Investment income drops for Fort Erie as rates come down
March 12, 2026 at 3:38 AM
While lower interest rates might be welcome news for those renewing mortgages, it also means lower investment income for municipalities like Fort Erie.
Finance staff at the town have budgeted $175,000 less in investment income for 2026, as lowering interest rates mean their investments aren’t going quite as far as they did the previous couple years.
In 2024, when the Bank of Canada’s overnight lending rate peaked at five per cent, the town budgeted nearly $1.9 million in investment income, which is money that doesn’t have to be charged to property taxpayers.
Last year that number dropped to $1.3 million, and with expectations that for 2026 the rate will remain at the 2.25 per cent mark the Bank of Canada set last fall, staff are planning for less investment income again this year.
The numbers were presented in a report to council at the March 9 meeting. It was received without discussion.
“Decreasing rates are expected to continue impacting future budgets,” a staff report said.
The lower rates impact things in two ways. First, cash balances immediately receive a lower interest rate when the Bank of Canada drops its rate. And second, maturing, fixed-rate investments get reinvested at lower rates.
Fort Erie has also benefited from increasing reserve balances, allowing for more money to be invested.
“This growth has strengthened the town’s financial position and enhanced investment income generation. However, ongoing capital pressures and related reserve use will moderate reserve growth and may result in stable or declining investment balances,” the report said.
“Staff continue to monitor the investment portfolio, reinvest maturities at the most competitive rates available, and diversify holdings where appropriate to support long-term financial stability.”
Money from both reserve funds and development charge funds can be used to invest until such time as the municipality needs to use the money for capital projects.
Some income can also come from cash the municipality keeps on hand for bridge financing between expenses, such as staff payroll and the receipt of tax and water payments.
Finally, the town is also required to keep trust funds for cemetery maintenance. That money is also invested.
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About The Author
Luke Edwards
Luke Edwards is a longtime Niagara community journalist who has covered a variety of beats, including business, agriculture, the wine industry and politics. When not writing, there's a good chance he can be found at a baseball diamond or curling rink.
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