Reserves and long term liabilities
The City of Calgary’s Reserves and Long Term Liabilities Balances 2020 presents detail on all reserves and long term liabilities including:
- approval and authorization,
- funding sources,
- any conditions and restrictions on use, and
- a summary of activity in each of the last five years.
Purpose of reserves
The City allocates funds to reserves to meet specific future operating and capital expenditure requirements and to provide a measure of financial flexibility to react to budget shortfalls or provide for emergencies.
Each reserve is approved by Council in a report that identifies the purpose, conditions, restrictions and funding source for that reserve. Because reserves are set up with these characteristics, many of the funds held in reserves are committed to existing projects and activities.
The City has a process in place whereby every active reserve is reviewed at least once every three years.
Reserves are part of good management that allows for funds to be spent judiciously over time or to ensure service levels are maintained and not immediately impacted by a potential downturn in the economy.
The creation, use and management of reserve funds in a formalized financial reserve policy is a best practice and consistent feature of most large cities in Canada and the U.S.
Reserves are used to accumulate funds over time to replace capital assets, and also provide a measure of financial flexibility to react to budget shortfalls or the financial impact of significant unexpected issues in a timely manner.
A properly balanced approach to the planning and use of reserves is considered good financial management and is a key component of The City of Calgary’s strong credit rating.