Item - 2026.EX33.11

The Chief Financial Officer and Treasurer recommends that:

1. City Council approve the establishment of a vehicle reserve called the ‘Vehicle Reserve – Environment, Climate and Forestry in Appendix A, Schedule 1 – Corporate Reserves of the City of Toronto Municipal Code Chapter 227, Reserves and Reserve Funds, the purpose of which is to provide funding for the replacement of vehicles and equipment for Environment, Climate and Forestry as reflected in the Criteria Sheet in Appendix I.

2. City Council authorize that the names of the following accounts be changed to be consistent with the change in name of their respective Divisions, and amend the schedules of Chapter 227 as set out in the following table:

3. City Council direct that the Beneficiary Program for the Tree Canopy Reserve Fund (XR1220) be changed from Parks & Recreation to Environment, Climate & Forestry, as reflected in the Criteria Sheet in Appendix J.

4.  City Council approve the transfer of $12.6 million from the Budget Bridging and Balancing Reserve Fund (XR1735) to the New Deal – Subway & Transit Operations Reserve Fund (XR3041) as reflected in Appendix F to align with the intended purpose of the New Deal funds, with no net impact on the budget.

The City of Toronto (“City”) maintains obligatory reserve funds balances that will be recognized as revenues in future years, in addition to reserves and discretionary reserve funds that are intended to support the City's future activities. This report provides an update of these balances, as well as their related earned revenues and activities for the year ended December 31, 2025.

This report also serves as a statement of development charge (“DC”) balances and activity for 2025, as required by the Development Charges Act, 1997 (DC Act).

Obligatory Reserve Funds

Obligatory reserve funds are monies received from external parties for specific purposes outlined in Provincial legislation or third-party agreements.   

For the year ended December 31, 2025, the City’s obligatory reserve funds decreased from $6,726.4 million to $6,597.5 million. The decrease of $128.9 million was primarily driven by net changes in development and planning act, Ontario-Toronto New Deal, and water and wastewater obligatory reserve funds.

DCs continue to represent the largest component of the City’s obligatory reserve funds. DCs are collected from development projects for the purposes of recovering growth-related capital infrastructure costs. For the year ended December 31, 2025, the City’s DC balance decreased from $2,840.2 to $2,466.5 million. The decrease of $373.7 million was primarily driven by monies spent on eligible capital and operating expenditures exceeding DC contributions, due to decreased development activity amid current market conditions.

Reserves and Discretionary Reserve Funds

Reserves and discretionary reserve funds are established by Council to support the financial management and operations of the City, minimize annual tax rate fluctuations, and provide a measure of financial flexibility to address the impact of significant unexpected pressures.

For the year ended December 31, 2025, the City’s reserves and discretionary reserve funds decreased from $5,612.8 million to $5,471.2 million. The decrease of $141.6 million was primarily driven by Council-authorized monies spent on capital infrastructure and operational support. The majority of the City's reserves and discretionary reserve funds balances ($5,131.6 million, or 93.8 percent) are committed to future Council directed activities that include capital and operating expenditures and rate-based activities.

The remaining reserve and discretionary reserve fund balance ($339.6 million, or 6.2 percent) is uncommitted and available to respond to various unanticipated costs, stabilize funding sources, including the tax base, or for emergency purposes such as extreme weather events. The uncommitted amount represents 1.8% of the total 2026 Operating Budget of $18,863.7 million.

There are total commitments and obligations of $44,349.1 million against the $12,068.7 million balance in committed reserves, discretionary reserves and obligatory reserve funds consistent with the approved 10-Year Capital Plan and other requirements and obligations. These commitments and obligations are over three times the current reserve, discretionary reserve fund and obligatory reserve fund balances, requiring continued reserve contributions to support planned expenditures. A further breakdown of the City’s current balances in comparison to planned operating and capital expenditures can be found in Appendix E.

There are no financial implications arising from the adoption of the recommendations in this report.