DATE: May 9, 2018 REPORT NO. CS TYPE OF REPORT CONSENT ITEM [ x ] ITEM FOR CONSIDERATION [ ]

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1 Ok DATE: May 9, 2018 REPORT NO. CS TO: FROM: Chair and Members of the Finance Committee Joelle Daniels Director of Finance 1.0 TYPE OF REPORT CONSENT ITEM [ x ] ITEM FOR CONSIDERATION [ ] 2.0 TOPIC Treasurer's Investment Report for 2017 [Financial Impact $616,189 Operating Surplus] (Report CS ) 3.0 RECOMMENDATION THAT Report CS Treasurer s Investment Report for 2017 BE RECEIVED. 4.0 PURPOSE To provide Council with the Treasurer s Investment Report for BACKGROUND This report is to comply with the annual reporting requirements for investments in accordance with section 418 of the Municipal Act, 2001 and related regulation O. Reg. 438/97. Which states: 8. (1) If a municipality has an investment in a security prescribed under this Part, the council of the municipality shall require the treasurer of the municipality to prepare and provide to the council, each year or more frequently as specified by the council, an investment report. O. Reg. 438/97, s. 8 (1); O. Reg. 43/18, s. 7. (2) The investment report referred to in subsection (1) shall contain, (a) a statement about the performance of the portfolio of investments of the municipality during the period covered by the report; (b) a description of the estimated proportion of the total investments of a municipality that are invested in its own long-term and short-term securities to the total investment of the municipality and a description of the change, if any, in that estimated proportion since the previous year s report;

2 Date: May 9, 2018 Page 2 (c) a statement by the treasurer as to whether or not, in his or her opinion, all investments are consistent with the investment policies and goals adopted by the municipality; (d) a record of the date of each transaction in or disposal of its own securities, including a statement of the purchase and sale price of each security; and (e) such other information that the council may require or that, in the opinion of the treasurer, should be included. O. Reg. 438/97, s. 8 (2); O. Reg. 655/05, s CORPORATE POLICY CONTEXT In accordance with the Strategic Financial Plan Policy Statements, the Finance Committee will monitor cash and investment income balances on a regular basis to ensure investment income is maximized. 7.0 INPUT FROM OTHER SOURCES Standard and Poor s Financial Services Dominion Bond Rating Service Moody s RBC Quarterly Economic Update 8.0 ANALYSIS As shown on attached report. 9.0 FINANCIAL IMPLICATIONS For 2017, finance reported a surplus in investment income of $616,189. The surplus is due to a higher than anticipated balance in our investment portfolio resulting in a larger amount of investment income earned than initially projected despite a decrease in the overall rate of return on our investments CONCLUSION Receive report(s) as presented. Joelle Daniels Director of Finance Catherine Brubacher General Manager of Corporate Services/City Treasurer In adopting this report, is a by-law or agreement required? If so, it should be referenced in the recommendation section. By-law required [ ] yes [x ] no Agreement(s) or other documents to be signed by Mayor and/or City Clerk [ ] yes [x ] no Is the necessary by-law or agreement being sent concurrently to Council? [ ] yes [x ] no

3 Date: May 9, 2018 Page 3 Return on Investments (ROI) City of Brantford Investment Report for 2017 Table 1 shows the average balance and return on investments in our long-term, shortterm and total investment portfolio. Table Return on Investments In 2017, the City had an increase in the average portfolio balance and as a result, the City invested these funds into a mixture of short-term and long-term instruments in order to diversify the investment portfolio. The average rate of return on long-term investments decreased as maturing investments earning a high rate of return were reinvested at lower rates due to the economic conditions at that time. The short-term return increase is directly attributable to the Bank of Canada raising the overnight rate by.50% in Average Balance Return on Investments Average Balance Return on Investments Total Long-Term $ 195,668, % $ 157,443, % Total Short-Term 76,091, % 74,550, % Total Portfolio $ 271,760, % $ 231,994, % Investment Holdings Below is a graphical representation of the 2017 investment portfolio as compared to Graph 1 Investment Holdings December 31, 2017 December 31, 2016

4 Date: May 9, 2018 Page 4 Summary of Purchases and Maturities Table 2 illustrates a summary of investment purchases and maturities that occurred throughout Table Purchases and Maturities 2017 Purchase and Maturity Summary Long-Term (Greater than 1 year) Purchases Maturities GIC's $ 51,000,000 $ 19,273,748 Bonds 30,450,516 6,360,000 Deposit Notes 15,100,000 Step Up Notes 20,000,000 Floating Rate Note 1,000,000 Municipal Own (Investments in own issues) 289,988 Total Long-Term $ 96,550,516 $ 46,923,736 Short-Term (Less than 1 year) Purchases Maturities Short-Term GIC's $ 23,000,000 $ 49,000,000 High Interest Investment Savings Accounts 46,000,000 43,000,000 Total Short-Term $ 69,000,000 $ 92,000,000 Investment Holdings by Rating Table 3 illustrates the City s long-term investments based on ratings provided by Dominion Bond Rating Service (DBRS), Standard and Poor s (S&P) Financial Services and Moody s rating agencies. These investments meet the minimum requirements as stated in section 418 of the Municipal Act, 2001 and related regulation O. Reg. 438/97. Table 3 Credit Ratings Investments in Long Term Issues by Rating (DBRS/S&P/Moody's) AAA $ 3,500,000 2% Aaa 4,800,000 2% AA+ 7,000,000 3% AA 170,074,963 81% Aa2 1,650,517 1% AA- 24,000,204 11% Total Long Term Investments $ 211,025, % (EXCLUDES OWN ISSUES AND ONE UNIVERSAL CORPORATE BOND PORTFOLIO)

5 Date: May 9, 2018 Page 5 Investment Holdings in Own Issues Table 4 illustrates the City s total investment holdings in its own issues (City of Brantford debenture issues that are purchased internally) at December 31, 2017 and December 31, In 2017, the City held 1.1% of total investment holdings in its own issues compared to 1.3% in The City endeavors to utilize investment holdings in its own issues when it is advantageous to do so. Table 4 Municipal Own Issues Total Investments in own issues Queen St. Affordable Housing $ 890,604 $ 912,228 Braneida Industrial Park 637, ,867 John Noble Home 604, ,611 Brantford Ice Park 488, ,000 Brantford Airport Hangers 308, ,915 Total Investments in own issues $ 2,929,634 $ 3,219,622 % of Total Investment Holdings 1.1% 1.3% Table 5 Municipal Own Issues Maturities Table 5 lists the maturities by date for the City s investments in its own issues. The maturities represent the principle payments on the City s investments in its own issues. There were no Municipal Own purchases in Municipal own issue maturities Maturity Date Amount Interest Rate John Noble Home 1/15/2017 $ 6, % 40 Queen Street 4/3/ , % Braneida Industrial Park 4/3/ , % Airport T Hanger 6/15/2017 8, % John Noble Home 7/15/2017 6, % 40 Queen Street 10/2/ , % Braneida Industrial Park 10/2/ , % Airport T Hanger 12/15/2017 8, % Brantford Ice Park 12/18/ , % Total Maturities in own issues $ 289,988 Future Investment Strategy In 2017, the Bank of Canada raised the overnight rate to 1.00%. Economists are currently forecasting the overnight rate to rise to 2.00% by the fourth quarter of In 2018, the City s strategy is to invest the majority of maturing long-term investments into shorter term instruments (1 to 5 year GIC s) to fulfill cash flow needs for capital projects and when it is advantageous to do so invest in long-term investments (5 to10 year bonds) in order to diversify the portfolio.

6 Date: May 9, 2018 Page 6 Treasurer s Statement In my opinion, the investments held by The Corporation of the City of Brantford during the calendar year of 2017 were consistent with the City of Brantford s investment policies and goals and did not fall below the standards set out in section 418 of the Municipal Act, 2001 and related regulation O. Reg. 438/97. May 9, 2018 Catherine Brubacher General Manager Corporate Services/City Treasurer Date