- Our Town
How much should Revelstoke have saved for the future?
How much should Revelstoke have saved away for a rainy day? How much should we be setting aside each year to replace the fire hall, community centre or water treatment plant? How about for a new police station? How much should we be saving each year to replace the many pieces of equipment owned by the city? What about for road maintenance projects? How about to buy new park land?
A new City of Revelstoke policy entitled Reserve Funds and Surpluses was to be presented at city council’s Sept. 10 meeting.
Requested by council after the budget process this spring, the reserve fund policy sets minimum and optimum reserve levels, and is designed to guide council on how much they should be saving each year.
It breaks down the minimum and optimum targets for dozens of categories – cemetery, recreation, affordable housing, parking stalls, liability insurance, snow removal – to name several.
Traditionally, municipal politicians are tempted to use reserve funds as a slush fund to keep taxes down during the annual budget cycle; by dipping into reserves or just not adding to reserves, you reduce the pain this year, deferring it until later.
For example, the City of Revelstoke had to borrow to purchase its new aerial platform fire truck; ideally, past councils should have been socking away a little each month since the previous one was delivered in the mid-1970s.
From an economics perspective, there’s little incentive for any city council of the day to be fiscally prudent with reserves; it means raising taxes for now, so a future council can reap the benefits. It’s even harder when, in general, most councils have inherited reserve funding deficits from the councils that preceded them.
According the report, the City of Revelstoke has been doing better in the reserves department over the past decade.
In 2003, the city had a total of $5.43 million socked away. That has risen fairly consistently to $9.59 million in 2012.
However, the report shows it’s not enough.
It’s impossible to compare the actual to the minimum or ideal in the report because many categories are left blank. For example, there’s $123,756 in the cemetery trust, but the report doesn’t prescribe the minimum or ideal should be in a dollar value because it’s based on fees collected for funeral services – not a budget allocation.
The report says city reserve chests are well off the minimum in many big categories.
For example, Revelstoke has $44,594 in general operating surplus, but should have a minimum of $1.3 million.
We’ve got $23,928 in the bank for snow removal, but need a minimum of $150,000, and an optimum of $300,000.
On the flip side, the report says the City of Revelstoke has saved too much for some things. Like the water operating surplus, now sitting at $186,481, when an optimum level of $160,395 is recommended.
Unfortunately, more funds come up too short than too high.
It’s not an ideal comparison, but for the funds that have a minimum surplus listed, the total minimum required is $5.8 million. The city has $5.0 million saved – short of the bare minimum requirement, and far short of optimal levels.
City of Revelstoke finance director Graham Inglis prepared the report.
In an interview with the Times Review, he said the main idea is to “set targets” to help “focus” council during budget deliberations.
It will likely take several years for the city to build up the reserves to the minimum level, Inglis said.
As the finance director, Inglis brought special attention to the general operating surplus fund. He compared it to the average person’s savings account – it’s where you go when unexpected things happen.
At the end of 2012, Revelstoke had only $44,594 in the account. Inglis recommends a minimum of $1.3 million and an optimal level of $2.6 million.
“It’s your rainy day reserve,” Inglis said.
At their Sept. 10 meeting, Inglis presented the policy, followed by some brief discussion at council. The proposed policy will be reviewed in the near term.
Here's the policy as it was presented on Sept. 10: