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Home My WebLink AboutTR-80-88 ��° '° ''� TOWN OF NEWCASTLE REPORT File # Res. By-Law # MEETING: GENERAL PURPOSE & ADMINISTRATION MEETING DATE: October 17, 1988 REPORT #: TR-80-88 FILE #: SUBJECT: WORKING FUNDS RESERVE AND GENERAL CAPITAL RESERVE RECOMMENDATIONS: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. That report TR-80-88 be received; and 2. That By-law 81-111, and By-law 82-70 be rescinded;and 3. That the attached By-law which re-establishes the Working Funds Reserve limits be adopted; and 4. That attached By-law which establishes a General Capital Reserve be adopted. BACKGROUND & COMMENTS: WORKING FUNDS RESERVE: By-law 81-111 (copy attached) was created to establish a policy concerning Working Capital Reserves. The intention was to be able to provide from the annual surplus, .funds that would be available to meet financial obligations during the interim between tax installments. The limits that were set however, result in having to transfer funds that far exceed both the Town's requirements and the surplus generated in any year since that Reserve was established. TR-80-88 Page 2 The By-law sets the lower limit that the Reserve balance should meet, at five percent of the current year's total tax billing. The total tax billing in 1987 was $ 23.6 million, which required the Reserve balance equal at least $ 1.2 million. The limits therefore are unrealistic and the minimum balance they demand are inappropriate. The recommendation here is to change the limits to allow the target to read five to ten percent of the Municipal portion only of the tax bill. The Reserve would then have to maintain a minimum balance of 50, but would be allowed to float upwards to 10% of the Town's portion of the current levy. For example; the 1987 Reserve balance would have had to have been at least $253,037 to meet the lower limit requirement. The actual balance at December 31, 1987 was $324,462, and therefore would have satisfied the restrictions imposed by the recommended change. By-law 82-70 (copy attached) amended section 1. of By-law 81-111, in order to allow any amount of the current surplus to be transferred to meet the limits set, and not all the surplus as dictated in By-law 81-111. This By-law should therefore also be rescinded. The new By-law will incorporate the recommended change in the limits and the change accomplished by By-law 82-70 all under one By-law, and will refer to the reserve as Working Funds Reserve. The Town's external auditors concur with this proposed change by way of their annual management letter comments. GENERAL CAPITAL RESERVE: The general ledger currently has a reserve called the General Capital Reserve. This Reserve was established in 1981 by Council resolution approving the transfer of funds to cover capital projects in-process at the year end. There was never a By-law adopted to set this Reserve up and identify guidelines. According to the Municipal Act (sec.164(2) ) , a reserve may be created by including a transfer in the current year's budget, and therefore the preceeding is not in contradiction of the Act. The attached By-law was generated in order to establish some formal guidelines as are set out for the other Town Reserves. It is recommended that this Reserve be established to provide for contingency items of a capital nature, as well as to hold funds that were budgeted for capital projects that are incomplete at year end. _ 9R-80-8D Page 3 In order to provide for the capital contingency, it is recommended that the Treasurer be allowed to transfer in any given year' any amount budgeted for as a transfer to the Working Funds Reserve in the previous year, that is no longer deemed to be required to meet the current year's obligations. This recommendation has been incorporated into the attached By-law. For example: 1989 BUDGET: Transfer to Working Funds Reserve; $ 295,000 (89 eat.Tao Bev.- Municipal X 5% limit) (say 5,900,000 X 5%) -------' I988 WORKING FUNDS RESERVE: Balance @ Deo.3I/88 (eot) 400,000 1989 GENERAL CAPITAL RESERVE: as of January 1989, the funds in the Working Funds Reserve of 400,000 are no longer required to meet obligations of the current fund. These funds are therefore transferred (all or in part, as determined by the Treasurer to be required for future capital contingencies) to the General Capital Reserve. According to the MouiniDnI Information on reserves, the funds set aside in a Working Funds Reserve may be transferred back to the current fund as revenue if the funds are not required. The above procedure of transfer of excess funds of the Working Funds Reserve to the General Capital Reserve, when the funds are no longer required to meet the cash flow requirements of the current year, has been discussed with, and concurred by Janet Andrews of the Ministry of Municipal Affairs, - Oshawa ! Field Office. Respectfully submitted, Recommended for presentation to the Committee Treasurer Chief m istrative officer MAM/JBB/geu �/ THE CORPORATION OF THE TOWN OF NEWCASTLE BY-LAW 81- 111 being a by-law to establish a policy respecting Working Capital Reserves WHEREAS the Council of the Corporation of the Town of Newcastle considers it desirable to establish a policy respecting working capital reserves; AND WHEREAS Section 308 (1 ) of The Municipal Act, R.S.O. 1970, as amended, provides , that "every Municipality and every board , commission , body or local authority established or exercising any power or authority with respect to municipal affairs under any general or special Act in an unorganized township or unsurveyed territory may in each year provide in the estimates for the establishment or maintenance of a Reserve Fund for any purpose for which it has authority to spend funds: NOW THEREFORE BE IT ENACTED AND IT IS ENACTED AS A BY-LAW OF THE CORPORATION OF THE TOWN OF NEWCASTLE AS FOLLOWS: Policy: 1 . That a policy is hereby established whereby any operating surplus shall be paid to the Working Capital Reserves; and 2. That the amount of the Working Capital Reserves shall be allowed to float within target limits of 5% to 10% of the current year's total tax billing. By-Law read a first time this Eighth day of September 1981 By-.Law read a second time this Eighth day of September 1981 By-Law read a third and final time this Eighth day of September 1981 Garnet B. Rickard =�- Mayor David W. Oakes Clerk THE CORPORATION OF THE TOWN OF NEWCASTLE BY-LAW 82-70 Being a by-law to amend By-Law 81-111 entitled "A By-Law to establish a policy respecting Working Capital Reserves". WHEREAS, the Council of the Corporation of the Town of Newcastle has deemed it expedient to amend By-Law 81-111 to redefine the policy respecting Working Capital Reserves; NOW THEREFORE, the Council of the Corporation of the Town of Newcastle hereby, enacts as follows: 1 . That the policy Section I , of By-Law 81-111 is hereby deleted and that the following be substituted, therefore: POLICY: That a policy is hereby established whereby an amount of the operating surplus in any given year be transferred to the Working Capital Reserve as directed by resolution of Council . By-Law read a first and second time this 25th day of May, 1982. By-Law read a third and finally passed this 25th day of May, 1982. Garnet B. Rickard,. Mayor seal Davi d W. Oakes , «� Town Clerk � 10-03) THE CORPORATION OF THE TOWN OF NEWCASTLE BY-LAW 88- being a by-law to establish a policy respectiny General Capital Reserves WHEREAS the Council of the Corporation of the Town of Newcastle considers it desirable to establish a policy respecting General Capital Reserves; AND WfiEREAS Section 308 (1) of The Municipal Act, R.S.O. 1970, as amended, provides, that "every Municipality and every board, commission, body or local authority established or exercising any power or authority with respect to municipal affairs under any general or special Act in an unorganized township or unsurveyed territory may in each year provide in the estimates for the establishment or maintenance of a Reserve Fund for any purpose for which it has authority to spend funds: NOW THEREFORE BE IT ENACTED AND IT IS ENACTED AS A BY-LAW OF THE CORPORATION OF THE TOWN OF NEWCASTLE AS FOLLOWS: Policy: 1. That a policy is hereby established whereby the unexpended funds for any capital project which has been provided for in the current estimates of the Town, and which is incomplete at the end of any given year, be transferred to the General Capital Reserve for future completion of that project. 2. That a policy is hereby established whereby any funds transferred to the General capital Reserve from the Working Funds Reserve, and any funds found to be in excess of that required to complete the projects as described under section 1. here, be available for use in the Town's annual budgeting process for items of a capital nature, and shall also be available to provide for contingency items of a capital nature. By-Law read a first time this day of 1988 By-Law read a second time this day of 1988 By Law read a third and final time this day of 1988 i Mayor Acting Clerk THE CORPORATION OF THE TOWN OF NEWCASTLE BY-LAW 88- being a by-law to establish a policy respecting Working Funds Reserves WHEREAS the Council of the Corporation of the Town of Newcastle considers it desirable to re-establish the policies respecting Working Funds Reserves; AND WHEREAS Section 308 (1) of The Municipal Act, R.S.O. 1970, as amended, provides, that "every Municipality and every board, commission, body or local authority established or exercising any power or authority with respect to municipal affairs under any general or special Act in an unorganized township or unsurveyed territory may in each year provide in the estimates for the establishment or maintenance of a Reserve Fund for any purpose for which it has authority to spend funds: NOW THEREFORE BE IT ENACTED AND IT IS ENACTED AS A BY-LAW OF THE CORPORATION OF THE TOWN OF NEWCASTLE AS FOLLOWS: Policy: 1. That a policy is hereby established whereby an amount be included in the annual estimates of the Town to be transferrred to the Working Funds Reserve. 2. That the balance in the Working Funds Reserve by allowed to float within target limits of 5% to 10`b of the current year's total Municipal portion of the tax billing. 3. That the Treasurer be authorized, after any given year-end, to transfer to the General Capital Reserve, any funds that are no longer required to meet the cash requirements of the previous year. By-Law read a first time this day of 1988 By-Law read a second time this day of 1988 By Law read a third and final time this day of 1988 Mayor Acting Clerk