‘Very large’ cash infusion to Petrolia’s working capital reserve planned

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Heather Wright/The Independent

Almos Tassonyi says the $1.5 million the Town of Petrolia plans to put into its working capital reserve is “large…very large.”

Tassonyi, a Research Associate, International Property Tax Institute who is affiliated with the School of Public Policy at the University of Calgary, should know what he’s looking at. He was a senior economist with the Ontario Ministry of Finance until 2011.

The Independent asked Tassonyi about the town’s plans to put about 20 per cent of the tax revenue it collects this year into a working capital reserve fund established in 2014.

When it was established taxes climbed eight per cent to pay for the $500,000 fund. Town officials had a goal of paying for all of the town’s capital projects from it.

But a graph by staff in the draft budget book shows the town didn’t spend the full amount in that year. It left over $132,000 in the reserve in 2014. Since then it has grown by 30 times that amount to just under $4 million by the end of 2020.

In all, the town had $7,992,400 in reserves at the end of December 2020. Some are for specific projects, but the working capital reserve isn’t.

Tassonyi looked over the town’s financial records and says the $1.5 million is unusual.

Tassonyi viewed the town’s Financial Information Return prepared for the province and was surprised by the “blips” in the amount of money the town collected. Over the last five years, Petrolia has received millions in grants for a water treatment plant and upgrades to the drinking water plant.

But Tassonyi noted “the tax increases have been pretty steady… when I look at total taxation revenue.”

And he noted the amount of money placed in reserves “does seem very large when you’re talking about something like $1.5 million compared to nearly $6 million (in operating revenues).”

Tassonyi says while it is up to council and there are no hard and fast rules, he says a “reasonable” contribution to reserves is between one and five per cent “depending on the size of the municipality and what the implications on the tax rate are.”

The town holds a virtual public budget session Monday at 6 pm. The contributions to the working capital reserve is just one part of the $7.4 million budget with a proposed two per cent tax increase which will be discussed.