/Reviving reserves

Reviving reserves

By Chad Ingram

Published May 3 2018

The financial reserves of the County of Haliburton are too low an auditor told members of council last week.

By the end of this year the county is forecast to have total reserves of approximately $2 million. Some auditors say that when it comes to a healthy level for reserve funds municipalities should have the equivalent of about half a year’s tax levy in the bank. In the case of the local upper-tier government that would mean having reserves of about $8 million.

Reserves are essentially municipalities’ rainy day funds. Councils draw upon them for all kinds of reasons – unbudgeted road work repairing flood damage any manner of unforeseen or last-minute expense. They are sometimes also drawn upon for large capital projects in order to avoid taking on significant debt.

This latter practice has certainly been common within the county not just at the upper-tier level but among its four lower-tier municipalities as well. All the local governments carry low debt and of course that in its way is a good thing. It demonstrates fiscal prudence; keeping one’s financial house in order.

Low taxes low services low debt. That’s typically the way things work in the county. Now at the county level it’s low reserves as well.

Last week the auditor told councillors that he didn’t necessarily advocate for a pay-as-you-go approach making a joke that if he’d had to pay for his house in cash he’d still be living with his mother.

Obviously there’s a world of difference between personal finances and those of a municipality but the analogy was not a bad one.

There are a number of things the community wants – a transit system of some kind for many a large modern athletic complex –  that could never be paid for out-of-pocket. At some point some of these large-scale projects will require taking on significant debt. As the auditor pointed out there’s no reason that such projects can’t be paid for in an inter-generational fashion as they would benefit the community for decades. And at least during the tenure of the current provincial Liberal government it’s essentially become an unspoken rule that municipalities that carry more debt get more grants. Obviously hindsight is 20/20 but if the county government had have taken on some more debt for projects in recent years it’s likely it would have received more grants or wouldn’t have had to wait as long for the ones it did get.

It’s also worth noting that under the Municipal Act local governments cannot borrow for operations. So for a local government with dwindling reserves leaving reserve funds for operational expenses and borrowing for capital projects may make sense.

In short it may be time for a shift in mindset when it comes to the way the county manages its finances. A recommendation from the auditor last week was that council institute a phased-in tax increase to direct more money to reserves. Sure tax increases are unpopular and politicians especially in Haliburton County often pride themselves on how small a tax increase they can deliver.

But that way of thinking has left Haliburton County with reserves that need to be replenished.