Casual legal: Putting aside funds for a rainy day
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.
By Shauna Finlay
Reynolds Mirth Richards Farmer LLP
Alberta Municipalities Casual Legal Service Provider
Recently, the Court of King’s Bench considered a challenge to a municipality’s ability to collect taxes and allocate a portion of those taxes to a reserve fund.
In Enterprise Properties Ltd. v Flagstaff (County), 2026 ABKB 94, the Court dealt with a judicial review that challenged the legality of portions of the municipality’s 2021 and 2022 property tax bylaws and the 2022-2024 Business Plan, arguing that the collection of property taxes for transfer to municipal reserve funds for future use was beyond the County's jurisdiction under the Municipal Government Act (MGA).
The municipality argued that a variety of provisions of the MGA explicitly and implicitly permit the creation of, and contribution to, reserve funds. The County also pointed to its Reserve Funds Policy to explain the purpose for the fund and what such funds could be used for.
Ultimately, the Court found that the municipality did have authority to create a reserve fund, and the authority to include in its budget, amounts to be transferred into a reserve fund. Further, the Court confirmed that municipalities may raise property taxes to pay for transfers into reserve funds, provided those transfers are expressly included in the municipality’s budget.
In so finding, the Court referred to the some of the reasons it is important to have reserve funds, including the fact that municipalities are not permitted to run deficits, the limits on the debt municipalities may take on for capital projects and the long term planning that municipalities are required to do.
This is an important case that confirms that municipalities may engage in longer term financial planning, including through the creating of reserve funds for future expenditures.
To access Alberta Municipalities Casual Legal Helpline, Alberta Municipalities members can call toll-free to 1.800.661.7673 or email casuallegal [at] abmunis.ca (casuallegal[at]abmunis[dot]ca) and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] abmunis.ca (riskcontrol[at]abmunis[dot]ca), or call 310.MUNI (6864) to speak to Alberta Municipalities Risk Management staff. Any Regular or Associate member of Alberta Municipalities can access the Casual Legal Service.
