North Huron opts to use reserve funds to soften tax increase

NORTH HURON – Chris Townes, director of finance/treasurer for North Huron, presented council with some options that would reduce the 2023 taxation impacts through the use of reserve funds.

Townes’ report said that the proposed consolidation and use of reserves would reduce the 2023 operating and capital budget by $455,877, nearly half of the $1 million council is looking to cut from the budget.

Reserves and reserve funds are created with council approval. They involve setting money aside for various future needs, such as planned future expenditures, to protect the township against an unbudgeted or unforeseen event, to smooth out future program expenditures which may fluctuate from one year to the next, and to accumulate funds for future capital expenditures, or irregular or occasional expenses (such as municipal elections every four years).

There are two types of reserve funds: obligatory reserve funds, which are to be used solely for the purpose prescribed for them by statute; and discretionary reserve funds, revenues earmarked for future expenditures that council is authorized to spend and to set aside a certain portion of any year’s revenues so that the funds are available as required.

The report said that the primary purpose and advantage of discretionary reserve funds are to finance capital projects and enable a municipality to spend money without affecting the general municipal levy or the need to issue debentures.

Council approved the recommended changes, which include the following:

$898,685 would be transferred from the Working Funds Reserve into an Asset Management Reserve Fund. Within this transfer, $401,496 would be used to offset internal debt borne by the Police Station Repairs/Armories and the new Blyth Firehall/ Public Works Building;

An additional $450,506 would be used to pay off internal debt (public works plow truck, LED street lighting upgrades, and the landfill compactor) with total annual cost savings of approximately up to $139,800 during the term of the loans starting within the 2023 operating budget;

$51,077 of reserves would be used to offset 2023 operating costs.

The $51,077 will be used to offset:

physician recruitment reserve funds would be used to offset the cost of physician recruitment ($7,360);

$24,141 would be utilized from the council surplus to offset the 2023 annual costs associated with the council budget;

$10,725 would be utilized from the Building Code Act Reserve to net out the 2023 CBO operating cost;

$8,850 would be utilized from the Museum Reserve (located originally within the Working Funds Reserve) to net out the 2023 operating costs associated with the closure of the North Huron Museum;

$250,000 from the proposed Asset Management Reserve would fund the demolition of the old Blyth Firehall and Public Works buildings (Capital Projects); and

up to $15,000 from the proposed Economic Development Reserve would fund residential housing development.

Townes told council that these changes would be reflected in the 2023 draft budget presented at the next budget meeting, and that more discussion could be held if council wished to use more of the reserve funds at that time.

Townes said that a separate report would present a recommendation for allocating the $4.2 million proceeds from the airport sale.

“This report will take into consideration the ongoing replenishment and maintenance of reserves and reserve funds and the township’s aging assets.”

Staff will also present a report recommending the Blyth Fire Department Donation Reserves payout to the Blyth Fire Department Association.

Cory Bilyea, Local Journalism Initiative Reporter, Wingham Advance Times