The Hydro Investment Reserve has been widely discussed on social media lately. Unfortunately, all the information has not been accurate, so I thought it would be helpful to share some history to provide a better understanding of this critical fund and its purpose.
In 2005, the Town sold Aurora Hydro for approximately $35 million. Aurora Hydro was a significant asset of the Town, funded over many years by the Aurora community. When sold, Council passed a very specific bylaw so future Councils would use the funds to purchase another asset for the benefit of the broader community and not squander the money to artificially reduce or mask tax rates. Resultant, 90 percent of the proceeds ($31.5 million) were used to establish a special reserve fund and the remaining 10 percent ($3.5 million) used to establish the Council Discretionary reserve.
However, in the 2006 to 2010 term, Council began the practice of using interest from this reserve to artificially reduce the tax rate increase and subsidize the Town’s operating budget – effectively removing $2.246 million from the Hydro Reserve Fund. This practise is not financially sound as it eats into the overall value of the asset and serves to mask real tax increases. Nor is it consistent with the spirit of the original Council motion to preserve the Hydro Funds to purchase a community asset since compounding interest helps the reserve fund grow over time to maintain the total value relative to the cost of inflation.
During the 2010 to 2014 term Council recognized this conflict and moved to reduce the use of the interest to lower tax rates. They began reducing the amount taken from the reserve by $100,000 each year and during the 2014 to 2018 term, Council successfully fulfilled this commitment. Since 2016 all investment income generated from this fund was again kept within the fund to grow.
In total, $5,146,500 was removed from the reserve to fund a reduced tax rate.
So what should the Hydro Investment Reserve be used for?
This has been debated since 2006 by 4 Councils. Many ideas have come forward and no single project was deemed worthy of investing the funds. But what was clear, is funds should be used to purchase/build an asset that would enhance the quality of life for all Aurorans.
Last term, Council approved $5.3 million from the Hydro Investment Reserve for the redevelopment of the Armoury and $500,000 for the Cultural Precinct Plan/Library Square.
This term, Council approved $1.0 million for the Cultural Precinct Plan/Library Square. And in December 2019, Council approved a further $24.3 million for Library Square as part of the No Grant funding strategy.
Today the Town has $75 million dollars in reserves including the $8.1 million remaining in the Hydro Investment Reserve. We are the envy of many Municipalities.
I hope this helps everyone understand the Hydro Investment Reserve and the intention of how the funds are to be used.
That’s all for this week, but stay tuned for next week as we discuss Library Square in more detail.
3 Responses
Very good information, keep on the great work
We won’t be the envy of municipalities for very long… this headlong rush to squander reserves is foolhardy. But when had that ever stopped council?
Good morning Mr Bushey, investing in our community, revitalizing the downtown core, helping our local economy are exactly what these reserves are for to benefit our Town for future generations . But thank you for your opinion. I know that you have reached out to Councillor Humfryes, I am sure she has answered all your questions on this matter. If you would like to discuss this further I am always available and you could give me a call anytime. 4165431624. I hope you have a great day.