New reserve fund proposed

Town Council

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“Historically, the Town of Saugeen  Shores has ended each fiscal year with an operating surplus,” said Lori Sweiger, at the recent Council meeting.  “The surplus is rolled over into the next budget year and then transferred  into the Future Capital  Projects  Reserve.  If needed, a portion of that year-end surplus has also been used to fund general operating expenses.”

The Future Capital Projects Reserve is one of the primary funding sources for capital and, given that the balance fluctuates year to year, a regular transfer to the reserve is seen as helping to ensure funds remain available to us.

According to Sweiger, if a year were to end in a deficit, “there is no fund now in place to help mitigate the effect an operating deficit might have on the following year’s budget.”

One possible solution brought forward was for the establishment of a Tax Stabilization Reserve funded from the municipal tax levy at a rate of 2%.  The reserve would then be used if the town ended a year with an operating budget deficit  or to offset a projected one-time spike in the tax rate.

Vice-deputy Mayor Doug Gowanlock as how a one-time tax spike could be estimated.  "Are we going to definite that?" he asked.  "It doesn't make sense to me."

"There are things," replied Sweiger, "such as the impact of a decrease in building permit fees from 2008 levels and also the increase in the doctors' recruitment budget but I agree we have to define what  a one-time spike is."

"If we set up more reserves," said Councilor Fred Shildroth, "where does that place  the general reserves?  I am wondering how we transfer dollars from one reserve to another.  Maybe we should just keep a general reserve where we can take money and use it for whatever is needed."

"I don't think it's a bad idea to have this kind of reserve to give us a reserve on the operating side," said Councilor Luke Charbonneau.

Deputy Mayor Doug Freiburger said he though the a reserve like this should be kept separate and he wanted to know what the initial amount would be.

Sweiger said that it initially would be $140,000.  "We would start each year at zero with no surplus or deficit and council will always have the decision to remove or add to the reserve."

"Is there a normal over-run in operations?"asked Councilor Victoria Serda. "Do you see it affecting the budget this year?"

Sweiger replied that historically the town has ended up with a surplus of approximately $350,000  "Traditionally, the majority of surplus goes into Capital project funding."

The matter is to be brought before Council in the new year.

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Monday, December 21, 2009