Financial Reserves

Money the City deliberately sets aside, like a savings account, to pay for future projects, meet obligations, and cushion against unexpected costs. Reserves are "restricted," meaning they're earmarked for specific purposes rather than everyday spending.

Like a family savings account kept separate from the money you spend each week.

The future cost of safely shutting down, dismantling, or cleaning up aging assets when they reach the end of their life. The City's ARO was about $186 million in 2025.

Like knowing you'll eventually pay to tear down and haul away an old shed, so you save for it in advance.

Savings set aside specifically to cover those asset retirement (ARO) costs down the road.

Like a jar labeled "future demolition" that you add to a little at a time.

Big, long-lasting investments like roads, buildings, utility equipment, and facilities. "Sustaining capital" keeps existing assets in good shape; "strategic capital" builds new things.

Like the difference between buying groceries and buying a new roof - the roof lasts for decades.

Savings dedicated to funding the City's major infrastructure projects, both maintaining current assets and building new ones.

Like a dedicated home-renovation fund you build up before a big remodel.

Savings set aside to help pay for shifting the City's energy infrastructure toward net-zero emissions targets set by provincial and federal governments - a cost that's uncertain but potentially very large.

Like setting money aside now for the electric vehicle you know you'll need to buy later.

A permanent community fund with a $200 million target. Only the earnings above inflation are spent, so the fund keeps benefiting residents indefinitely. Its target balance is protected against inflation using the Alberta Consumer Price Index.

Like a fruit tree you never cut down - you only ever pick the fruit, so it keeps producing forever.

Savings that keep everyday services running smoothly and absorb surprises like insurance claims, investment losses, or inflation.

Like an emergency fund for a surprise car repair or a higher-than-usual heating bill.

A standard measure of inflation (how much prices rise over time). The City uses it to keep the Endowment Fund's value protected against inflation.

Like noticing your grocery cart costs more this year than last for the very same items.

The shortfall when the City's day-to-day costs are higher than the revenue it brings in. By law, the City cannot run a deficit, so reserves help cover the gap in tough years.

Like dipping into savings in a month when the bills come in higher than your paycheck.

The cash a City business unit (such as its utilities) has left over after paying its own operating costs and maintaining its equipment and assets. This leftover cash is the main source that fills the reserves. In 2025, the City's Free Cash Flow was about $31.8 million.

Like your take-home pay after the bills and groceries are paid - whatever's left is what you can save.

A cap on how much the City can borrow. Medicine Hat aims to stay within a 70% debt limit and to balance borrowing against drawing on reserves.

Like a self-imposed rule never to let your credit card climb above a set balance.

The rulebook that decides how leftover cash gets shared out - how much stays in each business unit, how much goes into reserves, and how much is passed to the City to help fund everyday municipal services (the "dividend").

Like a household budget rule that says "half to savings, some to home repairs, the rest to spending."

The earnings generated while reserve funds are invested. This income helps close the budget gap and fund City operations, easing the pressure on property taxes. A portion of investment income is also transferred to the Endowment Fund, Asset Obligation Reserve, and Energy Transition Reserve.

Like the interest our savings account earns while the money simply sits there.

Money the City owes, both in the short and long term, including debt and long-term obligations. At the end of 2025, the City's liabilities totaled about $724 million.

Like the balance left on your mortgage and car loan - money you've committed to pay over time.

The difference between what's added to reserves and what's taken out in a given year. When more is withdrawn than added, reserves shrink - which is why they need to keep growing over time.

Like watching whether your savings balance grew or shrank by December compared to January.

Using reserves to smooth out year-to-year swings in costs and revenue so residents don't face sudden, sharp tax increases.

Like a budget-billing plan that evens out your utility bill so you avoid painful spikes. (FYI - we have that in real life! Head on over to our Budget Billing page to learn more.)