Municipal Budget 101 - Reserve Funds



Municipal Office

395 Mulock Drive P.O. Box 328 Station Main, Newmarket, Ontario
L3Y 4X7

Email Us

Feeling reserved about reserves?

The holidays represent a good way to demonstrate why it is important to have a 'reserve fund'.  During this festive time, our hearts often over-extend our pocketbook and we are left with some hefty year-end debt to usher us into the New Year. Unless, of course, you 'reserved' (or saved) an appropriate amount of dollars in anticipation of your annual holiday shopping.

For example, if you typically spend $1,000 each year around the holidays and you make $40,000 a year, that would mean 2.5% of your income would be 'reserved' for holiday gifts and festivities. But remember, you need to top up that account year-over-year or you'll find yourself in debt to pay for all of those thoughtful gifts come year-end.

The Town of Newmarket has hundreds of reserve funds, each one with a very specific purpose, so that we can afford things we need or the community wants.

We can all learn a lesson from our good friend Clark W. Griswold. Clark, the father figure in the beloved holiday classic Christmas Vacation relies on his holiday bonus (which he has not yet received) to finance a swimming pool for his family, only to find out that his bonus is a one-year subscription to the jelly of the month club. The moral of the story is: don't buy the pool if you don't have the cheque in hand.

In municipal government this would not be considered a "sustainable source of funding". You cannot plan your financial future around a holiday bonus or small inheritance. In the same way, the Town cannot depend on unreliable sources of funding – like a one-time grant or record revenues - to lower the tax rate because it's unstable, unpredictable and unsustainable.