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Published on October 8, 2025
• 3 min read
Your budget surplus can be used as a strategic lever and valuable financial management planning tool.
A municipality’s accumulated surplus represents much more than a positive budgetary balance. Indeed, these funds are a strategic lever for financial management as long as they’re used in a disciplined and responsible manner. This approach not only allows municipalities to preserve their financial health, but also optimize the allocation of public resources to benefit taxpayers.
Use an investment strategy to grow your budget surplus
One of the founding principles of sound financial management involves treating surplus funds as a medium- and long-term planning tool rather than a reserve that you should quickly spend. Accumulating a budget surplus makes it possible to generate investment income, which is a significant opportunity for the municipality. By investing these funds in a prudent, but strategic manner, the municipality can increase its own-source revenue and thereby reduce the tax pressure on taxpayers.
Conduct an analysis to be able to choose between returns and debt
While the introduction of an investment strategy appears responsible, it must be supported by a periodic review of the differential between interest rates on the long-term debt and the on investment. Such an analysis allows municipalities to determine whether it’s more advantageous to retain investments or repay certain debts.
Where returns are higher than borrowing costs, municipalities come out ahead and citizens benefit directly.
A tool for stabilizing the tax burden
Having a surplus provides leeway to stabilize the tax burden’s growth. During periods of economic uncertainty or increasing costs, it can be used to absorb the tax increases resulting from one-time expenses, maintain services or finance projects without incurring debt. This flexibility facilitates predictable management that reassures citizens.
Use your budget surplus to make cash investments
Another option worth considering is using your surplus to make cash investments. However, this decision must be aligned with the useful life of the property, plant and equipment in question. Generally speaking, it’s preferable to use cash to finance short- and medium-term projects and avoid passing on the cost to future generations who will not benefit from the asset.
Decide when to use your surplus and when to incur debt
Using surplus funds doesn’t restrict you from borrowing. Indeed, these two options can complement each other as part of a well-balanced financial strategy. For example, using surplus funds to pay off an existing debt at its refinancing maturity date could prove useful, especially where the remaining amortization is limited (five years, for example). This decision would provide you with more financial leeway in future years compared to avoiding long-term debt.
Furthermore, a loan bylaw is a democratic governance tool that should not be overlooked. This process gives citizens the opportunity to comment on major projects through public consultations and register mechanisms in particular. In this way, it strengthens transparency, the legitimacy of decisions and the population’s commitment to the municipality’s fiscal policy. In other words, even if a municipality has a significant surplus, choosing to finance a project through borrowing may be a responsible and democratic manner to involve citizens in the decisions that shape their living environment.