minimum required transfer of 1.5%. As such a total of $82,778 will be available as a funding source for this sculpture project by the end of 2019.
Council will recall that the principle amount of $2,750,000 identified for the Arts Endowment Trust was placed in accordance with the Municipal Act, 2001 in two mutual funds; Universe Bond Fund (80%) and Equity Fund (20%) administered by the One Investment Program. As at August 20, 2019, the balance in the Arts Endowment investment is $2,993,911, an increase of 8.14% or $225,387 over the starting balance as at January 1, 2019. This increase is largely attributable to increases in the market value gains of the units held.
Unlike other types of investments such as GIC's where a guaranteed yield is paid at time of maturity, any gains due to market value increases are not realized until such time as units are redeemed. At any measurement point market values may be higher or lower than the previous mark. The intent of the Arts Endowment Trust was to ensure that in perpetuity funds generated from investment yields would be available to support capital projects that have an arts related component. As such, preservation of the principle investment of $2,750,000 is of upmost importance. However of equal importance is the realization of any yields as a result of substantial market value gains through the redemption of units at a time when market values are high. This mitigates against the risk that those yields are not available when the funds be required. The timing of when to realize gains can never be known with any certainty. Market values can continue to rise and/or market values can decline overnight.
In order to fund this project, an additional amount of $61,722 will be required. City Council will need to approve the withdrawal as it is above the minimum transfer of 1.5% or $41,528 which would otherwise be completed at the end of 2019. Administration is recommending that this withdrawal be completed following approval of this report in order to realize the increase in market values. The additional withdrawal of the $61,722 would crystalize the market value gain experienced to date in 2019 and then be subsequently invested in a short-term guaranteed investment until such time as the funds are required for the sculpture project. The additional investment income can be used to offset any unforeseen costs.
This would leave a balance of $2,890,661 remaining in the Arts Endowment investment with the One Investment Program. This balance would continue grow for the remainder of 2019 assuming that market values continue to increase. There is risk that at December 31, 2019, the market value per unit may result in a balance that is less however this risk would need to be considered in the context of market analysis information which indicates that over a long period of time increased returns and higher yields can be generated by mutual funds rather than guaranteed investments and the fact that a portion of the market value gain available as at the date of this report was realized through the redemption noted above.
As indicated above, funds in the amount of $26,000 have been pledged from the Korean Society ($1,000) and International Relations Committee ($25,000) in previous years. Due to the delay in this project, should those funds not be available, Administration is recommending that any shortfall be funded, as a first charge, from the 2020 minimum contribution of 1.5% to the Arts Endowment capital project.