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HomeMy WebLinkAboutFIN 13-14 c;fr co Report to Executive Committee I'ICt'`T� II Report Number: FIN 13-14 Date: June 9, 2014 From: Paul Bigioni Director, Corporate Services & City Solicitor Subject: Investment Portfolio Activity for the Year Ended December 31, 2013 Ontario. Regulation 292/09 under the Municipal Act, 2001 Recommendation: It is recommended that Report FIN 13-14 of the Director, Corporate Services & City Solicitor regarding Investment Portfolio Activity for the Year Ended December 31, 2013 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 2013 totaled approximately $221.8 million with a year end balance in the portfolio of approximately $86.4 million. 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, overall returns on the City's portfolio remain low due to interest rate hikes still not materializing during 2013, however, the returns still compare favourably to market benchmarks. Over the last decade, the City's returns have generally exceeded comparative benchmarks. - Financial Implications: Total investment income, including bank account interest for 2013 was $1.3 million (2012 - $1.2M) of which $422,000 (2012 - $222,000) was for Current (Operating) Funds. The balance of the income was allocated to the various reserve funds. Discussion: The City's investment portfolio is comprised of two main components: (i) Reserve Funds; and (ii) 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. . 393• • Report FIN 13-14 dune 9, 2014 Subject: Investment Portfolio Activity for the Year Ended Page 2 December 31, 2013 Ontario Regulation 292/09 Under the Municipal Act, 2001 The Treasurer of the City of Pickering is required under Provincial Regulation 292/09 to report certain information and opinions to Council. The schedules to this report are included as part of that Regulation's information requirements. The portfolio balance at December 31, 2013 of $86.4 million (2012.- $79.4M) is higher than the prior year. Unspent Federal and Provincial•funding received in advance for the Frenchman's Bay Harbour Entrance project, debt proceeds in October and supplementary tax due dates at the end of November and the end of December all contributed to the increase in the investment portfolio balance over 2012. This led to a short-term investment balance at the end of 2013 of$47.2 million (2012 - $39.9M). The long-term investment balance of $36.2 million (2012 - $36.3M) remained relatively unchanged compared to the prior year. During the latter half of 2013, Pickering invested some money with TD Waterhouse in Guaranteed Investment Certificates (GIC). •The interest rates ranged from 1.25% to 1.55% which is higher than the interest rates for Banker's Acceptances or Deposit Notes, however, GIC's are, less liquid than these other investment instruments. It is expected during the summer of 2014, the overall portfolio will be reviewed. • The return on the portfolio maintained with Nesbitt Burns decreased slightly in 2013 with a weighted yearly rate of return of 1.23% (2012 — 1.37%) on the combined short-term and long-term investments. There was a slight increase in rates from the beginning to the end of the year, but interest rate hikes from central banks were further delayed. Worldwide rates continue to remain low which has had a significant effect on the portfolio returns over the last few years. 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. Furthermore, staff's approach tends to be conservative, given that they are investing public money. Notwithstanding these restrictions, an annual return of 1.23% still outperformed.the annual returns for the CIBC World Markets 91-Day T-Bill Index (1.0%) and the Morningstar Canadian Money Market Mutual Fund Index (0.6%). These indices are deemed to be comparative benchmarks for reviewing the portfolio's performance and are considered the standard for analysis of investment funds in the industry. The average return on interfund investments (internal loans) was 2.7% (2012 —4.4%). This decrease is attributable to the approximately $2.6 million issued at the end of 2012 • at a lower rate of interest. At year end 2013, the total portfolio of approximately $86.4 million, consisted of approximately $36.2 million or 41.9% in external long-term investments and approximately $3.0 million or 3.5% in Interfund Investments (Internal Loans). The balance of approximately $47.2 million is short-term investments of 90 days or less. • 394 Report FIN 13-14 June 9, 2014 Subject: Investment Portfolio Activity for the Year Ended Page 3 December 31, 2013 Ontario Regulation 292/09 Under the Municipal Act, 2001 All investments were made in accordance with the Investment Policy approved by Council. • Attachments: 1. Investment Activities.for 2013 - 2. Outstanding Investments as at December 31, 2013 3. Portfolio Performance Review - Correspondence from BMO Nesbitt Burns Prepared By: Approved/Endorsed By: Kristine Senior Stan Karwowski Manager, Accounting Services Division .ead, Finance & Treasurer Paul Bigio- ' Director, o .o .te Services & City Solicitor Recommended for the consideration of Pickering City Council 6Valleig 044 23' 2.0/11 Tony Prevedel, P.Eng. Chief Administrative Officer 395 ATTACHMENT#. / TO REPORT#f 10 I3 — I t• . „ Ch M 0) C) 0) C•7 0) M m C') C'7 Co M 0) M C') (r) M,C7 M CO c) CO Ch (h m „ Cc) 0) m M 00 'L di C C ••6 L C L 6- 1. ,-' >, C ' C C ! ! -. 0 C CT Q Q U c2 AL > Q U U 7 m m ca (U N m m m C m a) c. 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