By Trevor Busch
Dwindling reserves could leave the Town of Taber facing a significant capital deficit by 2020 if all approved projects move forward in 2018-2019 and expected grant funding fails to materialize.
In 2018, the Town of Taber will be spending $15,383,735 on capital projects, of which $6,957,162 will be funded from reserves, with the remainder to be allocated from a combination of grants, MSI and other sources.
“So the bottom line here is in 2018, we’re going to be going into our reserves to the tune of $7 million,” said Coun. Joe Strojwas during capital budget deliberations at the Jan. 8 regular meeting. “How does this impact our reserves? What have we got in our reserves today, and how is this going to impact us in 2018?”
Finance director John Orwa suggested the capital budget could be funded from reserves in 2018-2019, but that 2020 might present a problem.
“Based on an analysis I did, we were still going to be fine up to 2020. The reason behind that, if you see the $6.9 million that we’re talking about, part of that we’re also factoring in that we’re going to be very aggressive on our grant requests from different areas that might help us. With the analysis that I did, we’re still fine with reserves until 2020. Based on 2018, looking at 2017 results at the end of 2017 we have about $11 million in reserves. If we look at the contribution that is added to reserves, then take out the commitments that you’re making, we’ll have almost $16 million in reserves by the end of 2018 — that’s taking out the commitments that you’ve asked for. And then on top of that, you add again a contribution to reserves as a commitment in 2019. So we’ll still have a balance at the end of 2019 that will take us through. At the end of 2019, we’ll have about $4 million in reserves.”
In 2019, only $4,540,235 will be spent on capital projects, of which $2,275,235 will be funded from reserves, with the remainder to be allocated from a combination of grants, MSI and other sources.
In 2020, the town is planning to spend $10,331,400, which is currently being shown to be fully funded from reserves.
“Looking at the proposal that we have here today, we’re committing approximately $10 million, but we only have $4 million in the budget?” questioned Strojwas.
Orwa explained that the budget analysis wasn’t that simple.
“That might not be correct. If at all, 2020 is just a wish list, this is what we expect to do in 2020. And based on what we discussed with the team, based on our reserves, we’ll be able to reduce it because we’ll be adding more to that $4 million when we add to reserves again in 2020.”
Coun. Louie Tams attempted to clarify the explanation.
“At the end of 2017, we have $11 million in reserves, by the time we take the $7 million out, that’s $5 million, and then add $1 million in budget. But that does not include any grant applications on that $7 million. What you’re saying is if we got zero dollars in grant applications, we’re going to take $6.9 million out of reserves.”
Always a crystal ball question, Orwa was unable to speculate on any total figure of estimated grant funding anticipated in future, but noted the town was attempting to secure as much as possible.
With 2020 still a question mark, Strojwas advocated for approving the 2018-2019 capital budgets, but recommended council defer any decision on further capital expenditures.
“For 2018 to 2020 — that’s what’s being asked of us here — I can foresee passing 2018 and 2019, but going into 2020 where we’re going to be working from a negative balance out of our reserves, I don’t think we can fund our reserves, we need to know how we’re going to fund those capital expenses before we can approve this.”
Following discussion, council voted unanimously to finalize the capital projects for inclusion in the 2018-2019 capital budget. The 2020 capital budget was left unapproved.
“I’ve always talked about the budget being a best guess, it’s always a best guess going forward and looking ahead,” said Coun. Garth Bekkering. “Just because council passes a capital budget this evening, does not mean that at some point in time, council can’t step back and take another look at it. You can change the budget anytime you want.”