Cumberland is looking at changing its reserve and surplus policy.
While the amendments to the current practice represent some housekeeping, a major aim is to make sure the village puts aside enough funds for unexpected costs as well as other expected costs as the community grows, such as paying for a portion of police costs.
Chief financial officer Michelle Mason presented council with an update at the last regular council meeting of the year on Dec. 13.
“What the reserve policy says is that I will analyze it annually,” she said.
One change at this time is how the calculations are made using the current financial plan, and she said it was time to increase the minimum and optimum levels in the policy to match the increased operating revenues in the financial plan. Another change is to the financial stabilization reserves. Mason said the minimum and optimum levels do not result in enough funds when she is stabilizing revenues for user rates and property taxes.
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As well, Mason is also looking for an increase in the percentage of operating revenue. She said for a small organization such as the Village of Cumberland, the recommended percentages are not enough.
“You don’t actually get the dollar amount that you would need for the same type of cost pressures that we would have,” she said. “A larger organization would get them because they have larger revenues.”
According to the staff report, the percentages currently are five per cent for general financial stabilization, 10 per cent sewer financial stabilization and for 20 per cent water financial stabilization. The recommended increases are 10, 20 and 30 per cent, respectively. As the report says, the funds exist for any major operating issues that emerge, though Mason added that she would come back to council if the numbers should be different later on.
Mason said other changes included some “housekeeping” or language changes as well as setting up a separate reserve for facilities. Around capital reserves, she noted they now have information for minimum and optimum based on replacement values, whereas a few years ago, they only had historical costs to use.
Council was receptive to the proposed changes, including the proposed facilities reserve.
“We know that our facilities are very old, and they will need significant investment soon,” said Coun. Jesse Ketler.
As far as the increase to the reserves, Coun. Vickey Brown said they are putting more funds in stabilization reserves to avoid “massive” increases to service rates and taxes later.
“We need to bump them up substantially,” she said.
Council passed a motion to adopt the Amended Reserve and Surplus Policy, and based on this, to direct staff to amend bylaws to establish a General Fund Municipal Facility Assets Renewal Reserve and adjust the language of the General Village Asset Reserve to remove buildings from this reserve as well as change language in the Infrastructure Asset Renewal Reserve Fund Establishment Bylaw.