comprised of Finance and Directors of Integrated Planning & Public Works and Community Services will determine which proposed capital projects meet the objectives to receive funding from this account, prioritize timing of projects within the budget, allocate appropriate funding amounts, and provide their recommendations as part of the Capital budget process for Council approval. Revenues Under Section 42, 51.1 & 53(13) of the Planning Act municipalities are given the authority to request the conveyance of land to the City for parks at a rate of 5% for residential development and 2% of industrial and commercial development. Cash in lieu of parkland can be taken at the discretion of the municipality consistent with the City of Waterloo Parkland Dedication By-law 2022-073 and Policies, enacted by Council on September 26, 2022. Cash in lieu payments populate this Reserve Fund. The source of revenue for this Reserve Fund is dependent on overall development and redevelopment. It is anticipated that this Reserve Fund will continue to grow. Expenditures The use of the Reserve Fund will be prioritized as follows: 1. Land acquisition for additional parks in developing areas or redeveloping areas. 2. To fund the development of the newly acquired lands. 3. To support the redevelopment of existing parks (not new parkland). 4. Additions to facilities to support growth where the need is due to growth. 5. The non-growth component of growth-related capital projects for Parks Development and Recreation Facilities identified in the City's Development Charges Background Study. Council Approved Funding Level The funding level should be sufficient to purchase and develop new parkland opportunities and to provide funding for the upgrade of parks/facilities in areas undergoing intensification as required. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 14 PLANNING LITIGATION RESERVE FUND (LIT) (Discretionary) 860003 POLICY: The Planning Litigation Reserve Fund provides for the cost of planning litigation hearings that may commence against the City for various legal reasons. Revenues An operating budget allocation is transferred annually to maintain the Planning Litigation Reserve Fund. Expenditures Expenditures from this Reserve Fund are legal or administrative in nature. In addition, the Planning Litigation operating account is closed to this Reserve Fund annually. Council Approved Funding Level The Planning Litigation Reserve Fund balance should not drop below $500,000. PROVINCIAL GOVERNMENT GRANTS RESERVE FUND (PGOV) 860056 POLICY: The Provincial Government Grants Reserve Fund will facilitate the use of grant funds from provincial streams (e.g., Building Faster Fund (BFF), Housing-Enabling Core Servicing (HECS)) in accordance with each grant stream's Transfer Payment Agreement (TPA). Establishing a reserve fund for provincial grants allows for the application of interest on unspent grant funding as a part of year end processing. Revenues Any allocations to the City of Waterloo of provincial grant funding that has not yet been allocated to capital projects or that have been returned from capital projects populate this reserve fund. Expenditures Funding is to be used to support municipal efforts to deliver on commitments outlined through each grant stream, in accordance with the requirements of each grant TPA. Each grant stream TPA sets out eligible projects/expenditures, as well as terms & conditions, in further detail. Unspent provincial government grant funds in capital projects at the end of each fiscal year will be returned to the Provincial Government Grants Reserve Fund and interest will be applied. Funds will then be reissued to the capital projects at the start of the next fiscal year. If permitted under the applicable grant TPA, funds may be redistributed to other eligible and similar projects as approved by the appropriate authorizing officers, as per policy FC-002 POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 15 Financial Requests Outside of the Budget Process, for administrative ease and improved tracking. Council Approved Funding Level The balance of the Provincial Government Grants Reserve Fund should not drop below $0 and should be monitored regularly to make best use of the opportunity available to the City of Waterloo. RECONCILIATION ACTION PARTNERSHIP RESERVE FUND (RAP) 860055 POLICY: The Reconciliation Action Partnership (RAP) is a collaborative group of municipal representatives working to coordinate efforts to support Indigenous-centered initiatives across Waterloo Region. RAP includes members from each of the eight (8) area municipalities within the Region of Waterloo, each contributing towards the annual RAP operating budget. The mandate of the RAP is outlined within the Terms of Reference / Governance Framework for the RAP, and subject to the approval of area CAO's. The Reconciliation Action Partnership Reserve Fund offsets any annual deficit and collects any annual surplus resulting from the operations of RAP, in alignment with EIDB-001, the Reconciliation Action Partnership Use of Funds Guideline. The RAP Reserve Fund is administered by the host municipality - the area municipality responsible for the physical collection, retention, distribution and reporting of RAP funding. The term and location of the host municipality will be determined by RAP in consultation with Area CAO's and Area Treasurers. Revisions to the host municipality are subject to the approval of Area CAO's. Revenues Revenues to the Reconciliation Action Partnership Reserve Fund result from any year end surplus remaining from the annual RAP operating budget and are carried forward within the reserve fund for use by RAP in future years. Expenditures Expenditures from the Reconciliation Action Partnership Reserve Fund result from any year end deficit incurred in excess of the annual RAP operating budget. Council Approved Funding Level The balance in the Reconciliation Action Partnership Reserve Fund should not fall below $0 and should reconcile and align with the comprehensive annual budget to actual reporting on the RAP funding provided to Area Treasurers and Area CAO's each calendar year. This reporting will be the responsibility of the host municipality, in consultation with the RAP membership. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 16 SICK LEAVE & VACATION LIABILITY RESERVE FUND (SL&V) (Discretionary) 860004 POLICY: The Sick Leave & Vacation Liability Reserve Fund provides financing for the accumulated sick leave benefit payable to eligible employees upon retirement, termination, or death. Revenues Revenues to this Reserve Fund are provided by 100% of the net difference between Fire salary budget and actual, less 50% of any calculated vacancy savings (position budget, less actuals, less labour-related commitments) for Fire positions. In addition, the yearly increase in vested sick leave liability for Municipal Building Officers I, II, and III, (MBO's) and fire inspectors is contributed to this Reserve Fund. Expenditures This payout benefit is only for Staff Association and CUPE members who began prior to 1985 and any member of the fire union with 10 years or more of service. In addition, the Reserve Fund provides for a retirement stipend from banked sick leave for CUPE staff hired after June 1,1985 who are voluntarily retiring and who meet the eligibility criteria. Allowable expenditures under this reserve also include costs incurred in relation to presumptive claims, as well as health care costs for retired firefighters in alignment with the current collective agreement. The payout is calculated annually, and the appropriate transfer is processed at year end. Council Approved Funding Level The Sick Leave & Vacation Liability Reserve Fund balance should be sufficient to cover 25% of the liability for both Sick Leave and Vacation, as well as projected presumptive claims. The balance should also be sufficient to cover payouts over a three-year period. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 17 RESERVES: COMPREHENSIVE BUSINESS LICENSING RESERVE (BUS) 870042 POLICY: The Comprehensive Business Licensing Reserve was established to fund any annual deficit and collect any annual surplus from the Comprehensive Business Licensing Program approved by Council on August 11, 2014, with report COM2014-021. The Comprehensive Business Licensing Program has been developed as a full cost recovery enterprise system. Revenues Revenues to the Comprehensive Business Licensing Reserve result from any surplus earned by the Comprehensive Business Licensing Program. Expenditures Expenditures from the Comprehensive Business Licensing Reserve are to fund the Comprehensive Business Licensing Program expense lines in the Operating Budget and to fund capital expenditures. Council Approved Funding Level The balance in the Comprehensive Business Licensing Reserve should not fall below $0 and should be sufficient to support the associated projects identified in the ten-year capital projection. COUNCIL'S COMMUNITY PRIORITY and CONTINGENCY RESERVE (CCPC) 870002-10464 POLICY: Council's Community Priority and Contingency Reserve was established in 2009 to provide for expenses that are not a part of the approved budget, but that Council determines to be necessary or of considerable merit. Revenues The Council's Community Priority and Contingency Reserve receives an annual contribution from Operating. Expenditures This Reserve provides funding for unforeseen expenditures that may occur within a year. It is used for unbudgeted or new expenditures of considerable merit. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 18 Council Approved Funding Level The Reserve should not drop below $0. ECONOMIC DEVELOPMENT RESERVE (ECDEV) 870040 POLICY: The Economic Development Reserve is to provide one-time funding for opportunities to enhance the business environment within the City of Waterloo, and to create a catalyst to stimulate and support continued economic growth within the City of Waterloo. Revenues The Economic Development Reserve is funded from an annual transfer. In addition, any annual Municipal Accommodation Tax (MAT) surplus is allocated to this reserve, in a separate program. Expenditures The Reserve provides funding to the Economic Development Division to implement various economic development related initiatives that provide lasting and sustainable economic benefit that are supported by a business case including metrics as follows: - initial financial support to attract financial contributions or commitment from other levels of government or the private sector; - implement initiatives as planned through Council's Strategic Plan, Economic Development Strategy, or any related Economic Development Strategies/priorities; - provide incentives to retain or attract businesses to the City of Waterloo and maintain a positive business environment The reserve also provides funding to position the City to respond quickly to new opportunities for economic growth and development and transfers annually $75,000 to the Economic Development Operating Budget. In addition, surplus funds collected and held in the separate Municipal Accommodation Tax program are to be used for purposes recommended by the Executive Director of Economic Development, including but not limited to: - market research - tourism, sport and cultural infrastructure (permanent and event related) - bid and grant funding for International, National, and Provincial-scale events - major festival and event expansion/development - one-time Festival and Event acquisition costs - collaborative tourism marketing efforts - additional staff resources, if required, to support the efforts above - any other items that may be prescribed / allowed by provincial legislation POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 19 Municipal Accommodation Tax operating deficits, if any, would also be posted to the MAT program of this reserve at year-end. Prior to submission to Council all reports, funding requests, or budget allocations related to the Economic Development Reserve are subject to review by the Executive Director of Economic Development or designate. This Reserve is not intended to provide funding for permanent on-going expenses such as permanent staff. Council Approved Funding Level The Economic Development Reserve balance is to remain positive. The target balance is $1.5 million, to provide flexibility to address a significant new priority or to allow funds to be accumulated towards a larger project. The maximum for the reserve is $5 million. If funding levels reach this maximum, funds would be redirected to the Tax Rate Stabilization Reserve, provided the Economic Development Reserve will have a sufficient balance remaining to meet the project funding requirements of the 10-year capital projection. ELECTIONS RESERVE (ELEC) 870006 POLICY: The Elections Reserve was established to amortize the cost of a municipal election over 4 years, rather than expensing the entire amount in the year of the election. Revenues The Elections Reserve receives an annual allocation from the operating budget. Expenditures Expenditures from the Elections Reserve are to be for election related expenses. The draw on the reserve for election costs is calculated annually and the appropriate transfer is processed at year-end, if needed. Council Approved Funding Level The Elections Reserve balance should not drop below zero. EMPLOYEE DEVELOPMENT and CAPACITY BUILDING RESERVE (EMPDV) 870032 POLICY: The Employee Development and Capacity Building Reserve is used to accumulate corporate savings from staffing vacancies to support employee-based initiatives. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 20 Revenues - Any calculated vacancy savings (position budget, less actuals, less labour-related commitments (e.g. acting, termination, benching expenses)) for all regular positions (Management, CUPE, Staff Association, and Waterloo Professional Firefighters Association), with the exception of the following: o Vacancy savings related to Fire Services positions are divided evenly (50% / 50%) between the Employee Development and Capacity Building Reserve and the Sick Leave and Vacation Liability Reserve Fund. o Position savings that are a part of Utilities, Cemeteries, or other Enterprise Units are allocated to the respective enterprise Reserve or Reserve Fund. o Maternity Leave positions, CUPE seasonal positions, contract positions, Temporary (casual) part-time positions are exempt - Vacancy management savings/transfers are calculated by Finance based on the actual time a position remains vacant (not held by Full-Time Permanent or Contract employee) in the calendar year. Expenditures - This Reserve funds employee-based initiatives such as: staff and leadership development, employee recognition, reorganization/restructuring implementation, employee wellness initiatives, terminations, back filling staff on extended sick leave if funds are not available in the division, space planning, other employee-related initiatives as determined by CMT. - Any unbudgeted expenses requested to be funded from this Reserve are subject to the following approval process: - CAO can approve unbudgeted expenses from this Reserve pursuant to By-Law #2021-065 (as amended), a by-law to define the duties of the office of the Chief Administrative Officer, and any successor by-laws, provide there is sufficient funding in the Reserve Council Approved Funding Level The minimum balance for this reserve is $500,000. FLEET EQUIPMENT RESERVE (ER) 870017 POLICY: The Fleet Equipment Reserve provides a source of funding for the replacement of vehicles and equipment, as outlined in the Fleet Management policy. Revenues Revenues for the Fleet Equipment Reserves are generated by applying an annual Capital Cost Recovery charge per vehicle/equipment (unit). Units repay the Reserve over the useful life of the unit, including a 25% markup factor as per the Fleet Financial procedures. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 21 Expenditures Expenditures are for the replacement of vehicles and equipment. Expenditures related to the replacement of Fleet Garage assets will be tracked through a separate program number within the reserve. Council Approved Funding Level The Reserve balance should be adequate to replace existing equipment on a replacement schedule based on estimated life span of the equipment. The Council approved target level of the reserve is 30% of the 5-year average spending for fleet capital. GENERAL CONTINGENCY RESERVE (GENCON) 870043 POLICY: The General Contingency Reserve funds operating expenditure variations that result from cyclical spending. In addition, unanticipated operating opportunities and pressures, and those which are anticipated but for which the timing is undetermined would also be funded from this reserve. The reserve may also be used for strategic, one-time, capital contingency expenditures. Revenues The General Contingency Reserve receives an annual operating budget allocation. In addition, an annual allocation of 10% of gross rent from City Centre leases is transferred to this reserve. Expenditures This Reserve provides for operating expenditure variations resulting from cyclical spending, unanticipated operating opportunities and pressures, and anticipated expenditures for which the timing cannot be anticipated. Examples would include but are not limited to: - expenditures from unexpected environmental issues such as soil or groundwater contamination - emergency maintenance requirements at any corporate facilities - expenditures relating to significant storm events - a major work related injury - offsetting the impact of tenant vacancy - the acquisition of new tenants and related leasehold improvements In addition, this reserve may at Council's discretion be used for select one-time capital contingency pressures. Costs related to the acquisition of new tenants and leasehold improvements, approved in accordance with financial control policy FC-002 Financial Requests Outside of the Budget Process, are charged to the leasehold improvement operating program code and closed to the General Contingency Reserve as a part of year-end processing. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 22 Council Approved Funding Level The General Contingency Reserve minimum balance is $500,000, which is equal to the highest potential charge per incident by the Ministry of Labour under the Occupational Health & Safety Act, Section 66. The target balance of the reserve is 3% of the net tax levy. The maximum balance for the reserve is 4% of the net tax levy. If funding levels reach this maximum, funds would be redirected to the Tax Rate Stabilization Reserve. HERITAGE RESERVE (HER) 870024 POLICY: The purpose of the Heritage Reserve is to fund expenditures related to the management of Waterloo heritage, which includes the City's heritage collection, heritage programming, and built heritage conservation efforts. Revenues Revenue sources of the Heritage Reserve include: - Donations made with or without a specified purpose - Proceeds received from fundraising activities - Budgeted contributions - Grants or subsidies - Insurance payments received for historical property loss, damage, or theft - Proceeds from the sale of City-owned designated properties - Proceeds from the de-accessioning of artifacts Expenditures The Heritage Reserve funds: - Costs of artifact acquisitions, loans, and restorations - Capital costs related to program delivery for the City of Waterloo Museum and built heritage conservation - Studies to further the City of Waterloo's heritage conservation and the City of Waterloo Museum's development Council Approved Funding Level The Heritage Reserve will remain in a positive position and should be sufficient to support the associated projects identified in the ten-year capital projection. PUBLIC ART RESERVE (ART) 870012 POLICY: The Public Art Reserve provides funding to acquire artistic works to be sited on or staged in municipally owned public spaces, as identified by the Public Art Master Plan, and in accordance with the City of Waterloo Public Art Policy (A-018). POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 23 Revenues Revenue sources of the Public Art Reserve include: - 1% of the City's contribution to the total budgeted non-land costs of applicable capital projects over $1 million, as defined in the City of Waterloo Public Art Policy, to a maximum of $300,000 - Developer contributions, as outlined in the Official Plan - Private sector and community donations - Proceeds from the de-accessioning of artistic works Expenditures The Public Art Reserve funds expenditures related to designing, fabricating, installing and documenting public works or community art projects chosen through an objective juried selection process, allowing for the strategic inclusion of artistic works in public spaces. The Interdepartmental Public Art Team may also recommend this Reserve as a funding source for extraordinary costs associated with the conservation or repair of artistic works that exceed the annual operating maintenance budget. Council Approved Funding Level The Public Art Reserve will remain in a positive position and should be sufficient to support the associated projects identified in the ten-year capital projection. REGIONAL ROAD MAINTENANCE AGREEMENT RESERVE (RRMA) 870037 POLICY: The Regional Road Maintenance Agreement (RRMA) began on January 1, 2010. This Reserve provides funding for summer and winter maintenance as per the RRMA in the event of a deficit in the Regional Road Maintenance Operating Budget. The Reserve aids in minimizing the financial implications resulting from extreme weather conditions. Revenues This Reserve is funded from the surplus from the annual Operating Budget for summer Regional Road Maintenance, if any. For summer maintenance, the City receives a flat rate per lane kilometre. The City can keep any surplus or must fund any deficit. The service level must be maintained, however, as per the agreement. For winter maintenance, the City receives 100% cost recovery up to the 5-year baseline average. The first 5% in cost over-runs is to be funded by the City, and any amount over 5% is fully cost recovered from the Region. Additionally, new for 2015 is the introduction of a monthly minimum winter payment. Each winter month, the City's winter payment will be equal to or greater than 65% of the monthly baseline average. This monthly minimum clause was added POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 24 to the contract to recognize the City's fixed cost associated with performing this winter work and may lead to a winter surplus. Any surplus generated from summer or winter maintenance can be used to offset any deficits generated by summer or winter maintenance. Expenditures This Reserve provides additional funding for Regional Road Maintenance summer and winter expenditures in the event of a deficiency in the Operating Budget amount for summer and winter Regional Road Maintenance. Council Approved Funding Level The Reserve should not drop below $0. There is no upset limit imposed by the RRMA. RESIDENTIAL RENTAL HOUSING RESERVE (RHR) 870038 POLICY: The Residential Rental Housing Reserve was established to fund any annual deficit and collect any annual surplus for the Residential Rental Housing Program approved by Council on May 9, 2011, with report PS-BL2011-016. Revenues Revenues to the Residential Rental Housing Reserve result from any surplus earned by the Rental Housing Program. Expenditures Expenditures from the Residential Rental Housing Reserve are to fund the Residential Rental Housing Program expense lines in the Operating Budget and to fund capital expenditures. Council Approved Funding Level The reserve should remain in a positive position and should be sufficient to support the associated projects identified in the ten-year capital projection. RIM PARK INVESTMENT RESERVE (RIM) 870033 POLICY: The RIM Park Investment Reserve was established to offset the lease liability of RIM Park. Revenues This reserve fund no longer has an ongoing funding source as no further contributions are anticipated to be needed, beyond interest earned. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 25 Expenditures Expenditures from the RIM Park Investment Reserve are to offset the lease payments from the operating budget related to RIM Park. Council Approved Funding Level The balance in the RIM Park Investment Reserve should be sufficient to cover lease payments until 2031. SANITARY SEWER UTILITY CAPITAL RESERVE (SEW-CAP) 870048 POLICY: The Sanitary Sewer Utility Capital Reserve provides funding for budgeted asset replacement or rehabilitation capital projects, as well as unbudgeted capital needs. Revenues The Sanitary Sewer Utility Capital Reserve is funded though annual contributions from the operating budget. The annual contribution is to be set at an amount that provides sufficient funding for all approved current asset replacement / rehabilitation capital projects, while maintaining the Council approved target level. Expenditures The Sanitary Sewer Utility Capital Reserve provides a source of financing along with any Council approved debt, for all approved asset replacement/rehabilitation capital projects and any unbudgeted capital needs that may arise. As pressures to sanitary sewer rates can result from either capital or operating activities, transfers between the Sanitary Sewer Utility Capital Reserve and the Sanitary Sewer Utility Stabilization Reserve may be required to minimize sanitary sewer rate impacts. These transfers are considered a normal part of the administration of the sanitary sewer utility model and will be approved by the Chief Financial Officer. Council Approved Funding Level The approved target level of the Sanitary Sewer Utility Capital Reserve is 1% of the estimated asset replacement value. SANITARY SEWER UTILITY STABILIZATION RESERVE (SEW-OP) 870044 POLICY: The Sanitary Sewer Utility Stabilization Reserve accumulates any Sanitary Sewer operating surpluses and provides a source of financing, both to offset any Sanitary Sewer operating deficits, as well as to avoid unplanned rate spikes in the subsequent year. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 26 Revenues The Sanitary Sewer Utility Stabilization Reserve is funded through an annual contribution from the operating budget, if required, and any year-end Sanitary Sewer operating surpluses. Expenditures The Sanitary Sewer Utility Stabilization Reserve provides a source of financing to offset any year-end Sanitary Sewer operating deficits that may occur, and to avoid unplanned rate spikes in the subsequent year. As pressures to sanitary sewer rates can result from either capital or operating activities, transfers between the Sanitary Sewer Utility Capital Reserve and the Sanitary Sewer Utility Stabilization Reserve may be required to minimize sanitary sewer rate impacts. These transfers are considered a normal part of the administration of the sanitary sewer utility model and will be approved by the Chief Financial Officer. Council Approved Funding Level The approved target level of the Sanitary Sewer Utility Stabilization Reserve is 5% of the annual Sanitary Sewer Utility operating expenditures. STORMWATER UTILITY RESERVE (SWM) 870045 POLICY: The Stormwater Reserve funds the entire Stormwater Utility day-to-day operations, as well as capital projects. It is also used to help moderate Utility rate increases as required. Revenues Stormwater Reserve revenues are generated from fees charged to external customers by the utility as approved in the Fees & Charges By-law. Any surpluses, after expenses that have been processed by the utility, are directed to this Reserve. Expenditures The Stormwater Reserve funds the entire Utility operations, both operating and capital. A deficit incurred by the Utility will be funded through this Reserve. Council Approved Funding Level The approved target level for the Stormwater Reserve is $1,000,000 to provide an appropriate contingency based on the current Stormwater Utility operating and capital budgets. TAX RATE STABILIZATION RESERVE (TRS) 870008 POLICY: The Tax Rate Stabilization Reserve provides a contingency for unforeseen events that might put pressure on the tax rate. This reserve is precluded from being used as a planned funding source for capital. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 27 Revenues The Tax Rate Stabilization Reserve revenues are the annual step gapping for Staff Association and Management. Step gapping is the difference between a position's salary and benefits budget and the actual level the position is paid at. Enterprise step gapping is exempted from this policy. In addition, this Reserve receives a 25% allocation from year-end property tax surplus, as outlined in the Surplus Allocation Policy. Expenditures The Tax Rate Stabilization Reserve is to be used for unforeseen expenditures of a one-time nature. Council Approved Funding Level This Reserve minimum balance is 1% of the Net Tax Levy. A target balance of 3% of the Net Tax Levy has been set for this reserve, and a maximum of 5% of the Net Tax Levy. If funding levels reach this maximum, funds will be redirected to the Capital Infrastructure Reinvestment Reserve Fund, at year-end. WATER UTILITY CAPITAL RESERVE (WAT-CAP) 870046 POLICY: The Water Utility Capital Reserve provides funding for budgeted asset replacement or rehabilitation capital projects, as well as unbudgeted capital needs. Revenues The Water Utility Capital Reserve is funded though annual contributions from the operating budget. The annual contribution is set to provide sufficient funding for all approved current asset replacement/rehabilitation capital projects, while maintaining the Council approved target level. Expenditures The Water Utility Capital Reserve provides a source of financing along with any Council approved debt, for all approved asset replacement/rehabilitation capital projects and any unbudgeted capital needs that may arise. As pressures to water rates can result from either capital or operating activities, transfers between the Water Utility Capital Reserve and the Water Utility Stabilization Reserve may be required to minimize water rate impacts. These transfers are considered a normal part of the administration of the water utility model and will be approved by the Chief Financial Officer. Council Approved Funding Level The approved target level of the Water Utility Capital Reserve is 1% of the estimated asset replacement value. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 28 WATER UTILITY STABILIZATION RESERVE (WAT-OP) 870047 POLICY: The Water Utility Stabilization Reserve accumulates any Water operating surpluses and provides a source of financing, both to offset any Water operating deficits, as well as to avoid unplanned rate spikes in the subsequent year. Revenues The Water Utility Stabilization Reserve is funded through an annual contribution from the operating budget, if required, and any year-end Water operating surpluses. Expenditures The Water Utility Stabilization Reserve provides a source of financing to offset any year-end Water operating deficits that may occur, and to avoid unplanned rate spikes in the subsequent year. As pressures to water rates can result from either capital or operating activities, transfers between the Water Utility Capital Reserve and the Water Utility Stabilization Reserve may be required to minimize water rate impacts. These transfers are considered a normal part of the administration of the water utility model and will be approved by the Chief Financial Officer. Council Approved Funding Level The approved target level of the Water Utility Stabilization Reserve is 5% of the annual Water Utility operating expenditures. WINTER CONTROL RESERVE (WC) 870016 POLICY: The Winter Control Reserve funds winter maintenance in the event of a shortfall in the Winter Control Operating Budget. The Reserve aids in minimizing the financial implications resulting from extreme winter weather conditions. Revenues Surplus from the annual operating budget for winter control, if any, is contributed to this reserve. Expenditures This reserve provides additional funding for winter maintenance expenditures on City roads and parks in the event of a deficiency in the operating budget amount for winter control. Council Approved Funding Level The Winter Control Reserve minimum balance is 25% of the 5-year average winter maintenance costs. A target of 50% of the 5-year average winter maintenance costs has been set for this reserve, and the maximum has been set at $2 million. If funding levels reach this maximum, funds would be redirected to the Tax Rate Stabilization Reserve. POLICY NUMBER: FC-006 Reserves and Reserve Funds Policy PAGE 29 COMPLIANCE: In cases of policy violation, the City may investigate and determine appropriate corrective action.