City Investments Continue To Over Perform Targets
It was all good news from the Investment Committee as their regular activity report was presented to Council this past Monday night.
Investment Committee member Councillor Dawn Luhning said although the report did not have any items which needed Council’s approval there were items in the report she would like to point out at what was the televised portion of Monday night’s meetings.
“Overall the portfolios are doing well,” she told Council.
Councillor Luhning pointed out the higher than targeted returns for the City’s equity investments.
“We have the moderate term portfolio which has an annual return of 4.25 percent that is set as policy and with the committee and the portfolio and we achieved a return of 4.73 percent for the first six months of 2021,” she said.
The long term portfolio also outperformed its targeted six percent objective managing a 7.51 percent return for the first six months of 2021, Councillor Luhning said.
The returns added up to $7.203 million in earnings for the City so far in 2021 equivalent to a 24.4 percent tax increase.
“So 25 percent is what we have to increase taxes for if we want to find $7.2 million.”
The City has already withdrawn the lion’s share of the investment earnings - $6.078 million - to fund capital and operational costs in 2021, Councillor Luhning said. The funds withdrawn would equal a 20.9 percent in property taxes.
The low returns from bonds and fixed investments at the present time was a concern to the committee with the decision made to move an additional five percent above the target investment from bonds to equity funds.
“The decision was made to offset the historic lows in fixed income markets as rates are very low right now and real returns on bonds and fixed income investments are negative when inflation is part of the equation,” Councillor Luhning said in explaining the justification for the Committee’s decision.
Councillor Luhing and later Councillor Heather Eby wanted to remind people that the City is a corporation with no end date and as such the investments are set up differently than an individual’s investment portfolio which terminates at the behest of the individual or their passing.
“It is not a retirement fund for the City of Moose Jaw. The City never gets to retire. This is forever and for our childrens’, childrens’ children,” Counicllor Eby said about the City’s investment strategy.
In the minutes of the Investment Committee the overweighting was done at the behest of Royal Bank of Canada management team who manage the City’s investments.
The final decisions of the Investment Committee were made following a 21 minute move to an in-camera meeting so any discussion is protected under the Cities Act.
In the past - especially just after the start of the COVID - 19 pandemic - the City’s equity portfolio experienced negative returns which later surprisingly bounced back in 202
The City earns money from the substantial reserve funds that were established in the wake of overspending and a near bankruptcy they f0. Equity portfolios follow the stock market and do not have any guaranteed rate of returns. aced.
It needs to be noted that the reserve were setup by a provincially appointed management team who ran the finances after the City of Moose Jaw was facing financial bankruptcy for massive overspending during the Thirties - mostly in the development of Crescent Park.