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HomeMy WebLinkAboutCST 20-11eLtLf D¢► PICKERING Report To Executive Committee Report Number: CST 20-11 Date: May 9, 2011 76 From: Gillis A. Paterson Director, Corporate Services & Treasurer Subject: Investment Portfolio Activity for the Year Ended December 31, 2010 Ontario Regulation 292/09 under the Municipal Act, 2001 Recommendation: That Report CST 20-11 of the Director, Corporate Services & Treasurer regarding Investment Portfolio Activity for the Year Ended December 31, 2010 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 2010 totaled approximately $210.6 million with a year end balance in the portfolio of approximately $68.6 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 and as confirmed by the attached Performance Report from BMO Nesbitt Burns, the return on the City's portfolio has slightly declined from prior year. However, returns compare favourably to market benchmarks. Over the last decade, the City's returns have generally exceeded, sometimes significantly, comparative benchmarks. Financial Implications: Total investment income, including bank account interest for 2010 was $1.1 million (2009 - $1.6M) of which $208,000 (2009 - $171,000) was for the Current (Operating) Funds. The balance of the income was allocated to the various reserve funds. Sustainability Implications: This report does not contain any sustainability implications. 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. sport CST 20-11 Date: May 9, 2011 Subject: Investment Portfolio Activity for the Year Ended Page 2 December 31, 2010 Ontario Regulation 292/09 under the Municipal Act, 2001 The.Treasurer of the City of Pickering is obligated to report certain information and opinions under Provincial Regulation 292/09 to Council. The attached schedules are also included as part of the information requirements. The portfolio balance at December 31, 2010 of $68.6 million (2009 - $62.1 M) is higher than the prior year primarily due to the receipt of debenture proceeds of just over $4.0 million received in the middle of October. These funds were for a number of projects that were already underway or completed and had resulted in a reduction in the short-term funds available for investing while awaiting the Region to go to market. The further increase in the overall balance is due to the timing of the receipt and use of funds related to the Federal Gas Tax instalment of $1.3 million received in the middle of November and supplementary tax billing of $1.6 million due October 28 & 29, November 29 & 30 and December 15. This resulted in a short-term investment balance at the end of 2010 of $34.0 million (2009 - $27.6M). The overall increase in the Reserve Fund balances of approximately $2.3 million contributed to an increased long-term investment balance of $33.4 million (2009 - $32.2M). The return on the portfolio slightly declined in 2010 with a weighted yearly rate of return of 1.25% (2009 - 1.54%) on the combined short-term and long-term investments excluding interfund investments. The economy continued to be sluggish during 2010 which kept the average short-term rate of return below 1.0%. The City's portfolio was somewhat protected by having a favourable mix between the short-term (highly liquid) and longer term investments, in addition to taking advantage of selling some bonds early when they were selling at a premium and recognizing a monetary gain. 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 1.25% still out performed the annual returns for the CIBC World Markets 91-Day T-Bill Index (0.4%) and the Morningstar Canadian Money Market Mutual Fund Index (0.3%). 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 average return on interfund investments was 3.7% (2009 - 3.5%). Of the year end total portfolio of some $68.6 million, approximately $33.4 million or 48.7% were external long-term investments and approximately $1.1 million or 1.6% were Interfund Investments (Internal Loans). The balance of approximately $34.0 million is short-term investments of 90 days or less. All investments were made in accordance with the Investment Policy approved by Council. Report CST 20-11 Date: May 9, 2011 78 Subject: Investment Portfolio Activity for the Year Ended. Page 3 December 31, 2010 Ontario Regulation 292/09 under the Municipal Act, 2001 Attachments: 1. Investment Activities for 2010 2. Outstanding Investments as at December 31, 2010 3. Correspondence dated March 31, 2011 from BMO Nesbitt Burns Prepared By: ristine Senior Manager, Accounting Services Approved /Endorsed By: Gillis A. 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