Even with a boost, city’s main reserve still far from target
Rainy day fund has been taking hits from harsh climate in recent years
While the city proposes to pay a bit more into its rainy day fund in 2020, city hall’s main operational reserve won’t be anywhere near where a policy says it should be to manage budget risks, which in recent years has included impacts of harsh climate.
However, the city’s top money manager says the sheer size of the city’s $3.76-billion budget helps if there are unplanned expenses.
“Overall the budget is large enough to absorb most risks prior to turning to the use of reserves,” city treasurer and finance GM Marian Simulik said.
“For example, the 2019 budget is showing enough flexibility to absorb both the additional costs of a record-breaking winter and a significant spring flood.”
There are four operating reserves, but the tax stabilization reserve is the main citywide reserve.
The account is projected to open 2020 with $15.6 million and increase to $18.2 million by the end of 2020.
While the city is planning to make an $8.4-million contribution to the tax stabilization reserve in 2020, it’s also budgeting to use $5.8 million for operations during the year.
A report informing reserve management policy adopted by city council in 2018 calls for a minimum target of $34.8 million in the tax stabilization account by 2020.
“As part of the draft 2020 budget we have increased the yearly contribution to the tax rate stabilization reserve recognizing that it was moving away from the target,” Simulik said.
The city will have drained about $10 million from the tax stabilization reserve in 2019, according to the difference between the 2019 opening balance and the projected 2020 opening balance.
Other operating reserves will also be underfunded in 2020, going by the standards of the reserve policy targets.
The transit reserve will have $1.5 million in 2020, but the policy calls for a minimum of $4.7 million in that account. Given the other financial pressures for transit, the city is unable to make a contribution to that reserve, Simulik said. Staff will look for solutions in 2020.
An employee benefit reserve is projected to have $54.8 million in 2020, but the target balance is a minimum of $67.6 million. The city is trying to reduce the expenses, which will move the balance closer toward the target, Simulik said.
There’s a citywide capital reserve that’s also underfunded, but Simulik
said long-range projections show the balance moving closer to the target.
It’s the tax stabilization reserve that’s usually the go-to account when there are spending surprises, like the floods or the clean up from last year’s tornadoes. It’s also the account that helps backfill an endof-year deficit, if need be.
When it comes to winter maintenance, the city proposes to add $5.6 million to the snow and ice budget in 2020, hopefully reducing the need to dip into reserves at the end of the year if it’s a brutal season.
The draft 2020 budget, which was tabled this week, says winter maintenance is costing $14-million more than anticipated in 2019, and the year isn’t done yet.
Robb Barnes, executive director of Ecology Ottawa, said cities need to consider how the frequency of abnormal weather can affect their finances.
“I think that we’re seeing around the world cities are starting to feel the impacts of climate change and find that it affects the budget first,” Barnes said.
Barnes said city council hasn’t budgeted like a city that’s under a climate emergency, which council declared last April.
He warned the city against writing a “tepid, timid and tentative budget” when it comes to responding to climate change.
Provincial decisions could impact municipal budgeting and the City of Ottawa, like other Ontario municipalities, are on watch for more funding surprises by the Ontario Progressive Conservatives.
During his budget speech, Mayor Jim Watson also flagged the funding uncertainty that comes with a federal minority government.
Tax stabilization reserve money would fund several operations in 2020. The Ottawa Police Service is receiving $2.4 million until it can find more savings, while the longterm care branch is receiving $1 million for a documentation system. A payment of $500,000 will be for implementing a new community funding framework.
Reserve money will be earmarked for studies — a ward boundary review ($400,000) and winter maintenance standards review ($250,000) — and $180,000 will be directed to the Building a Better Neighbourhood project.
Another $100,000 will fund work for a new anti-racism secretariat and $50,000 will be set aside for the Kanata 50th anniversary celebrations. There’s $900,000 of reserve money being set aside for election funding. jwilling@postmedia.com