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Home My Public Portal AboutInvestment Policy P-99_Effective September 22, 2020Municipality of the District of Chester • Policy Approval Date: May 14, 2020 Effective Date: September 22, 2020 Sponsor: Director of Finance r Investment Policv P-U99 (continued Page 2 of 13 iJ PURPOSE MUNICIPALITY OF THE DISTRICT OF CHESTER POLICY P-099 INVESTMENT POLICY 1.01 The purpose of this Statement of Policy and Procedure is to provide guidance for medium- and long-term investments and to specify which investments are permitted for excess/surplus funds that are not immediately required for current operations. 1.02 Authority for this policy is derived from the Municipa/GovernmentAct(MGA) section 100(1) regarding the investment of funds. MGA section 100(1) requires funds of a municipality are to be invested in an interest -bearing account and section 100(1)(b) allows funds to be invested pursuant to an investment policy adopted by Council and approved by the Minister. 2 PRINCIPLES 2.01 The following objectives are the principles underlying this Policy in regard to the investment of short-term excess funds, ranked in order of importance: (1) preservation of the principal amount of all investments; (2) subject to subsection (1), maintenance of the liquidity of all investments; and (3) subject to subsections (1) and (2), maximization of the rate of return on all investments. 2.02 The following objectives are the principles underlying this Policy in regard to the investment of medium or long-term surplus funds, ranked in order of importance: (1) preservation of the principal amount of all investments; (2) subject to subsection (1), matching the maturing or liquidity of investments with the anticipated dates of utilization of the funds, as determined by the Treasurer after consultation with the Mun.icipality's Audit Committee at or shortly after a fiscal year end; and (3) subject to subsections (1) and (2), maximization of the rate of return on all investments. 2.03 The Municipality acknowledges that investments with higher potential for appreciation and returns are expected to be more volatile. This acknowledgement is in relation to the objectives in section 2.02. Notice of Intention to Adopt —Council —April 30, 2020 (2020-188} First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice — Council — May 14, 2020 (2020-207} Effective Date May 14, 2021 Investment Policy P-099 (continued) Page 3 of 13 2.04 The Municipality's priorities include fiscal responsibility. The Municipality's investment strategy needs to complement its other strategies to enhance services, upgrade infrastructure, invest in the community and maintain a reasonable tax rate, balanced with a need to mitigate risk by the safeguarding of public assets. The Municipality is accountable for the prudent stewardship of public funds and their effective and efficient use. 3 POLICY 3.01 Cash reserves which are not required in the medium- or long-term shall be invested appropriately, giving due regard to risk, returns, liquidity and any other relevant factors. They shall be invested as set out in section 3.05 below. 3.02 Short-term excess funds shall be invested in liquid investments with very low levels of risk, as set out in section 3.04, below. 3.03 All investment activity shall conform to legislative requirements (legislation and regulations) and with this policy. The investment of funds shall be made be made in accordance with restrictions imposed by both statutes and conditions prescribed by funds held in trust. 3.04 The only eligible investments for surplus funds of the Municipality are bonds, bills, Guaranteed Investment Certificates, deposit accounts, or other money market, fixed income or debt instruments of the following institutions or corporations: (a) Government of Canada; (b) Province of Nova Scotia; (c) other Provincial governments of Canada with a minimum AA credit rating; (d) chartered banks, trust companies and credit unions have a DBRS Morningstar rating of "R-1 Mid" or higher; (e) credit unions covered by the Nova Scotia Credit Union Stabilization Fund; (f) for medium or long-term surplus funds only, Canadian companies having a Bond ratingCommercial Paper rating of 11R1 Medium" or better from the Dominion Bond Rating Service; and /or (g) investment pools approved by the Minister (i.e. Mun. Finance Corp). 3.05 The maximum term and total investment of short-term excess funds and their maximum credit rating shall be as follows: Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice — Council — May 14, 2020 (2020-207) Effective Date — September 22, 2020 Investment Folic P-099 (continued Security (section 3.04) Max. Non- Max. Investment limits DBRS redeemable Term Individual aggregate Credit qualit (a) Government of Canada 1 year -- 100% N/A (b) Province of Nova Scotia 1 year -- 100% N/A (c) other Provincial 1 year 100% 100% R-1 (mid) governments of Canada (d) chartered banks, trust 1 year 100% 100% R-1 (mid) companies & credit unions (g) investment pools 1 year 100% 100% approved by the Minister * - i.e. could include a GIC with a term of more than the time limit above as long as the GIC was redeemable within the time limit above. 3.06 The maximum credit rating and maximum total investment of of medium or long-term surplus funds shall be as follows. Security (section 3.04) DBRS Max. Investment limits Credit Quality Individual aggregate (a) Government of Canada N/A -- 100% (b) Province of Nova Scotia N/A -- 100% (c) other Provincial governments of AA 50% 100% Canada (d) chartered banks, trust companies A 50% 100% and credit unions (f) Canadian companies A 10% 20% (g) investment pools approved by the 100% 100% Minister 3.07 For clarity, the investment in equity investments and private placements are not permitted. 4 SCOPE 4.01 This Statement of Policy and Procedure applies to the Finance Department. 4.02 This Statement of Policy and Procedure applies to the investment of both Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice — Council — May 14, 2020 (2020-201) Effective Date May 14, 2021 Investment Policv P-U99 (continued Page5of 13 short-term excess funds and medium or long-term funds. The scope of this policy does not include funds required for day-to-day treasury operations. 5 PROCEDURES 5.01 Responsibility The Treasurer is responsible for investing funds. 5.02 Ethics and Conflict of Interest Investment activity on behalf of the Municipality shall be governed by the Municipality's policies Conflict of Interest Policy, P-55, section 29, and Code of Ethics Policy,P-55, section 32.The Municipality's Treasurer shall not engage in any personal or business activities which he/she would benefit from, or reasonably be perceived to benefit from, investment choices made on behalf of the Municipality. 5.03 Identifying Funds for short Term Investing Quarterly the Treasurer shall update its cash flow forecast to identify funds available to invest. 5.04 Identifying Funds for Medium- and Long -Term Investing (a) Semi-annually, the Treasurer shall update its rolling cash flow forecast to identify funds available for medium- or long-term investment. (b) The Finance Department shall identify the funds available for medium - and long-term investment by: (i) Reviewing historical cash levels Updating the cash flow forecast monthly Considering other appropriate factors 5.05 Investing Medium- and Long -Term Funds (a) Upon request, provide a copy of this Policy to participating financial institutions (b) Contact at least three (3) participating financial institutions and inform them of the following: (i) Amount to invest, (i i) term, flexibility (iv) time and date which rates and investment proposals will be received Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188} Second/Final Notice — Council — May 14, 2020 (2.020-201) Effective Date — September 22, 2020 Investment Polic P-099 (continued Pale 6 of 13 191 5.07 5.08 (v) any other criteria, not inconsistent with this policy, which will or may govern the choice of investment proposal; (c) Obtain proposals from participating financial institutions and select the successful proponent for the investment based on comparison of rates, the extent to which a proposal best meets the objectives and terms of this policy and any other criteria which are provided in advance to participating financial institutions; and (d) Inform participating financial institutions of the outcome. Accounting Every investment shall be in the name of the Municipality and registered securities shall bear the name of the Municipality and documentation shall be obtained in the form of a certificate from the borrower, or a confirmation by a broker or banker that the documentation is held in safe -keeping for the Municipality. The Treasurer shall record all investment fund transactions with a sound system that will allow for accurate measurement, efficient review, timely reporting and effective evaluation. Performance Measurement (a) The performance measurement of the investment the following information to be reported on: • Time -weighted rates of return • Investments held by asset class and type • Quarterly investment activity • Book value, interest rate and income earned • Portfolio compliance with this policy • External benchmarks, as appropriate portfolio shall include Reporting (a) The Treasurer shall provide the CAO with written reports at least quarterly. The reports shall show: • Summaries and detailed listings of assets broken down by investment classes; • Details and summaries of transactions occurring within the portfolio (including deposits, withdrawals, capital gains/losses, interest, dividends, management fees); and • Details and summaries of the performance of the benchmark portfolio, if available. (b) The Treasurer shall provide asemi-annual compliance statement to the Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice — Council — May 14, 2020 (2020-207) Effective Date —May 14, 2021 Investment Polic P-099 (continued Paae 7 of 13 CAU attesting that the portfolio is being managed in compliance with this policy. The CAO, at the request of the Council, may request and the Treasurer shall provide additional compliance statements during the year. (c) At least once per year, the Treasurer shall meet with the Council or its delegate (i.e. Audit committee) to provide information on: • Compliance with this policy; • Investment portfolio performance; • Investment strategies used; • Existing market conditions; • Planned investment strategies; and • Any other information the Treasurer considers necessary, or the board requests. (d) The CAO shall review the quarterly investment reports and sign and date it as evidence of the review. (e) The CAO shall include a copy of the quarterly investment report in the quarterly reporting package to the Council with a summary and commentary on the investment report. (fl Municipality shall not enter into any investments or purchase any financial instruments other than those set out in this policy. 6 REFERENCES and RELATED STATEMENTS of POLICY and PROCEDURE P-51 —Signing Officers Policy P-81 —Operating Reserve Fund and Operating Fund Accumulated Surplus Policy Municipal GovernmentAct (MGA) —Section 99 —Capital reserve fund Financial Reporting and Accounting Manual, a regulation of the MGA —section 3(1)(0)(ii)(F) —Capital Reserve Fund, borrowing from capital reserve fund MGA section 100(1)(b) — Investments, allows funds to be invested pursuant to an investment policy adopted by Council and approved by the Minister. 7 DEFINITIONS 7.01 "CAO" means the Chief Administrative Officer, or her/his designate. 7.02 "Cash equivalents" refer to securities which are highly liquid that is, they can be easily converted to cash without loss because, among other reasons, they have maturity terms equal to or less than 12 months and are readily traded in investment markets. Cash equivalents include money-market funds (that is, funds which invest in short-term securities). Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) Firsfi Notice —Council— April 30, 2020 (2020-188) Second/Final Notice — Council — May 14, 2020 (2020-201) Effective Date — September 22, 2020 Investment Policv P-099 (continued 7.03 "Council" means the elected officials that make up the Council 01 the Municipality. 7.04 "Credit risk" means the risk that a debtor is unable or unwilling to repay an obligation when due. 7.05 "DBRS Morningstar" is an independent, globally recognized credit rating service. 7.06 "Equities" refer to investments which represent ownership interests in a corporation and include common stocks, trust units, rights warrants, instalment receipts and other instruments which are convertible into common stock. 7.07 "Excess/surplus funds" are funds which are not immediately required for expenditures but will be required in the short-term; that is, within the next 12 months. 7.08 "Fixed -income securities" refer to debt or other securities which provide investors with a fixed periodic return and provide for repayment at maturity. These include bonds, preferred shares and debentures. 7.09 "Foreign exchange risk" means the risk due to fluctuations in foreign exchange rates. 7.10 "Funds" means public funds held by the Municipality, including trust funds, reserves funds and surplus cash funds of the operating fund and capital fund. 7.11 "Interest rate risk" means the risk that a fixed rate investment will change in value due to a change in interest rates. 7.12 "Liquidity risk" means the risk of being unable to buy or sell an investment quickly or at a price close to its market value. 7.13 "Medium- and long-term investments" are funds which are not immediately required for expenditures but will be required in the medium to long-term; that is, beyond the next 12 months. Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice —Council — May 14, 2020 (2020-207) Effective Date May 14, 2021 Investment Policv P-U99 (continued NMI Pa q e 9 of 13 7.14 "Minister" means the Minister of the Department of Municipal Affairs. 7.15 "Municipality" means the Municipality of the District of Chester. 7.16 "Pooled funds" are like mutual funds in that investors pool their investment funds to reduce fund costs and access higher returns . Differences include the fact that the pooled funds are more exclusive they may be more focused; have higher minimum investment requirements; and are usually offered to select clients. 7.17 "Risk" means a measure of the possibility of gain or loss (realized or unrealized), consisting of credit risk, foreign exchange risk, interest rate risk and liquidity risk. 7.18 "Risk tolerance" is the level of volatility of investment returns which [company] considers acceptable. 7.19 "Treasurer" means the employee of the Municipality designated by the CAO, under section 37(1) of the MGA, to perform the duties the Treasurer of the Municipality. 8 ATTACHMENTS 8.01 Attachment A — DBRS Morningstar ratings 8.02 Attachment B —Quarterly investment report template Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice —Council — May 14, 2020 (2020-207) Effective Date — September 22, 2020 nvestment Pnlir PANY continue d) Paine 10 of 13 Attachment A — pg. 1 This aP1,en3ix prLFvidLira an oti=erIbdea� of tthe rating meal`s ��F�� use a., at the date of this �ul�licati�nr� and i� intended a:� a reference wide only. For more information, please refer to the Rating Scales section ;at dbm. cam_ ll rating categorries ether than and D also contain _�ubcate hukh es des:i, nat on indicates that the rating is in the mi=d.dle of the catepon i lhh and1. �'he ah:�ence of either a thigh car flo��t 1- ighest credit aualim The capac t% fear the payment of 1~inaincial `-oldig3ti�rn_� us exceptionally high and unlikely to tic ��r�lxr ff"ected by future events. up—edor credit quality. The capacitor for the payment nit financial ohilgatilans Ls considered high_ Credit quality* ditter_s (roan AAA r�nly to a small degree. Unlikely to he SIgnif�icantly vulnerahle• tn, future events. ioiii3 ere- dit quality. The capacity for the pap ient oir tin:anclal nlhlig3d ns. B, SuliSNUI L1a_1, but of les.Ner credit duality thaAl he urulnerable to future events, but quallfy'ing negative- factors are ovansiAcreld manageable. c4uate credit cqualit� _The ca}Pa L iLL N for the pad{mcnt cif taenancial oh8i ati�an�s i s con idere�i acceptable. l id be �*uln� rable to future c��ent� ��rutati�je, non-i me:�tntent-grac�c credit �ualit�,� The ca�ar,�atyx t�-�r the �►a�Tnent of fDnancia.l �ahligation� is uncertain. '�;ulneu�llc to future events.. highly :�Peculatiti=e credit �ualit�='Thti re is a h%� l�~�'cl nf uu�iccrlr�intyr �c.5 t�-� tlu� �^apacit�� to meet financial c�li,gation� '��ery� highly{ ��cculati�c credit r�ua]itg: In da�n�er oi�defaultingorr, fi:c�ancial ol�t%�ti�n�. T'l�erc i� little di�cr�-mc�c het�k�n tth�e:�e three cateparies, although CC and C ratin . are n-nrmyll f° applied to obligations that are seen as highly likely- to default or suhordinated IND ttraoblij: atiorvi rated in the CCC to B� ranges t�h[igatc-uns in respect of which •dcfaulthas not technically= taken }dace, buti.5 considered ine%gtable, may he rated in the C ca.tcgom4 '��hst:n the i�.�uer h3.� filed under an�� p}�li�ahle• trarr�:raug�trc�r in:�D��•n�c�, or uirt�dcn�a up statute or there is a failure to :�tasf'�= an h1igation after the exhaustion of,grace periods,, a do%xmgr:ade to D may occur. DB&S may also use SD (electhv Default) in cases herc only so me ►;kcurities are impacted, such as the case of a distres~.sed exchange. See Default Definitlon for more information. Commordal Paper and ShortaTerm Debt Rating Scale ratinfi categc�ncs are furth►�c denoted. b�' the suh��ate��rFc� �;hinh'�, r<middlt;� and �lo�c;l_ R-i (high) I-�i;�h,�t cr��it aualit�t�. The• caparit�.{ for thEc �a��Tmeut of'sh�irt-t��rm� �nnancial oG�ir`��atinn� a�� th�:�' fall due i� cx�ptionall� high. i�'nlil�el�' to he auve-1 sklti= affected tag •future ev=entU*_ Notice of Intention to Adopt —Council —April 30, 2020 {2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice — Council — May 14, 2020 (20201,,,,,207) Effective Date — May 14, 2021 I nvestment Pol i P-U99 (continued ell of 13 Attachment A — pg. Z. superior credit quality°: The capacity f►�ar t� payment ofswhDrtw-term fiinancial obligations as they fall due Is wry, high. DII-Hers, frnm fi4 (high) by a relative- modest degree Unlit. ly to iw w1nimi�a�antl�a3 vulnerable to future events. oM cTrdit quality: The capacity for the payment of shiamwterm financial ohli ationS aS they fall due v; suNstantia[. ve—mil strcn*,!th is not a_5 faNtaurable as higheir rating categariC.,. May he vulnerable to future events, but quail, Ying nepti a factory are con,sidenJ manageable. Upper end of adequate credit au:alit� The capalcityr For the paynient of short-term financial obli gations as they Fall due is acceptable. klay he vulnerable to future eve- nm idequate credit quality_ The 7capaicity far the payntcnt of s orttcrm financial o ligation as they fall due is. acceptabite. Alave be � uInerahle to future events or may he c-xpcarod to anther factors that could reduce credit clualIM R� �la�u►� Lower end of ad equate creA t quality The capaculy for the payment of short-term financial cnbligatloW5 a5 uturt fall due i� :acceptJE�le. ay he vulner3bire to futuure,e��eutli. A number ofcha].leW—s are present that could affect the issueCs ahi]ity to m�ect such ol�lig atwIn_IS. Lowest end of a�.oquate credit �ualt�. �'he� i~� cap�etyfc-ar the p�ayn�cr�t c�fshc�rt-term �anancial cal�li�ti�n�. as th�?;faCC due_ �aia�L fie �vineralalt to future e��nt_s and the cert.aint�,r,�-�f �eetinti�: _such nhli�.ticnn_� could he in�}�act-�d byT a �}arie#�,f of de��Goprnent�,. :�p��ulati��e credit �uall:�°. 7'h� c:ap;a�it�,P �a�c the �ra�•�ieut �rf'��In�-�rt;ternl fin,anti�t ��h1i�a�tinn� a� tlac�f fail due n�. ur��rtaan. Hi,�l�,= ,pe�ulatit�e credit �ualit�c Th►crt u:� a hi�T� l�rel o�:f uncec$ainty� � to the ca�aci�� to cn�t short-teca�n I"inana:iyl a~l�l,�,�ti�.-�rc.� a.� fail due. �1��hen the i:�uer hay �ilcd under anyr ap-pl►r�]e hau�.ru�t�,� ie��c��.°en�� or �.� indir� up �tatut� nr theme i� a faila�mne to s�.tis�~ a�n ohli�atic�n after the exhaustiatin �-rf�rae� �,�ria�d:�. a dca�,�n�;rade to D n�a�r occur_ D�� n�a�• al�.ou �� ::�lecti��e: Default; nn c��-s inhere only some securittes are in p2icted, surrh as the case of distres_scd exchange. See Default Definition for s ewe inflarmatiannn. Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final NOtice — Council — May 14, 2020 (2020-201) Effective Date — September 22, 2020 Investment Poli P-099 (continued Attachment D Quarterly Investment Report Description of investment Date acquired Cost Market value (If sold during the quafter, enter 0) interest received Interest accrued, net Total Interest Notice of Intention to Adopt —Council —April 30, LULU (2420-188) First Notice —Council— April 30, LULU (LULU-188} Second/Final Notice — Council — May 14, LULU (LULU-207) Effective Date May 14, 2021 Investment Policy P-099 (continued ) Page 13 of 13 Version Number Amendment Description Policy Editor Policy Sponsor Approval Date 2020-001 Policy created Director of Finance Department of Finance May 14, 2020 Annotation for Official Policy Boolc To provide guidance for medium- and long-term investments and to specify which investments are Reason for Adoption d for permitted excess/surplus funds not o immediately required for operations. Notice of Intention to Adopt Council — April 30, 2020 Date of First Notice at Council Council — April 301 2020 (2020-188) Date of Second Notice at Council Council — May 14, 2020 (2020-207) Date of Ministerial Approval September 22, 2020 Effective Date September 22, 2020 I certify that this Policy was adopted by Council as indicated above. �L October 4, 2020 Pamela M. M ra, Mur cipal Clerk Date Notice of Intention to Adopt —Council —April 30, 2020 (2020-188) First Notice —Council— April 30, 2020 (2020-188) Second/Final Notice —Council — May 14, 2020 (2020-201) Effective Date — September 22, 2020