City of Powell River chief financial officer (CFO) Adam Langenmaier is recommending consolidation of the reserve funds the city maintains.
At the Thursday, January 23, finance committee meeting, Langenmaier presented a report outlining new reserve funds that he wants to establish, as well as a number of older reserve funds where he would like to see the reserves closed and balances transferred to other reserves.
“Over the past several CFOs there have been updates to the reserve policy and here’s one more update,” said Langenmaier. “I’ve tried to clean up the reserves that are still in effect by default of council not making motions to close them.”
There are new reserves Langenmaier recommends to be added. The first is the election reserve.
“We know this is an every four year cost, and if we can have a reserve where we contribute one quarter of the expected cost of the four-year cycle, in the fourth year we don’t have big hits to pay for our election,” said Langenmaier. “Also, it gives us a buffer if we have an unexpected byelection or a more costly referendum at election time.”
Langenmaier recommended a minimum of $50,000, which was about the cost of the last election, and an optimum of $75,000 in the reserve, to cover future costs or a referendum.
The next reserve is the north harbour. Langenmaier said this is unique because on the city’s financial statements, there is a north harbour reserve, however, in the reserve policy, it is not identified.
“I recommend the establishment of the north harbour reserve within our policy,” said Langenmaier, “with a minimum balance of $750,000 and an optimum balance at $1.5 million. What this does is it allows the north harbour to function as a business unit and to have the people who are mooring their boats in the north harbour feel like their moorage payments are being saved.”
Langenmaier said that as of 2018, the north harbour balance was $989,000. The expected reserve balance for 2019 includes the expected net income of $185,000.
Councillor Rob Southcott, who has a boat moored in the north harbour, said he gets lobbied by boaters. He said he thinks there is an expectation that a reserve fund will be built up so when the harbour needs to be rebuilt in 30 years, there will be significant funds in the reserve for that purpose.
Langenmaier said staff can bring back a longer term plan of how to achieve reserve balances and council will have time to input into what is optimum.
“I just put recommendations here to get the reserve established and then to continue the conversation of replacement and how we are going to get there,” he said.
Councillor Maggie Hathaway said she likes the idea and believes there is a perception that harbour funds go into general revenue.
“The more we plan ahead the better off we are,” she said. “We can say to people that money is going into reserve for the kind of things we need to do down the road. I really like this plan.”
Finance committee chair George Doubt said Langenmaier’s recommendations takes a number of reserves and moves them into places where they can be spent for the purposes they were originally intended.
He said the actual operation of one specific area such as the north harbour is a debate for a different day.
“I don’t want to get too bogged down in the details of each one of these accounts,” said Doubt.
Mayor Dave Formosa said he agrees with the changes recommended by the CFO to the reserve policy.
“It simplifies and makes very clear what are discretionary and non-discretionary accounts” said Formosa. “It’s a great idea. We can get into the details of these at another time.”
Councillor Cindy Elliott said she was also in favour of simplifying the policy, as did Southcott.
Councillor Jim Palm said he was in support of the changes. He said he would like to see an increase of the maximum reserve from $1.5 to a maximum of $3 million in the north harbour reserve.
“I’d like to see the maximum increased so we have somewhere around a third of the funds available,” said Palm. “Even if we raise $3 million we are nowhere near the 50 per cent figure.”
Formosa said the policy could take away the maximum and just have a minimum.
“The idea is to accumulate cash,” he added.
Langenmaier also recommended the establishment of a Willingdon Beach Campsite reserve. He said currently, the city takes 50 per cent of the profits from the campsite and it goes into general government, typically to be rolled into supporting recreation programs.
By establishing a reserve, there would be direction from council that there is a target to be hit. He said it would give staff the ability to do some higher value upgrades, knowing there is funding to achieve these. A minimum balance of $125,000 and an optimum balance of $375,000 is being proposed.
Langenmaier said if his recommendations are adopted, once the old reserves are empty, they would be closed.
The finance committee recommended sending the matter to city council.
