On Oct. 23, 2018, Didsbury town council approved dipping into the water reserve fund to withdraw $159,771 to help pay for the Butte upgrades.
Reserves are funds set aside by municipalities to pay for repairs and new infrastructure, plus extraordinary operating expenses.
Reserve funds come from two sources: firstly, “funded reserves” from the provincial government (example: gas tax) that can only be spent on specific types of projects; and secondly, “unfunded reserves,” where municipalities set aside excess revenues it generated (example: from water and waste water fees) into an account where the funds can be spent on a wider variety of projects.
The elected council of the municipality is required to approve any spending of reserve funds.
To paraphrase a line from the movie Apollo 13: “Didsbury, we have a problem.”
It is simply explained from the following quote from the Feb. 13, 2018 council agenda in response to the question “What are unfunded reserves?”
Here is the response: “These reserves have funds that are allocated to them; however, the physical dollars have not been placed in the reserves bank account. The physical dollars allocated to these reserves are currently in the general bank account to use for day-to-day operations of the town. There has been a focused effort to fully fund these reserves in the last five years and we are almost there.”
We can conclude from the above:
First, after consideration to cash on hand, plus receivables due from others, less amounts payable by the town (the sum of these three items being the net near cash position of the town), less the known amount from government sources that is funded reserves, equals an unfunded financial shortfall at year end 2017 of nearly $1.3 million. This is more or less consistent with past shortfalls.
Second, the shortfall will need to be covered by residents, or by additional bank debt.
Third, the need to use unfunded reserves for day-to-day operations suggests cash liquidity issues.
Fourth, council has not approved the use of these funds for day-to-day operations.
Fifth, by not having separate bank accounts prudent “best practice” financial management is not being followed.
Sixth, the allocation of $39,000 last year, while a small amount, from unfunded reserves to fund the skateboard park design was not fiscally prudent, plus a dangerous precedent.
Seventh, the shortfall in unfunded reserves, coupled with the choice to allocate reserves to avoid a 14 per cent increase to residents for water and waste water charges, resulted in the town needing to fund the 23rd Street project from other sources.
It is worthy to note one of the contributing factors for Mountain View Regional Waste Management Commission determining it is not sustainable (Gazette July 24, 2018) was management of its reserve accounts.
While Alberta Municipal Affairs does not have formal policies in regards to the above, its Guide to Municipal Financial Statements indicates the practices being followed by Didsbury result in a cascading number of financial indicators that should be of general concern, or signal “red flag” issues worthy of more immediate attention.
Despite council and administration being made aware on numerous occasions of these concerns, on behalf of the town, Mayor Hunter indicated, “We’re in a good place with our finances and they’re being looked after well” (Gazette May 1, 2018) and “We are managing our finances exceptionally well. Our taxpayers and residents are recipients of the benefits of this fiscal responsibility” (Gazette May 15, 2018).
One can only surmise they believe concerns of residents are but mutterings of “the five percenters” seated in the “peanut gallery.” A derogatory reference to a view the sole object of five per cent of the population is to make uninformed negative comments about council and town administration. You decide.
Confidence in the financial picture of Didsbury needs to be unflagging and reassuring; it leads to belief we can do anything, withstand anything and achieve anything.
Didsbury is in the process of preparing its 2019 budget. What are your thoughts on the financial health of the town? It’s your money.
Kevin Bentley,
Didsbury
