FAS-003 - Operating and Capital Reserves Policy 2026City of Saint John
Operating and Capital Reserve Policy
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Title: Operating and Capital Reserve Policy
Subject: Operating and Capital Reserves Policy Category: Finance and Strategic Services
Policy No.: FAS-003 M&C Report No.: 2026-226
Effective Date: 2018-04-23 Next Review Date: 2029-10-05
Area(s) this policy applies to: Cross Corporate Office Responsible for review of this Policy:
Finance and Strategic Services
Related Instruments:
FAS-001 Asset Management Policy
FAS-002 Investment Policy
FAS-004 Operating Budget Policy
FAS-005 Capital Budget Policy
FAS-020 Long Term Financial Plan Policy
Policy Sponsors:
Chief Financial Officer
Document Pages:
This document consists of 8 pages.
Revision History: Revision updated 2026-08-18, Approved by Council 2026-10-05
Common Clerk's Annotation for Official Record
I certify that the Operating and Capital Reserve Policy Statement was adopted by
Common Council on 2026-10-05
I certify that the Operating and Capital Reserve Policy was approved by the
Chief Administrative Officer on
October 5, 2026
Common Clerk
Date
Date Updated:
2026-08-18 I Common Council Approval Date:
2026-10-05 I Contact:
Finance and Strategic Services
City of Saint John
Operating and Capital Reserve Policy
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TABLE OF CONTENTS
1. POLICY STATEMENT ...................................................................................................................... 3
2. DEFINITION OF RESERVES .............................................................................................................. 5
3. PERMITTED USE OF RESERVES ......................................................................................................... 5
4. AUTHORITY .................................................................................................................................. 6
5. ADEQUACY OF RESERVES ................................................................................................................ 6
6. FUNDING RESERVES ..................................................................................................................... 6
7. INVESTMENT OF RESERVE FUNDS .................................................................................................... 7
8. TEMPORARY BORROWING FROM RESERVES .................................................................................. 7
9. ANNUAL REPORTING ................................................................................................................... 7
10. RESPONSIBILTIES ....................................................................................................................... 8
City of Saint John
Operating and Capital Reserves
1 Reserve Fund Regulation, NB Reg 97-145, Sections 3.1 to 3.4, under the Municipalities Act (O.C. 97-1036), as continued under the Local
Governance Act.
3
1. POLICY STATEMENT
1.1 This policy sets consistent standards and guidelines for the establishment,
management, and accounting of reserve and reserve funds in accordance with agreed
upon policy guidelines and applicable regulations under the New Brunswick Local
Governance Act.
1.2 The City of Saint John (City) establishes this policy to address longer term funding
strategies and to ensure good financial and cash management for the ongoing financial
stability of the City. In conjunction with the Asset Management, Investment and Debt
Management Policies, Operating and Capital Budget Policies and Long Term Financial
Plan Policy this policy will guide decisions relating to long term operating and capital
expenditures to minimize debt servicing costs, address the infrastructure deficit, and
mitigate the effect of unanticipated events.
1.3 The City must comply with the New Brunswick Local Governance Act Reserve Fund
Regulation in relation to the establishment and use of Reserves. Under the Act, reserves
are permitted to be established for Operating and Capital purposes.
1.4 All reserves will be managed in accordance with the New Brunswick Local Governance
Reserve Fund Regulation as follows:
1General Operating Reserve Fund
■ A municipality may, by resolution of Council, establish, manage and contribute
to a general operating reserve fund for the payment of operating expenses,
unexpected operational deficits or emergency revenue shortfalls.
■ Total accumulated balance held in a general operating reserve shall not exceed
5% (Five percent) of the total expenditure that was budgeted for the
municipality for the previous fiscal year.
■ Monies held in a general operating reserve fund shall be used for no purpose
other than the payment of operating expenses. Transfers to capital funds or
capital asset projects are strictly prohibited.
■ Every Council resolution respecting a contribution made to or a withdrawal
from a general operating reserve fund in respect of a calendar year shall be
made by December 31 of that calendar year and shall specify the dollar amount
contributed to or withdrawn from the general operating reserve fund.
City of Saint John
Operating and Capital Reserves
2 Reserve Fund Regulation, NB Reg 97-145, Sections 4.1 to 4.3, under the Municipalities Act (O.C. 97-1036), as continued under the Local Governance
Act.
3 Reserve Fund Regulation, NB Reg 97-145, Sections 5.1 to 5.5, under the Municipalities Act (O.C. 97-1036), as continued under the Local Governance
Act.
4
2General Capital Reserve Fund
■ A municipality may by resolution of Council, establish, manage, and contribute
to a general capital reserve fund for the payment of capital expenses.
■ Monies held in a general capital reserve fund shall be used for no purpose other
than the payment of capital expenses. A capital expense is defined as an
expenditure for a tangible asset that confers an operational benefit on the
municipality for a period exceeding one (1) year.
■ Every Council resolution respecting a contribution made to or withdrawal from
a general capital reserve in respect of a calendar year shall be made by
December 31 of that calendar year and shall specify the dollar amount
contributed to or withdrawn from the general capital reserve fund.
3Utility Operating Reserve Fund
■ A municipality may, by resolution of Council, establish, manage and contribute
to a utility operating reserve fund for the payment of operating expenses,
unexpected operational deficits or emergency revenue shortfalls.
■ Total accumulated balance held in a utility operating reserve shall not exceed
5% (Five percent) of the total expenditure that was budgeted for the
municipality for the previous fiscal year.
■ Monies held in a utility operating reserve fund shall be used for no purpose
other than the payment of operating expenses. Transfers to capital funds or
capital asset projects are strictly prohibited.
■ Every Council resolution respecting a contribution made to or withdrawal from
a utility operating reserve fund in respect of a calendar year shall be made by
December 31 of that calendar year and shall specify the dollar amount
contributed to or withdrawn from the utility operating reserve fund.
City of Saint John
Operating and Capital Reserves
4 Reserve Fund Regulation, NB Reg 97-145, Sections 6.1 to 6.4, under the Municipalities Act (O.C. 97-1036), as continued under the Local Governance
Act.
5
4Utility Capital Reserve Fund
■ A municipality may by resolution of Council, establish, manage, and contribute
to a utility capital reserve fund for the payment of capital expenses.
■ Monies held in a utility capital reserve fund shall be used for no purpose other
than the payment of capital expenses. A capital expense is defined as an
expenditure for a tangible asset that confers an operational benefit on the
municipality for a period exceeding one (1) year.
■ Every Council resolution respecting a contribution made to or withdrawal from
a utility capital reserve in respect of a calendar year shall be made by December
31 of that calendar year and shall specify the dollar amount contributed to or
withdrawn from the utility capital reserve fund.
2. DEFINITION OF RESERVES
2.1 "Reserves" are established when funds are set aside (designated) for a future purpose by a
resolution of Council.
2.2 "Operating Reserve" means a general operating reserve; a service; or utility
operating reserve.
2.3 "Capital Reserve" means a general capital reserve; a service or utility capital
reserve.
3. PERMITTED USE OF RESERVES
3.1 The City of Saint John will set aside and maintain adequate reserves to provide for:
3.1.1 Major unanticipated/unforeseen events;
3.1.2 Major capital renewal;
3.1.3 Future liabilities;
3.1.4 One time operating expenses which are greater than $100,000 and are not
part of the recurring operating budget;
3.1.5 Infrastructure deficit; and
3.1.6 Investment in growth opportunities.
City of Saint John
Operating and Capital Reserves
5Reserve Fund Regulation, NB Reg 97-145, Sections 7.1 to 7.2, under the Municipalities Act (O.C. 97-1036), as continued under the Local
Governance Act.
6Reserve Fund Regulation, NB Reg 97-145, Section 10. to 10.2, under the Municipalities Act (O.C. 97-1036), as continued under the Local
Governance Act. 6
4. AUTHORITY
4.1 A resolution of Council will be required to establish a reserve.
4.2 5No transfer of money from general and utility operating reserve fund or general and
utility capital reserve fund shall be made except:
4.2.1 By resolution of Council; and
4.2.2 Within the fiscal year to which the expenditure relates.
4.3 6A resolution of Council will be required to close a reserve.
5. ADEQUACY OF RESERVES
5.1 The target balance and adequacy of individual reserves shall be determined on a case-
by-case basis. All targets should align with the City’s General Fund and Utility Fund Long
Term Financial Plan, Asset Management Plan, and the Debt Management Plan to
ensure fiscal sustainability.
6. FUNDING RESERVES
6.1 Reserve funds shall be funded through council-approved allocations. Sources of funding
may include:
6.1.1 Operating Surpluses: The excess of actual revenues over actual expenditures at the end
of a fiscal year.
6.1.2 Planned Budget Allocations: Annual contributions approved within the City's operating
or capital budgets.
6.1.3 One-Time Revenues: Unexpected or non-recurring revenue, such as unbudgeted grants
or unallocated non-tax revenues.
6.1.4 Asset Sales: Net proceeds from the sale of City-owned assets.
City of Saint John
Operating and Capital Reserves
7 Reserve Fund Regulation, NB Reg 97-145, Section 8, under the Municipalities Act (O.C. 97-1036), as continued under the Local
Governance Act.
8 Reserve Fund Regulation, NB Reg 97-145, Section 9, under the Municipalities Act (O.C. 97-1036), as continued under the Local
Governance Act.
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7. INVESTMENT OF RESERVE FUNDS
7.1 7Any money, including interest, held within general and utility operating reserve
fund or general and utility capital reserve fund shall be invested in accordance with
the provisions of the New Brunswick Trustees Act.
7.2 All investments of general and utility reserve funds shall comply with the New
Brunswick Trustees Act and the City's Investment Policy.
8. TEMPORARY BORROWING FROM RESERVES
8.1 Temporary borrowing from general and utility reserves for short term cash flow
management and internal financing is permitted, however the following conditions
must be met:
8.1.1 Borrowing must not adversely affect the intended purpose of the reserves;
8.1.2 Borrowing must not be used for purposes contrary to the Long Term
Financial Plan;
8.1.3 A plan to repay the reserve within a reasonable timeframe is required and
must be documented; and
8.1.4 Borrowing must be approved by Resolution of Council.
9. ANNUAL REPORTING
9.1 8The annual reporting of the Operating and Capital Reserve Funds shall be in
accordance with the requirements of the Local Governance Act regulatory framework.
City of Saint John
Operating and Capital Reserves
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10. RESPONSIBILITIES
10.1 Council shall:
10.1.1 Approve the Reserve Policy; and
10.1.2 Approve transactions to and from reserves by specific resolution.
10.2 The Chief Administrative Officer Shall:
10.2.1 Ensure compliance with the principles and mandatory requirements
contained in this policy.
10.3 The Chief Financial Officer Shall:
10.3.1 Develop and update this policy as necessary and present changes to
Council;
10.3.2 Ensure that the principles and requirements contained in this policy are
applied consistently across all Service Areas;
10.3.3 Perform the transfers to and from reserves and reserve funds as authorized by
Council;
10.3.4 Recommend strategies for the adequacy of reserve levels; and
10.3.5 Report to Council, the reserve balances and forecast as part of the annual
budget approval process.