HomeMy WebLinkAboutCS 26-08
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REPORT TO
EXECUTIVE COMMITTEE
Report Number: CS 26-08
Date: June 9, 2008
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From:
Gillis A. Paterson
Director, Corporate Services & Treasurer
Subject:
Investment Portfolio Activity for the Year Ended December 31,2007
Recommendation:
That Report CS 26-08 of the Director, Corporate Services & Treasurer be received for
information.
Executive Summary: The following report and attachments represent a summary of
the investment activity and year end balance in the portfolio. Investment activity for the
year 2007 totaled approximately $114 million (2006 - $149M) with a year end balance in
the portfolio of approximately $51.1 million (2006 - $55.9M). Current Fund investments
are limited to one year or less and Reserve Funds to 10 years or less under the Council
approved policy. As discussed below and as confirmed by the attached Performance
Report from BMO Nesbitt Burns, the return on the City's portfolio has performed
favourably comparative to market benchmarks.
Financial Implications: Total investment income for 2007 was $3,009,000 (2006 -
$2,606,000) of which $1,633,000 (2006 - $1,404,000) was for the Current (Operating)
Funds.
Sustainability Implications:
implications.
This report does not contain any sustainability
Background: The City's investment portfolio is comprised of two main areas:
Reserve Funds, and balances available in the Current Fund when not required to meet
current operating expenditures. This latter balance can vary greatly depending upon
many factors including the timing of the receipt of property taxes and levy payments to
the School Boards and the Region. Investments are undertaken as one consolidated
pool of funds and interest earned is credited back to the appropriate funds.
As the Treasurer of the City of Pickering there are certain information and opinions that
I must report, under Provincial Regulation, to the Committee and Council. The attached
schedules are also included as part of the information requirements. The portfolio has
decreased over prior year by approximately $4.8 million. The main contributing factor is
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Report CS 26-08
Date: June 9, 2008
Subject: Investment Portfolio Activity for the Year Ended
(1 6 December 31,2007
Page 2
the refund to OPG for the settlement of outstanding assessment appeals for the years
2003 to 2006. This decrease was offset by the overall increase in the Reserve Fund
balances. The portfolio performed extremely well during 2007 with a weighted yearly
rate of return of 4.27% (2006 - 3.81 %) on the combined short term and long-term
investments excluding interfund investments. This was achieved by providing a more
favourable mix between short-term (highly liquid) and longer term investments.
The average return on interfund investments was 4.1 % (2006 - 3.90%) which IS
comparable to prior year.
As you are aware investment parameters are much narrower for the City than
permitted for money market funds due to the Municipal Act and Regulations limiting the
selection of qualified investments for municipal entities. However notwithstanding these
restrictions, the annual return of 4.27% continues to perform comparably with the
annual returns for the CIBC World Markets 91-Day T-Bill Index (3.29%) and the
Morningstar Canadian Money Market Mutual Fund Index (3.8%). These returns are
deemed comparative benchmarks for reviewing the portfolio's performance and
considered the standard for analysis of investment funds in the industry.
The reduction in total investment activity from prior year is primarily due to the
concerted effort made last year to increase the portion of long term investments to the
overall portfolio. This allows the City to take advantage of more stable rates of return
rather than fluctuating with the short term markets. This will prove to be beneficial for
2008 returns as we have seen a continual decline in the short term rates as of January
2008. In addition, the City's high interest yield bank account (money market account)
was used to a greater extent then in prior years since the interest rate on the account
was comparable to the 90 day paper being purchased through Nesbitt Burns.
Of the year end total portfolio of some $51.1 million, approximately $26.4 million or
51.7% (2006 - 48.1 %) were external long-term investments and approximately $4.2
million or 8.2% (2006 - 8.6%) were Interfund Investments (Internal Loans). The
balance of approximately $20.5 million is short-term investments of 90 days or less.
It is my opinion that all investments were made in accordance with the Investment
Policy approved by Council.
Attachments:
1 . I nvestment Activities for 2007
2. Outstanding Investments as at December 31,2007
3. Correspondence dated May 1,2008 from BMO Nesbitt Burns
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Report CS 26-08
Date: June 9, 2008
Subject: Investment Portfolio Activity for the Year Ended
December 31,2007
Page 3
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Prepared By:
Approved I Endorsed By:
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Kris ine Senior
Manager, Accounting SeNices
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Gillis A. Paterson
Director, Corporate SeNices & Treasurer
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Copy: Chief Administrative Officer
Recommended for the consideration of
Pickering City Council
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Th0mas J. Quinn, ~DMR.;..,CMM "'
Chief Administrative Officer
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CITY OF PICKERING INVESTMENT ACTIVITIES FOR 2007
Financial Purchase Maturity
Institution Instrument Cost Principal Yield Term Date Date
Short-term
Nesbitt Burns BNS BON 2,024,851 2,047,000 4.159% 96 04-Jan-07 10-Apr-07
BNS BA 3,177,386 3,210,000 4.163% 90 30-Jan-07 30-Apr-07 ..-.,,~.,
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BNS BA 2,999,890 3,019,000 4.152% 56 02-Feb-07 30-Mar-07
BNS BA 2,290,240 2,313,000 4.169% 87 02-Feb-07 30-Apr-07
BNS BA 6,011,359 6,073,000 4.159% 90 06-Mar-07 04-Jun-07
TDBA 486,016 487,000 4.104% 18 08-Mar-07 26-Mar-07
BNS BON 4,295,061 4,337,000 4.144% 86 26-Mar-07 20-Jun-07
BNS BON 8,018,901 8,099,000 4.143% 88 30-Mar-07 26-Jun-07
BNS BON 2,058,930 2,080,000 4.150% 150 10-Apr-07 07-Sep-07
BNS BA 2,665,802 2,684,000 4.153% 60 30-Apr-07 29-Jun-07
BNS BA 4,499,524 4,537,000 4.126% 73 30-Apr-07 12-Jul-07
BNS BA 2,633,352 2,661,000 4.165% 92 30-Apr-07 31-Jul-07
BNS BON 6,184,842 6,253,000 4.250% 94 05-Jun-07 07-Sep-07
FIRSTBANK BA 4,340,010 4,385,000 4.251% 89 20-Jun-07 17-Sep-07
FIRSTBANK BA 2,688,689 2,717,000 4.270% 90 29-Jun-07 27-Sep-07
BNS BON 2,092,978 2,116,000 4.317% 93 10-Jul-07 11-0ct-07
FIRSTBANK BA 4,536,674 4,585,000 4.320% 90 12-Jul-07 10-0ct-07
BNS BA 8,936,190 9,000,000 4.420% 59 31-Jul-07 28-Sep-07
BNS BON 2,661,284 2,692,000 4.482% 94 31-Jul-07 02-Nov-07
BNS BON 4,384,459 4,433,000 4.811% 84 17-Sep-07 10-Dec-07
BNS BON 2,890,355 2,922,000 4.701% 85 27-Sep-07 21-Dec-07
BNS BON 5,999,861 6,056,000 4.678% 73 28-Sep-07 10-Dec-07
FIRSTBANK BA 2,115,903 2,132,000 4.628% 60 11-0ct -07 10-Dec-07 """,
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FIRSTBANK BA 4,598,153 4,650,000 4.677% 88 11-0ct-07 07-Jan-08 -,
BNS BON 4,045,504 4,068,000 4.412% 46 29-0ct-07 14-Dec-07 ;:r;
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CIBC BA 5,999,741 6,065,000 4.511 % 88 29-0ct-07 25-Jan-08 I
FIRSTBANK BA 2,704,243 2,732,000 4.408% 85 05-Nov-07 29-Jan-08 3:
RBC BA 4,067,551 4,113,000 4.482% 91 14-Dec-07 14-Mar-08 !'.!J
TDBA 2,921,406 2,942,000 4.288% 60 21-Dec-07 19-Feb-08
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Total Short-term 112,329,156 113,408,000 I'
BA - Bankers Acceptance
Total Long-term -I
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Total External Investments 112,329,156 113,408,000 rn
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Interfund Investments (Internal Loans) ;;;.J
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Development Charge Reserve Fund 597,000 =tt
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Total Investment Activity 114,005,000
Dispositions of Long-term Investments f"'~;
Province of Ontario 493,173 474,000 5.200% 643 03-Jun-05 08-Mar-07 :",:.:
CITY OF PICKERING OUTSTANDING INVESTMENTS AS AT DECEMBER 31, 2007
Financial Purchase Maturity Interest
Institution Instrument Cost Principal Yield Term Date Date Payable
Short-term Current & Reserve Fund Investments
Nesbitt Burns
FIRSTBANK BA 4,598,152.50 4,650,000.00 4.68% 88 11-0ct-07 07 -Jan-08
CIBC BA 5,999,740.60 6,065,000.00 4.51% 88 29-0ct-07 25-Jan-08
FIRSTBANK BA 2,704,242.88 2,732,000.00 4.41% 85 05-Nov-07 29-Jan-08
FIRSTBANK BA 4,067,551.35 4,113,000.00 4.48% 91 14-Dec-07 14-Mar-08
TDBA 2,921,406.00 2,942,000.00 4.29% 60 21-Dec-07 19-Feb-08
Total Short-term 20,291,093.33 20,502,000.00
Long-term Reserve Fund Investments
Nesbitt Burns Farm Credit Corporation 250,000.00 250,000.00 4.20% 3653 27 -Jun-03 27-Jun-13 Jun 27 & Dec 27
Province of Ontario 3,500,000.00 3,500,000.00 4.50% 3652 29-0ct-04 29-0ct-14 29th day each month
Province of Ontario 4,300,000.00 4,300,000.00 3.70% 1826 21-Jun-05 21-Jun-10 Jun 21 & Dec 21
CIBC 2,000,000.00 2,000,000.00 4.25% 1826 10-Feb-06 10-Feb-11 Feb 10 & Aug 10
RBC 2,000,000.00 2,000,000.00 4.50% 1826 25-Apr-06 25-Apr-11 Apr 25 & Oct 25
Province of Ontario 616,251.64 619,000.00 4.00% 1106 09-May-06 19-May-09 May 19 & Nov 19
Province of Ontario 1,972,052.40 1,964,000.00 4.50% 702 16-May-06 17 -Apr-08 Apr 17 annually
Canada Housing Trust 3,796,505.31 3,783,000.00 4.40% 591 02-Aug-06 15-Mar-08 Mar 15 & Sept 15
Province of Ontario 4,102,402.10 4,085,000.00 4.40% 840 02-Aug-06 19-Nov-08 May 19 & Nov 19
Canada Housing Trust 3,930,566.75 3,883,000.00 4.65% 1140 02-Aug-06 15-Sep-09 Mar 15 & Sept 15
Total Long-term 26,467,778.20 26,384,000.00 )."';~
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Total External Investments 46,758,871.53 46,886,000.00 ;;
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Interfund Investments (Internal Loans) ::?:
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Parkland Reserve Fund 292,287.00 3.67% 6 yr 01-Jan-05 31-Dec-10 Dec 31
Development Charge Reserve Fund 3,891,813.00 3.67% to 4.7% various various various Dec 31 :l.t
Totallnterfund Investments 4,184,100.00
Total as at December 31, 2007 51,070,100.00
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May 1, 2008
Mr. Gil Paterson
Director of Finance
Finance Department, City of Pickering
1 The Esplanade, Pickering ON L 1 V 6K7
Dear Gil,
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I am pleased to provide the attached performance report for the 2007 calendar year for your account # 365-13206-10 Corporation of the City of
Pickering, as well as a brief investment review of 2007.
Calendar Year 2007:
During 2007 the Canadian economy remained quite robust, given the material slowdown of the US economy. Interest rates were cut to
accommodate credit market concerns. 90 day T-Bill rates dropped from 4.17% in 01 to 3.84% in 04. Year over year Bank of Canada core inflation
figures eased from 2.3% in 01 to 1.6%in 04. The S&P/TSX Composite index rose 9.8% once again on the strength of commodity and materials
based equity issues.
Consumer price inde-x
Indice des prix ~ la consommation
Annu al percent change
Variation an nuelle en pou rcentage
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2
Excluding energy
Sans energie
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2004
2005 2008
2007
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Interest rates
Taux d'interet
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f Ccn~umer loan rate
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Prime rate ; ~ a ux p ri... ile gie
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2007
2008
Stock mar~;ets
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14.000
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12.000
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2005
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2007
2008
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1.300
1.500
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'1.300
1.200
1.100
1.000
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Portfolio Performance Review:
For comparison purposes I have included the following benchmarks that provide the closest representative return data. Please keep in mind that
there are two separate issues that should be taken into consideration when comparing the representative rates of return. First, the guidelines set
out in the Municipal Finance statutes governing your investment policy prohibit you from owning any fixed income investments that are not either
government guaranteed or issued by a major Canadian Chartered Bank. Canadian money market funds used to construct the Morningstar
Canadian Money Market Index contain a high percentage of higher yielding money market products that your investment policy prohibits you from
holding. Secondly, your portfolio has a relatively small percentage of qualified fixed income investments that are slightly longer than the 1 year
maturity period that typically defines money market investments.
Return Comparisons*
Comparative Benchmarks** 2007 2006 2005 2004 2003 2002 ~ 2000
CIBC WM 91 day T-Billlndex 3.29% 3.80% 2.50% 2.30% 2.90% 2.40% 4.80% 4.10%
Morningstar Canadian Money Market Mutual Fund Index 3.80% 3.30% 1.90% 1.50% 2.20% 1.80% 3.70% 4.80%
Your BMO Nesbitt Burns Account 4.27% 3.81% 2.51% 4.39% 3.16% 2.70% 4.48% 5.81%
* Return Comparisons are derived from separate third party sources which are believed to be accurate but are not guaranteed by BMO Nesbitt
Burns Inc.
** Comparative benchmarks have been selected that are most reasonable to use for comparison purposes but are not 100% specific to the
investment guidelines followed by the representative account in question.
*** The Morningstar Fund Indices are the best available representation of the performance of aggregate dollars actually invested, currently and
historically, in Canadian money market mutual funds and/or segregated funds. The indices measure the dollar weighted return of assets in
Canadian funds. The return calculation does not suffer from survivorship bias, as the impact of returns with funds that are no longer active are
retained. Funds that report returns before fees are excluded from Morningstar Fund Indices.
@ - "BMO" is a registered trademark of Bank of Montreal, used under license.
- "Nesbitt Burns" is a registered trademark of BMO Nesbitt Burns Corporation Limited, used under license.
TM - The "M-bar roundel symbol" is a trademark of Bank of Montreal, used under license.