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Home My WebLink AboutTR-76-98 . -.- THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON REPORT Meeting: General Purpose and Administration Committee File #: Date: October 5, 1998 c,) <t Res.#: GPA- 543- Report #: TR-76-98 File #: By-Law #: Subject: REVIEW OF MUNICIPAL INVESTMENT POLICY Recommendations: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. THAT Report TR-76-98 be received; 2. THAT the attached revised Schedule "A", along with it's supporting revised Appendix "A" and "A-1", be approved as the current Investment Policy for the Corporation of the Municipality of Clarington for surplus General Fund, Reserves, Reserve Fund and Trust Fund monies; 3. THAT the revised Appendix "A" and "A-1" be amended from time to time to reflect the current status of any bank or institution being considered for investment; and 4. THAT the investment procedures (attached Schedule "B") , be received for information. Background and Comments: 1.0 At the February 6, 1995, General Purpose and Administration meeting, Report TR-3-95 (Attachment #1), was approved to revise and update the policy formerly established in 1992. Prior to 1995, the Municipality invested solely in short-term instruments. Due to the increase in the level of Reserve Funds, due primarily to the 1993 Ontario Hydro Agreement and the collection of Development Charges levies, the policy was revised to introduce longer-term investment instruments. 1.1 This resulted in a much higher return on investments. At the time the policy was revised, it was determined that the initial limit on long term instruments be set at a maximum of 50% of the investment portfolio or $15 million, whichever is less. 1.2 Now that the Municipality has established a successful long-term portfolio, the initial limit has proven to be too restrictive to allow the Municipality to take advantage of favorable investment opportunities. It is therefore recommended that the policy be bL9 TR-76-98 Review of Municipal Investment Policy Page 2 revised to allow for a maximum of 65% of the reserve fund investment portfolio balance or $20 million, whichever is less. 1.3 This will still allow sufficient funds for capital requirements as the current reserve fund investment balance is $31,230,970 (reported to Council via monthly cash activity reports) and the annual budget draws on the reserve funds for capital purposes have been as follows: 1998 1997 1996 2,962,862 2,510,926 3,056,935 1.4 The current investment policy also indicated that the maximum investment term would not exceed five (5) years except for Ontario Municipal Government and municipal investment pool investments. Beginning in 1997, very favorable rates have been available on Province of Ontario savings bonds. The Municipality has purchased $1 million of Ontario Savings Bonds with staggered maturity dates. The final maturity date is beyond the five (5) year maximum, however because these bonds are fully cashable with no penalty, every six (6) months the policy (Schedule "A") is recommended to change to allow for these exceptions. For clarification purposes, Ontario Savings Bonds should be included with municipal government bonds as an allowable exception to the five (5) year maximum investment term. 1.5 Section, 3, Schedule "A" of the current policy, indicates that a maximum of 30% of the portfolio is permitted to be invested in instruments issued by each of the provincial governments. However, the investment policy also includes minimums and maximums based on security ratings. Since 1995, many of the provinces have fluctuated in their rating, with the Province of Ontario being one of the only one consistently rated A (high) or greater. As a result, the combination of the above policies have become inadvertently restrictive. It is therefore recommended that the maximum be raised to 40% for the Province of Ontario only. 2.0 The above policy changes have been incorporated into the revised Schedule "A", Appendix "A" and "A-1" and Schedule "B" for Council approval in order to improve the flexibility of the municipal investment portfolio and maximize returns while still protecting the security of the portfolio. y submitted, Reviewed by, H.BSc., AMCT, ~._---~ W.H. Stockwell, Chief Administrative Officer. MM/NT/hjl Attachments 830 REVISED SCHEDULE "AU REPORT TR-76-98 CORPORATION OF THE MUNICIPALITY OF CLARINGTON SHORT TERM/LONG TERM INVESTMENT POLICY FOR SURPLUS GENERAL FUND, RESERVES, RESERVE FUND AND TRUST FUNDS LEGISLATIVE AUTHORITY Section 167(2} of the Municipal Act R.S.O. 1990 provides the legislative authority to invest monies not immediately required for current operating purposes. Section 163 of the Municipal Act R.S.O. 1990 provides the legislative authority to invest monies raised for a reserve fund and its earnings in such securities as allowed under the Trustee Act. POLICY 1. TYPES OF INVESTMENT That the Municipality of Clarington place investments in those instruments permitted under the Municipal Act and the Trustees Act of Ontario, and more specifically only those issued or guaranteed by the following institutions (See Appendix A and A-1 for current listing) : (i) (ii) (iii) The Government of Canada The Provinces of Canada Ontario Municipal Governments as defined in the Municipal Affairs Act Schedule "A" and "B" banks. (iv) 2. PLACEMENT OF INVESTMENT That the Municipality be permitted to take advantage of investments offered by qualified investment brokerage houses, such as RBC Dominion Securities and/or Wood Gundy Inc., and financial institutions as circumstances dictate. 3. LIMITATIONS AND DIVERSIFICATION OF PORTFOLIO HOLDINGS That the following limitations be placed on investments with any one financial institution based on the issuer of the investment according to the rating supplied by a qualified bond rating service, per attached Appendix "A" and "A-1", taking into account the overall value of the investment portfolio. That the mix of investments be maintained of holdings in the portfolio with a minimum of 20% AAA (maximum), 70% A (high) and maximum 10% A (low). 831 Revised Schedule "A" Page 2 INVESTMENT INSTITUTION LIMIT Government of Canada Province of Ontario Other Provinces of Canada Schedule "A" banks Schedule "B" banks Ontario Municipal Governments Municipal Investment Pools No limi t Maximum 40% of portfolio Maximum 30% of portfolio Maximum 30% of portfolio Maximum 10% of portfolio Maximum 20% of portfolio Maximum 30% of portfolio 4. TERM OF INVESTMENT Investments in long term bonds shall be limited to $20 million or 65% of the Reserve Fund investment portfolio balance, whichever is less. The maximum investment term will not exceed five (5) years, except for Ontario Municipal Government and Municipal Investment Pool Investments and Ontario Savings Bonds. 5. Municipal Investment Pools, as mentioned above, includes the CHUMS Money Market Fund and the LAS Pooled Investments program offered by the Municipal Finance Officers Association and the Association of Municipalities of Ontario. These funds were combined under the new 'ONE" fund May I, 1995. 832 REVISED APPENDIX "AU REPORT TR-76-98 DBRS Rating Schedule as of August 1, 1998 Schedule "A" Banks Schedule "B" Banks AA (high) . Union Bank of Switzerland (Canada) . Deutsche Bank (Canada) . Credit Suisse First Boston (Canada) AA . National Trust Company . Chase Manhattan Bank of . Royal Bank of Canada Canada . Toronto Dominion Bank . Citibank Canada . Canadian Imperial Bank of Commerce . Bank of Montreal . Bank of Nova Scotia . Canada Trust Company . Montreal Trust Co. of Canada . Royal Trust Corp. of Canada AA (low) . Bank of America (Canada) . Bank Nationale de Paris (Canada) A (high) . National Bank of Canada . Bank of Tokyo - Mitsubishi . Hongkong Bank of Canada . BT Bank of Canada . Industrial Bank of Japan (Canada) A . Fuji Bank Canada . Laurentian Bank of Canada b33 REVISED APPENDIX A-l REPORT TR-76-98 DBRS Rating Schedule as of August 1, 1998 Issurer Name Government Issuers Federal Government and Agencies (local currency) . Government of Canada . Business Development Bank of Canada . Canada Mortgage & Housing Corp. . Canadian Wheat Board . Chevron Canada Finance . Export Development Corp. . Farm Credit Corp. Provincial Governments . Alberta . British columbia . Manitoba . New Brunswick . Newfoundland . Nova Scotia . Ontario . Prince Edward Island . Quebec . Saskatchewan Provincial Government Agencies . Alberta Municipal Finance Corp. . British Columbia Municipal Finance Authority . British Columbia, Hydro & Power . Hydro-Quebec . Manitoba Hydro Electric Board . New Brunswick Power Corporation . Newfoundland & Labrador Hydro . Nova Scotia Power Finance Corp. . Ontario Hydro . Societe d'habitation du Quebec 834 DBRS AAA AAA AAA AAA AAA AAA AAA M(high) M A A BBB BBB(high) A(high) BBB(high) A(low) A(low) AA(high) AA A(low) A A BBB BBB A (high) . . SCHEDULE "B" TR-76-98 INVESTMENT PROCEDURES 1. That Deputy Treasurer or alternate under the direction of the Treasurer shall be responsible for the placement of short and long term investments. Subject to the limitations of this policy staff will invest at the highest interest rate available. 2. That Deputy Treasurer or alternate under the direction of the Treasurer shall determine the amount of funds and terms for which placements can be arranged within the limits of policy. 3. Competitive bidding will be obtained, when possible, before the placement of any investment. 4. All investments shall receive the approval of the Treasurer. 5. For information purposes, a monthly statement of investments outstanding shall be submitted to Municipal Council. 8j5 / Attachment #1 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON REPORT -.I Meeting: GENERAL PURPOSE AND ADMINISTRATION COMMITIEE File # Res. # C-; P Q - {o 7 - 9 S- By-Law # Date: February 6, 1995 Report #: TR 3 95 File#: Subject: REVIEW OF MUNICIPAL INVESTMENT POllCY Recommendations: It is respectfully recommended that the General Purpose and Administration Committee recommend to Council the following: 1. THAT Report TR-3-95 be received; 2. THAT the attached Schedule "A", along with it's supporting Appendix "A" and "A_I", be approved as the current Investment Policy for the Corporation of the Municipality of Clarington for surplus General Fund, Reserves, Reserve Fund and Trust Fund mornes; 3. THAT Appendix "A" and "A_I" be amended from time to time to reflect the current status of any bank or institution being considered for investement; and 4. THAT the investment procedures (attached Schedule "B"), be received for information. BACKGROUND AND COMMENTS: At the March 16, 1992 General Purpose and Administration meeting, report TR-19-92 was approved establishing the Municipality's current investment policy. Since that time, the value of the portfolio has increased significantly due primarily to the funds received through the 1993 Ontario Hydro Agreement, as well as the collection of Development Charges levies. The balance of the General Fund and Reserve Funds investments outstanding as of December 31, 1991 was $18,409,707. Mter payment of the rmal 1994 school levies, the balance of the General Fund and Reserve Funds investments at December 31, 1994 is approximately $32,000,000. The existing policy authorizes the placement of short term investments. This is generally considered to be less than one year. Since a substantial portion of the Reserve Fund monies will not be required until several years into the future, the Municipality would earn a much greater yield on its investments if it invested in longer term instrumen~. AECYCLEO~P"Pt(" PAPER "tJ:1 RICYClE TH. IS PRINTED ON RECVCLEO PAPER b)6 TR-3-95 Pa~e 2 .., The existing policy also places a limit of 30% of the value of the portfolio to be placed within a single institution. Given that each institution offers securities held by other institutions (ie. a Bank of Nova Scotia bankers acceptance can be purchased through the Bank of Montreal) often at a higher rate than the original institution is offering, this limit does not reflect the actual spread of the individual investments among the institutions. Also, the Municipality traditionally receives higher rates from certain banks and if the 30% limit is already reached, the Municipality is forced to accept a lower rate from another institution. The attached revised policy will provide the Municipality with greater investment returns while still ensuring the security of the investment portfolio. Respectfully submitted, Reviewed by, ane . Marano, H.BSc., A.M.C.T., Treasurer. ~~ W.H. Stockwell, Chief Administrative Officer. MM/NT/hjl Attachments b)7 . . SCHEDULE A REPORT #TR-3-95 CORPORATION OF THE MUNICIPALITY OF CLARINGTON SHORT TERM/LONG TERM INVESTMENT POLICY FOR SURPLUS GENERAL FUND, RESERVES, RESERVE FUND, AND TRUST FUNDS LEGISLATIVE AUTHORITY Section 167(2) of the Municipal Act R.S.O. 1990 provides the legislative authority to invest monies not immediately required for current operating purposes. Section 163 of the Municipal Act R.S.O. 1990 provides the legislative authority to invest monies raised for a reserve fund and its earnings in such securities as allowed under the Trustee Act. POlley 1. TYPES OF INVESTMENT That the Municipality of Clarington place investments in those instruments permitted under the Municipal Act and the Trustees Act of Ontario, and more specifically only those issued or guaranteed by the following institutions (See Appendix A and A-I for current listing): (i) The Government of Canada (ii) The Provinces of Canada (iii) Ontario Municipal Governments as defined in the Municipal Mfairs Act (iv) Schedule A and B banks 2. PLACEMENT OF INVESTMENT That the Municipality be permitted to take advantage of investments offered by qualified investment brokerage houses, such as RBC Dominion Securities and/or Wood Gundy Inc., and financial institutions as circumstances dictate. b)8 Schedule A Page 2 " 3. LIMITATIONS AND DIVERSIFICATION OF PORTFOLIO HOLDINGS That the following limitations be placed on investments with anyone financial institution based on the issuer of the investment according to the rating supplied by a qualified bond rating service, per attached Appendix A and A-I, taking into account the overall value of the investment portfolio. That the mix of investments be maintained of holdings in the portfolio with a minimum of 20% R-l high, maximum 70% R-l middle and maximum 10% R-llow. INVESTMENT INSTITUTION LIMIT Government of Canada Provinces of Canada Schedule A Banks Schedule B Banks Ontario Municipal Governments Municipal Investment Pools No limit Maximum 30% of portfolio Maximum 30% of portfolio Maximum 10% of portfolio Maximum 20% of portfolio Maximum 30% of portfolio 4. TERM OF INVESTMENTS Investments in long term bonds shall be limited to $15 million or 50% of the Reserve Fund investment portfolio balance, whichever is less. The maximum investment term will not exceed five (5) years, except for Ontario Municipal Government and Municipal Investment Pool Investments. 5. Municipal Investment Pools, as mentioned above, includes the CHUMS Money Market Fund and the LAS Pooled Investments program offered by the Municipal Finance Officers Association and the Association of Municipalities of Ontario. These funds will be combined under the new "ONE" fund May 1, 1995. A By-Law will be forthcoming, as soon as a draft is available from "ONE". , ',9 0,) APPENDIX A REPORT #TR-3-95 Rating Schedule As Of April 29. 1994 (Dominion Bond Rating Services Limited) SCHEDULE A BANKS R-1(High) R-1(Mid) Royal Bank of Canada Toronto Dominion Bank Canadian Imperial Bank of Commerce Bank of Montreal Bank of Nova Scotia National Westminster Bank of Canada Montreal Trust Co. Canada Trust Co. National Bank of Canada Royal Trust Barklays Bank of Canada R-1(Low) SCHEDULE B BANKS Morgan Bank of Canada Credit Suisse Canada Union Bank of Switzerland (Canada) Swiss Bank Corporation (Canada) Deutsche Bank (Canada) The Bank of Tokyo Canada Hong. Kong Bank of Canada Fuji Bank Canada Industrial Bank of Japan (Canada) Mitsuhishi Bank of Canada Bank of America (Canada) Laurentian Bank of Canada b40 Appendix A~l INoe:x OF FEDERAL & PROVINCIAL RATINGS:' SHORT TERM DEBT last U date 03121.194 03/21/94 0,3j21~. 03.21/94 03, "21/94 03, "21/94 03'21/94 03 f21/94 93fWJ4 00 12.4194. 0< it02I9i 0:./31/94 Ocim/93 () iI02I93 H'29JJ3 1 Jl29193 () 4IZM4 04128194 c~ ( I4n:8I94 ( 12J18/94 (~ :lOl22l93 lOlZ2/93 'lUI8194 'lUl8194 rJ713O/93 1 UZl/93 1'V22/93 03/23/94 0210 1194 0210 1J94 Clm an Name ~AOA &. CUARANrEES GOVERNMENT OF CANADA CalUlda Mortg.gc and HoU&ing Corp. (CMHC) CAnadian Wbeal Bo~, The Export o.:...elopQl~t <Atpotation Fedenl &.sillCSS Oew.lopment Banle: Mobil CAnada Hiberni1 finaD(:C LW. NHA Mortgage-Backed Seeuri(i~ Pc~~ Hibernia PutnelSllip PROVINCES &. GUARA~ PROVIN~ OF ALBEATA Atbem Municipal Fia.ana: CQiporatiOtl PROVINCE OF BRITISH COUJMBlA Briti$h Columbia Hydro It. Power Autbority Briti~ Colulllbia Municipal Finance Authonty PROVINCE OF MANITOBA The Manitoba Hydto-El(.dric Board Malli~ Telephone ~m PROVINCE OF NEW BRUNSWla< New Bt'IIl\$Wia: POW<< CorporatiQI1 New Bruaswid: MunIcip1 fillatl.Ce (Mpor.ttioa PROVINCE OF NCWFOUNDl..AND NewfoundLand aDd Labador Hydro Ncwfoua41aad Muaicipal Finance CorpontiOll PROVINCE OF NOVA SCOTIA Nova ~ Municipal Finance Corp. PROVINCE OF ONT.4JUO Oatario Hydro PROVlNCEOF PRINCE EDWARD ISl..ANO PROVINCE Of QUEBEC Hydro-Qlleboc PROVINCE OF SASKATOiEWAN Saskatchewan Power Corp Saskatchewan TeIeCOtlllDl.:nications Debt Rated ShQrt Tmn Uab>. C4n & ~gn OUTenc)' Short Term Uab$. Cdn &. foreign Cl.lm:nc" SflortTcrm Uab>. Cdll &. Foreign Cutre4C:' Shott Term Ua"- Cdn &. Fomgn CuttCl1<~1 SOOrt Term !jabs. Cdn &. ~Sl' OI~" Oxnme:ciat Paper, Cda k ~sn OJrrer_;y SOOn Tc:rm liabilities, Czr.adiln Cwr~, Coal Q)C.I'ciaJ Papet, Cd II l; For~ign OIrretl:;Y " Short T CfID LAbilitics . $boi1 Tetm liabilities SIlort Term Uabiliti~ Short TUlll Uabilities Sbon TenD liabilities Short Tum Uabllidcs SbortTa1Il Uabilitics Sh<irt Ta1Il liabilities ShQrtTeon Ulbllitles Short Tum Uabilities Short Tmn wlbllitics Shott Ta1Il Uabilities Short Term Uabilities Shortienu Uabililies Short Tum Uabifities ShottTwnwbilities Short Tum liabilities Short T et'lD lia bilities SIwm Term Liabilities snort T ~1T.Il lJ II bili ti es Short TenD liabilities Short Term Liabilitics' Sl'.ort T eta! Uabiliues Short Tcn:u Uabiilties b 4 1 IIDm April 29, 1994 Ratio - I "'9" I I R-t (lUst) R-I (ldgb) R.I (high) R-l (bigb) R-I (bigh) R-t (high) R-I (high) R41 (bigh) R-l(mid)" R.I (mid) R-l (mid) R.-l (mid) R-t (~i~ R.I (low) R-I (low) R-I (low) R.-l (low) R-I (low) R-t (low) R-2 (mid) R-2 (mid) R-2 (alld) R-2 (bigb) R-2 (high) R.t (mid) R-I (mid) R-I (low) R.t (low) R-t (I~) R.2 (bigb) R-2 (l'jgb) . R-2 (Iligh) SCHEDULE B REPORT #TR-3-95 INVESTMENT PROCEDURES 1. That Deputy Treasurer or alternate under the direction of the Treasurer shall be responsible for the placement of short and long term investments. Subject to the limitations of this policy staff will invest at the highest interest rate available. 2. That Deputy Treasurer or alternate under the direction of the Treasurer shall determine the amount of funds and terms for which placements can be arranged within the limits of policy. 3. Competitive bidding will be obtained, when possible, before the placement of any investment. 4. All investments shall receive the approval of the Treasurer. 5. For information purposes a monthly statement of investments outstanding shall be submitted to Town Council. M42