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Financial Reserves

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Financial Reserves

The City corporation expects to have $237 million in financial reserve at the end of 2016. Generally, each reserve has an intended use, which is mandated by Council policy.

The tTax Rate Stabilization Reserve was established in 2011 to help buffer against volatile commodity markets and stabilize the contribution to the municipal operating budget from the energy utilities. However, with low oil and gas pricesthe tax rate stabilization fund was fully depleted at the end of 2016. $35 million was transferred from the Electric Reserve to the Tax Rate Stabilization Reserve to fund the shortfall in 2017 and 2018.

Reserves Outlook
Dec. 31, 2017 ($ millions)

  • Community Capital: $ 10
  • Infrastructure Reserve: $ 9
  • Gas Depletion: $ 51
  • Electric Equipment: $ 42
  • Tax Rate Stabilization: $ 17
  • Unrestricted – NGPR: $ 130
  • Total: $259

Although we have funds earmarked in other established reserves, we must carefully consider what we spend now, and what we save for future needs, including abandonment costs. Just like a household savings account, once the money is spent, it’s gone for good and new funds are needed to replenish the account.

In 2016, approved the establishment of a Heritage Reserve to:

  • create an endowment savings fund for the citizens of Medicine Hat,
  • capture value of the commodity based businesses from future earnings, and
  • utilize annual investment returns to support the prevailing Council’s Strategic Priorities.

During the 10-year Financially Fit plan, distributable cash flow from NGPR and Genco will be split half to Tax Stabilization Reserve and half to the Heritage Savings Reserve.  Once the municipal budget reliance on an energy dividend is eliminated, all distributable cash flow from NGPR and Genco would be transferred to the Heritage Reserve.