The new city council will face questions from taxpayers about the city’s $110 million in reserves.
Two lines of thought exist about these reserves. One wants to spend them to complete needed infrastructure upgrades like water and sewer lines.
Another group would like the reserve system to stay intact, thus reducing the property tax load and giving the city options for big projects.
The money in the reserves belongs to the taxpayers but much of it wasn’t raised by taxation.
The city’s main capital reserves date back to the 1950s when the city sold franchise rights for electric power to the new SaskPower Corporation.
From that amount, the capital reserves have grown to $36 million, according to the 2023 financial statements.
The reserves grew from the practice of only spending the annual return above the rate of inflation. If the return on investments of reserves is four per cent and inflation is two per cent the city only takes two per cent for city use.
The plan is intended to maintain the reserves’ purchasing power in the future.
Most of the major projects in this city have been funded by the reserves — the first Buffalo Pound water plant, the city yards, city hall, Kinsmen and Pla-Mor Palace arenas and the swimming pool, library and art museum, Events centre, Yara centre, cultural centre — to name some.
Along the way money from the reserves has financed other street and road projects.
Aside from the $36 million capital funds, the city has several reserves that have been built setting aside property taxes for future needs so taxes don’t jump over the moon and borrowing can be limited.
The largest is the equipment reserve, $30.7 million; solid waste, $13.9 million; and the land reserves $16.8 million. The land reserve comes from sale of lands for commercial and residential projects.
Without the cash spun off from reserves taxpayers would be digging for an extra 19 per cent every year. Our home taxes would jump from about $3,000 to about $3,600.
And the city wouldn’t have most of the amenities it enjoys.
The city could spend the reserves by giving taxpayers a three-year tax holiday, leaving them with much higher taxes in the fourth year.
And the city would no longer have the flexibility to complete public projects without borrowing or stiff tax increases.
City policy was to invest the reserves in quality bonds. When those returns were barely higher than inflation rates the city changed the investment policy.
In 2019 the city invested reserves in two stock portfolios — one long run currently worth $82.6 million and one short-term worth $26.4 million.
By the end of September, those portfolios had generated almost $35 million, about equal to one year’s property tax revenues. A nice chunk of that money was used for projects and kept property taxes from increasing further.
The city still has about $40 million cash on hand for day-to-day needs.
The decision to move from safe investments to the stock market was risky. So far it has succeeded beyond hope.
But a 30 per cent decline in the market as many analysts forecast would cut deeply into the nest egg, even though the blue-chip stocks in the portfolios would likely not fall as far as the market in general.
Ron Walter can be reached at [email protected]
