Reserves and reserve funds are an important tool for a municipality’s long-term financial sustainability that can reduce the need for long-term borrowing or imposing sudden tax increases on current or future taxpayers.
They are either mandatory (required) or discretionary (optional) and are used to offset or set money aside money for:
- maintaining/controlling property tax rates if the economy suddenly takes a downturn
- unexpected expenses or revenue shortfalls
- onetime or short-term funding for special purposes
- uncontrollable but often predictable events like floods, forest fires and pandemics
- flexibility to deal with fluctuating cash flows
- capital projects (like road repairs)
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