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Home My WebLink AboutFND-023-08~lar~~c Energizing Ontario Meeting: COUNCIL Date: October 14, 2008 Report #: FND-023-0~8 File #: Subject: MUNICIP/1L INVESTMENTS Recommendations: It is respectfully recommended to Council: REPORT FINANCE DEPARTMENT Resolution #:C -~~g-fig By-law 1. THAT Report FNq-023-08 be received for information; Submitted by: Reviewed b . ~ ~ Franklin Wu, Chief Administrative Officer. NT/LB/hjl REPORT NO.: FND-023.08 PAGE 2 BACKGROUND AND COMMENT: 1.0 In light of the current economic environment and volatility in the marketplace, the Finance Department was requested to provide a report to Council to relay to Council and the public both the types and security of municipal investments. 1.1 As of August 31, 2008, the Municipality of Clarington had $65,247,343.62 held in various investment instruments. These investments include funds held for General Reserve Funds, Obligatory Reserve Funds including Development Charge Reserve Funds, Trust Funds including the Host Community Fund Trust and from time to time operating funds. All funds are invested keeping in mind the following significant factors: (1) Municipal Investment Policy (2) Provincial Legislative Authority (3) Budgetary Requirements/Cash flow needs (4) Market Conditions 1.2 The Treasurer monitors all investment activity and reports the value of investments held to Council on a quarterly basis in the quarterly Financial Update Report (formerly the Cash Activity Report). Municipal Investment Policy: 2.0 Report FND-017-02 (Attachment #1) was approved by Council Resolution C-622- 02. This policy specifically limits the Municipality's investment options to debt issued by Federal, Provincial or Municipal governments and Schedule A or B Banks. We currently have $51,742,116.44 for Municipal purposes (Attachment #2) and $10,000,000.00 in Trust or 94.63% of our portfolio held in this format. All investments held are Canadian institutions. They are typically bonds, guaranteed investment certificates and banker's acceptances. 2.1 In 1999 the Municipal Finance Officers Association and Association of Municipalities of Ontario sponsored the "One-Fund". Report TR-61-99 was approved and the Municipality of Clarington has participated in this Bond fund since that point. In 2005, a second fund was added to the "One-Fund" portfolio to offer member Municipalities an opportunity to invest in equity. The Municipality of Clarington currently has $2,994,888.19 invested in the Bond Fund and $500,000.00 invested in the equity fund. 2.2 The original product of the ONE Funds portfolio, the objective of the Bond Fund is to provide competitive rates of return through a diversified portfolio of conservatively managed short-term bonds where preservation of capital is of prime concern. This represents 4.59% of the municipality's portfolio. REPORT NO.: FND-023.08 PAGE 3 2.3 Accepting investments as of January 2007, the objective of the ONE Equity Fund is to provide superior long-term investment returns through capital growth and dividend yield. The Equity Fund achieves this by investing in a diversified, conservatively managed portfolio of equity securities issued by Canadian corporations, as permitted by applicable legislation and regulations. This investment represents 0.77% of the municipality's portfolio and may be subject to some short-term market fluctuations. This is a very minor component and is intended to be held for a period of greater than 5 years. Legislative Authority: 3.0 Section 418(1) of the Ontario Municipal Act R.S.O. 2001 provides the legislative authority to invest monies not immediately required for current operating purposes (formerly section 167(2) of the Municipal Act R.S.O. 1990). Section 418(6) specifically states that only securities outlined in the Act can be invested in and proceeds to list all of the eligible investment vehicles. When the Municipal Act was revised in 2001, the list was expanded. 3.1 The Municipality of Clarington has maintained a conservative investment policy, following the more restrictive guidelines imposed by the previous Act. While this does not necessarily provide for the highest yielding returns in a strong market, it also protects the municipality from losses in poor market conditions. Conclusions: 4.0 The Municipality does not invest in stocks or commodities markets or in any foreign exchange transactions. The Municipality's portfolio is sound and our investment contacts are indicating that many organizations are currently trying to achieve what Clarington has been doing all along. This report is provided as information for Council. Attachments: Attachment #1 -FND-017-02 Attachment #2 -Investments Outstanding as of August 31, 2008 CORPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOW MANVILLE, ONTARIO L1C 3A6 T (905)623-3379 F (905)623-4169 1.{-~...~ .e~L- Fruu,, ?*1 4rY, NOV~tuiB~R'~1 cE; i~YlSMI„TQ TN6 !i~# - , , s, . ~~~~~~ i,l ilaFLW~Vf~~-ifl~~i17~19P~M9 •J tlt~l~BF]ity! (R~9~.} gUa~te~?`'i~s~11'rR4tl' X#~'FBpW#$~- ISIS. ~~Y;I'Qf.B xC1lltlJll'14~ 6v°+6 Of~the +~FE FTlibli#1s'it~liF6(' 1,8.16, f0 bQ if W$ . ,:; Revised Schedule "A" Report FND-017-02 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 TYPES OF INVESTMENTS 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 guazanteed by the following institutions (see Appendix A and A-1 for current listing): (i) The Government of Canada (ii) The Provinces of Canada (iii} Ontario Municipal Governments as defined in the Municipal Affairs Act (iv} Schedule "A" and "B" banks. 2. PLACEMENT OF INVESTMENT That the Municipality of Clarington 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. 13Q3 _, Revised Schedule "A" Page -2 - To Report FND-017-02 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, taking into account the overall value of the investment portfolio. That the mix of investment be maintained of holdings in the portfolio with a minimum of 20% AAA (maximum) 70A (high) and maximum 10% A (low). INVESTMENT INSTITUTION LIMIT Government of Canada No limit Province of Ontario Maximum 40% of portfolio Other Provinces of Canada Maximum 30% of portfolio Schedule "A" banks Maximum 30% of portfolio Schedule "B" banks Maximum 10% of portfolio Ontario Municipal Governments Maximum 20% of portfolio Municipal Investment Pools Maximum 30% of portfolio 4. TERM OF INVESTMENT Investments in long-term bonds shall be limited to 30 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 Mazket 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 1, 1995. 1304 Revised Schedule "B" Report FND-017-02 INVESTMENT PROCEDURES 1. That Deputy Treasurer or alternate under the direction of the Director of Finance/Treasurer shall be responsible for the placement of short and tong 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 Director of Finance/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 investment s shall receive the approval of the Director of Finance/Treasurer. 5. For information purposes, a quarterly statement of investments outstanding shall be submitted to Municipal Council. 13~~5 Attachment 2 CORPORATION OF THE MUNICIPALITY OF CLARINGTON INVESTMENTS OUTSTANDING AS AT AUGUST 31st, 2008 D FINANCIAL INVESTMENT INTEREST MATURITY MATURITY INSTITUTION COST RATE VALUE DATE GENERAL FUND Banker Acceptance BMO 1,094,291.00 3.12% 1,100,000.00 16-Sep-2008 Banker Acceptance BMO 1,912,903.76 3.20% 1,928,000.00 1-Oct-2008 Banker Acceptance TD 2,493,625.00 3.01% 2,500,000.00 22-Sep-2008 Banker Acceptance TD 877,756.00 3.01% 880,000.00 22-Sep-2008 Banker Acceptance TD 2,393,880.00 3.01% 2,400,000.00 22-Sep-2008 Banker Acceptance TD 1,097,118.00 3.00% 1,100,000.00 30-Sep-2008 TOTAL GENERAL FUND 9,869,573.76 RESERVE FUND Bond-Royal Bank RBC * 906,000.00 4.50% 906,000.00 29-Sep-2008 Banker Acceptance BMO 992,170.00 3.20% 1,000,000.00 1-Oct-2008 Bond-Ontario RBC 550,000.00 4.40% 574,200.00 14-Oct-2005 Bond-Quebec RBC 1,379,343.53 4.65% 1,787,409.00 1-Dec-2008 Bond-CIBC RBC 2,061,000.00 4.50% 2,153,745.00 3-Dec-2008 Bond-Canada RBC 1,143,285.67 3.80% 1,338,742.00 15-Dec-2008 Banker Acceptance HBSC 3,097,754.96 3.64% 3,196,000.00 5-Jan-2009 GIC-Laurentian Ba RBC 372,440.00 4.40% 461,912.00 28-May-2009 GIC-Royal Bank RBC 595,239.00 3.80% 617,858.08 23-Jun-2009 Bond-Canada RBC 4,180,000.00 4.10% 4,351,380.00 30-Jun-2009 Bond-Canada RBC 3,796,000.00 4.05% 3,949,738.00 29-Jul-2009 GIC-Royal Bank RBC 664,993.00 4.25% 753,434.00 29-Aug-2009 Bond-Canada RBC 739,938.86 3.55% 869,800.00 1-Oct-2009 Bond-Ontario RBC 733,772.63 3.85% 900,445.00 2-Jun-2010 Bond-Canada RBC 5,094,062.47 4.10% 6,058,590.00 1-Oct-2010 GIC-National Bank RBC 1,500,000.00 4.10% 1,833,770.00 6-Dec-2010 GIC-National Bank RBC 1,681,851.79 4.35% 2,080,894.41 6-Mar-2011 GIC-BMO RBC 2,221,742.00 4.30% 2,742,301.29 18-Sep-2011 Bond-Quebec RBC 776,152.23 4.35% 986,467.00 1-Dec-2011 Bond-Ontario RBC 999,999.54 4.20% 1,244,090.00 2-Dec-2011 GIC-Royal Bank RBC 2,000,000.00 4.05% 2,439,161.00 16-Mar-2012 B/A-TD RBC 1,471,061.00 4.80% 1,859,675.00 30-Oct-2012 B/A-Royal Bank RBC 1,503,357.00 4.80% 1,900,502.92 8-Jan-2013 GIC-BNS RBC 1,546,695.00 4.50% 1,927,463.38 12-Feb-2013 GIC-BNS RBC 599,161.00 4.35% 741,320.00 4-Mar-2013 GIC TD 1,009,028.00 4.45% 1,254,427.00 25-Mar-2013 GIC TD 257,495.00 4.51% 321,039.00 13-May-2013 TOTAL RESERVE F UND 41,872,542.68 TOTAL INVESTMENTS 51,742,116.44 Investment interest paid on a monthly/semi-annual/annual basis