HomeMy WebLinkAboutFND-017-02
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GEHERAI. PURPOSEANDjj~"SrRATION OOMMlTTEE
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Sulldact:. ftEVI$IONTO 11fE MUtfft)"~'~ENT POLICY
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It isrespecttully recQmmended that the~ and Administration Committee
recommend toCounoll the following: '. .,..
1. THAT Report-FNO-017-62 be reoei\""';: .
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2. TH.ATthe lonQ-term.,investmentJlmit ~e8ed to $30 million and that
SoheI;Iute W Part 4 be updatedto~jpcrease; and
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. . ~ THAT ~ "S" Part 5, be \Jfll!:w. "C{*'ffllild a quarterly atatement of
. ,1~""'''''''"f'...,U_ shall be&t6liIlr1fto Munic:i-t CouncIl.
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.Submitted by:
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1.0 AtthEl ~ 5,1998 General p~~'CI:lmmitlBe mENating, R~
TR-7e..ge{Attachment #1), was IlJ)pqlI~lt.w.,;jll9~d up(late1he MuliIiclpality's
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. ~Pol~, formerly updated ln1_~1'AttJlat time the .lQng-tem'tinveS~nt I(mil$
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. .~ increased t9 a maximum of 6lWtOf..,~ (,8M fund lnv_~""ft.portfolio bel. or
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$20 million. W;hIcbeverisless. .'
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Th& reseMl fund investmenUlll__in1_;V_~1i230;970 (8S~to Council
lIi$ monthly ~actMty reports). 1&,I;\I1!t'll1_'$48.828,638 (as reported to CounCiIvla
quarterly,(l8$h aetivityreports). It jslb.nr.~ that the policy be r.tWisedto.
altowfora maximum ofM% of the t1il'$~~d investment~~or$30
. milliOn, ~is leSs, to beinv~. _ iRvestrneftl
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, TM~~ term wiIi~.,~lJflvt(5) years, ~!forOntarioMun\Gipal
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Revised Schedule "A"
Report FND-017-02
CORPORATION OF THE MUNICIPALITY OF CLARlNGTON
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 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 guaranteed by the following institutions (see
Appendix A and A-I for current listing):
(i) The Goverrunent of Canada
(ii) The Provinces of Canada
(iii) Ontario Municipal Goverrunents as dermed 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.
1303
Revised Schedule "A"
To Report FND-017-02
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, 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 of20% AAA (maximum) 70A (high) and maximum 10% A (low).
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 limit
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 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
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 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 long
term investments. Subject to the limitations ofthis 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 ofthe Director of
Finance/Treasurer.
5. For information purposes, a quarterly statement of investments outstanding
shall be submitted to Municipal Council.
1305
Attachment #1
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
REPORT
Meeting:
General Purpose and Administration Committee
File #:
Date:
October 5, 1998
c~
Res.#:
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-I", be approved as the
current Investment Policy for the Corporation of the
Municipality of Clarington for surplus General Fundr Reserves,
Reserve Fund and Trust Fund monies;
3. THAT the revised Appendix "AN and "A-I" 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") I 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 instrument~. 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-t€rm
portfolio, the initial limit has proven to be too restrictiv~ to
allow the Municipality to take advantage of favorable investment
opportunities. It is therefore recommended that the policy be
13,06
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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 "Au) 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 o~ 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-I" 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,
/j JJJ:f6--v J,,-
W.H. Stockwell,
Chief Administrative Officer.
MM/NT/hjl
Attachments
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b)O
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REVISED SCHEDULE "AN
REPORT TR-76-98
CORPORATION OF THE MUNICIPALITY OF CLARINGTON
SHORT TERM/LONG TERM INVESTHENT 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 oi Ontario, and more specifically only those issued or
guaranteed by the following institutions (See Appendix A and A-I
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 UA" and UE" banks.
(iv)
PLACEMENT OF INVESTMENT
That the Municipality be permitted to take advantage of
investments offered by qualified investment brokerage houses,
such "as RBe 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 ratinq sUDDlied bv a qualified bond rating
service, per attached Appendix "A" and "A-ill, taking into account
the overa~l value of the investment portfolio.
That the mix of investments
portfolio with a minimum of
maximum 10% A (low).
be maintained of holdings in the
20% AAA (maximum) 70% A (high) and
1
1308
I.
'r
Revised Schedule ~A"
INVESTMENT INSTITUTION
Government of Canada
Province of Ontario
Other Provinces of Canada
Schedule "AN banks
Schedule "B" banks
Ontario Municipal Governments
Municipal Investment Pools
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.
S. 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 1, 1995.
1 3D 9
'.
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 i~vestments
outstanding shall be submitted to Municipal Council.
)
1310
REVISED APPENDIX A-I
REPORT TR-76-98
DBRS Rating Schedule as of August 1. 1998
Issurer Name DBRS
Government Issuers
Federal Government and Agencies ( local currency)
. Government of Canada AAA
. Business Development Bank of Canada AAA
. Canada Mortgage & Housing Corp. AAA
. Canadian Wheat Board AAA
. Chevron Canada Finance AAA
. Export Development Corp. AAA
. Farm Credit Corp. AAA
provincial Governments
. Alberta AA (high)
. British Columbia AA
. Manitoba A
. New Brunswick A
. Newfoundland BBB
. Nova Scotia BBB(high}
. Ontario A(high}
. Prince Edward Island BBB (high)
. Quebec A(low)
. Saskatchewan A(low)
provincial Government Agencies
. Alberta Municipal Finance Corp. AA(high)
. British Columbia Municipal Finance Authority -
. British Columbia, Hydro & Power AA
. Hydro-Quebec A (low)
A
. Manitoba Hydro Electric Board A
. New Brunswick Power Corporation BBB
. Newfoundland & Labrador Hydro -
. Nova Scotia Power Finance Corp. BBB
. Ontario Hydro -
. societe d'habitation du Quebec A (high)
1311
,
REVISED APPENDIX "An
REPORT TR-76-98
DBRS Rating Schedule as of August 1, 1998
Schedule "An 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 A...erica (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 I
(Canada) i
A . Fuji Bank Canada
. Laurentian Bank of Canada
1312