City Reserves and how they can be used

Reserves are funds set aside for future expenses and to provide financial flexibility for emergencies and budget shortfalls.

Reserves enable The City to make the necessary investments in the community when and where required. They are part of good financial management and ensure service levels are delivered and maintained. A balanced approach to planning and utilizing reserves is crucial for sound financial management and plays a significant role in maintaining The City's strong credit rating.

Each reserve is approved by Council in a report that identifies the purpose, conditions, restrictions and funding source for that reserve. Since reserves are set up with these characteristics, many of the funds held in reserves are committed to existing projects and activities. Reserves represent a temporary timing difference between cash funds available for an approved purpose and when the funds are spent. Reserves are not extra money that The City can use for any purpose.

Reserve categories

The City classifies reserves into three categories, and they are to be used for three distinct purposes: 

Committed and uncommitted reserve balances

At the time reserves are reported a committed and uncommitted portion is identified. The committed portion of reserve is the amount required for an already established and calculated spend. While the uncommitted portion doesn’t have a specific identified spend.

While a portion of the money in the reserve is uncommitted, it doesn’t mean it’s unrestricted. The uncommitted funds are only available within the defined purpose, conditions, and restrictions of each reserve.

Reserve amounts and reporting

Robust public information on reserves and long-term liabilities is essential to ensure public confidence and support transparency and accountability. Information and amounts of City reserves is shared with the public in the City’s Annual Financial Report and Reserves and Long-Term Liabilities Balances reporting.

As reported in 2022 Reserves and Long-Term Liabilities Balance, as of December 31, 2022, The City had a reserve balance of approximately $4 billion. This money is allocated and committed to 50 different reserves spread across three reserve types: Operating (approx. 30%), Capital(approx. 40%) and Sustainment (approx. 30%). As shared earlier, this is the money The City uses to ensure service levels are delivered and maintained.

The uncommitted reserves balance as of December 31, 2022 was approximately $1.7 billion. As noted above, while this money is uncommitted, the remaining balance is only available within the defined purpose, conditions, and restrictions of each reserve.

Any Council direction to use uncommitted reserves after January 1 of each year, will lower the uncommitted balance in City reserves as of December 31 the previous year.

Fiscal Stability Reserve

The Fiscal Stability Reserve (FSR) is a part of the Operating Reserve. It is discussed frequently by the Council and Calgarians as it is intended to cover emergency operational situations, unplanned reductions in revenue, and urgent capital expenditures. The FSR makes up 89% of the uncommitted funds within the Operating Reserves.

Furthermore, any investment income generated by this reserve is used for one-time operating expenses. For example, in 2022, the Council allocated $19 million from this reserve for Calgary's Mental Health & Addiction strategy.

The reserve account must maintain a minimum balance of 5% of The City's tax-supported gross expenditures (after recoveries), while the FSR target balance is set at 15% of The City's tax-supported gross expenditures (after recoveries). Council approves any annual tax-supported favourable operating variances to be transferred to the reserve, including any investment income earned on reserve funds. As of Dec 31, 2022, the FSR Reserves and long-term liability balance:

  • $795 million of the FSR has been committed by Council for use.
  • $436 million remains uncommitted – As noted above, funds are only available within the defined purpose, conditions, and restrictions of each reserve. 

Transfers into the Fiscal Stability Reserve

The City's operating expenses include providing services to maintain facilities, infrastructure, equipment, systems, and vehicles. These costs are covered by an operating budget comprising property tax, user fees and more. The City always seeks to reduce costs, increase revenue, and avoid financial shortfalls. When favourable operating variances occur, they are reported to Council and Calgarians periodically. Council can allocate these funds to support Calgarians, businesses, and the community during November’s budget deliberations.

Any remaining favourable operating variance is transferred to Fiscal Stability Reserve and Operating Budget Savings Account Merged (FSR/BSA).