Setting the Record Straight on Burlington's Reserve Funds

I submitted the following opinion to the Hamilton Spectator in response to the March 3, 2021 column by Joan Little, titled Burlington council grapples with tax hike.Click here to read my submission to the Spec or scroll down.--We appreciate the interest shown in Burlington’s budget by columnist Joan Little, and welcome this opportunity to set the record straight on several matters.Ms. Little states there was a $3,883,800 “reserve drawdown” in 2019.  I believe it is important to provide some much-needed context for the public.The City of Burlington has dozens of reserve funds that are set up to be used for specific purposes, and are intended for one-time investments.In 2019, various reserve funds were used exactly that way: to fund these one-time investments that should not be included as an ongoing expense in a budget to be borne by the taxpayers. Examples of investments funded that year were funding for an urban forest master plan, a fire home safety program, a plumbing permit grant program for basement flood protection and a project team to implement a new Enterprise Resource Planning software.These initiatives totaled $1,838,000.Burlington had a surplus of revenue over expenses the previous year of $1,687,510 that we were able to use for most of these investments. That surplus was invested in the Tax Rate Stabilization Reserve Fund, with the balance drawn from that account for an overall net reduction to that reserve of $150,490.Similarly, other specific reserve funds were used to fund related one-time initiatives those funds were set up for.The Policy reserve fund was used for investments required to re-examine and complete the Official Plan and the Integrated Mobility Plan. The Forestry reserve fund was used for additional tree planting and spraying for gypsy moth. These other reserve-specific initiatives totaled $1,970,800.Furthermore, $500,000 from the Tax Rate Stabilization Reserve Fund was used to fund the remaining commitments from the City for the Randle Reef Cleanup, thereby allowing for the removal of $230,000 from the budget on a permanent basis and closing out this funding commitment.The only “drawdown” on reserve funds to lower the tax impact was $75,000 from the Tax Rate Stabilization Fund. This budgeted draw was reversed as part of the 2020 budget.Ms. Little also mentions that $680,000 of the drawdown was allotted to advance the Elgin Street Promenade.This is incorrect -- in fact, the reverse happened. The Elgin Street Promenade was one of two capital projects that were removed from the budget entirely, resulting in a budget reduction of $929,000. The Promenade project was removed in order to seek upper level government funding that we got later that same year with one-time top-up funding provided under the Federal Gas Tax program. (See that announcement here: https://www.burlington.ca/en/Modules/News/index.aspx?page=2&newsId=99bea1e9-30ae-43b6-95db-876726bb2822).An update to our Asset Management Plan and associated financing plan will be presented to Council later this year that will give us a better understanding of our long-term infrastructure funding needs and the impact (if any) of this budget reduction.In addition, during this term of Council, we have increased our annual provisions to reserves from $35 million in 2019 to $40 million in 2021. These amounts are included in our annual budget.Our overall uncommitted reserve balances have gone from $112.6 million in 2016 to $129.8 million at the end of 2020. We are approaching our target of 10-15% of own source revenue in uncommitted reserve balances, and currently sit at 9.4%, up from 6.3% in 2016. The overall reserve balance (committed and uncommitted funds) is 13.2%.This year, we also approved an interest allocation policy where we realize capital gains above budget that provides funding to three reserve funds. For 2020, this resulted in $2.5 million in new funding allocated to: a new green initiatives reserve fund ($250,000), top up to the Tax Rate Stabilization Reserve Fund ($1.1 million) and top up to the Infrastructure Renewal Reserve Fund ($1.1 million) -- (Read the March 3, 2021 Staff Report F-03-21 here: https://burlingtonpublishing.escribemeetings.com/filestream.ashx?DocumentId=46639).Far from the incorrect narrative that seems to persist of “raiding reserves” to keep taxes down, this Council has increased reserve balances every year throughout our term, and will continue to do so. Where we have used reserves, it’s for the purposes those reserves were established, and for one-time investments that don’t belong on the ongoing tax base.RELATED LINK:

• 2019 Budget Impacts on Reserve Funds (this document was provided to Council and the public as part of the 2019 budget approval process)