An earmarked reserve is money set aside by a municipality for a specific purpose through policy or council direction, but without the formal legal restrictions of a statutory reserve. These funds represent council's intent to use money for designated purposes—like future equipment replacement, facility improvements, or contingency needs—while retaining flexibility to redirect funds if priorities change. Unlike statutory reserves established under provincial legislation, earmarked reserves can typically be repurposed through council resolution. Common earmarked reserves include equipment replacement, building maintenance, rate stabilization (smoothing utility rate fluctuations), and contingency funds. Good financial practice maintains adequate reserves for predictable future needs, reducing reliance on borrowing or sudden tax increases. Reserve policies typically specify target levels, contribution rates, and conditions for use.