Cities and towns have tough decisions to make now the province has reduced some of the grants they give them. But Premier Brad Wall should be more aware about what got us in this position in the first place – spending all of the extra resource revenues and reserves when times were good.
Yet Wall is suggesting that municipalities should tap into their reserves and spend that instead of raising taxes and making cuts to reflect the new fiscal reality.
There’s a few problems with that.
First of all, many towns have their reserves set aside for very specific purposes according to the law, which means they can’t, say, dip into their landfill infrastructure fund and use that to fund day-to-day operations.
Second, reserves are designed to deal with a one-time problem, say, an expected expense. Simply emptying the reserves today to fund day-to-day operations simply delays what will have to be done so that spending matches income.
Third, fiscally responsible cities use their reserves to borrow from themselves without going to the banks. Melfort’s one that does this. Instead of the interest going to banks, it goes back into the reserves instead, thus increasing the amount of money that’s available to borrow from the next project.
Municipalities – unlike the province – have no choice. They have to have balanced budgets each and every year. The province shouldn’t be giving them advice that leads to poor fiscal management and problems down the road.
