| Term deposit – 1 year, 3.3%, matures March 1, 2020 |
$5,145,000 | 2.0% |
|---|---|---|
| GIC – 1 year, 3.3%, matures March 21, 2020 | $7,000,000 | 2.70% |
| GIC – 6 months, 2.60%, matures April 29, 2020 | $2,587,500 | 1.0% |
| GIC – 6 months, 2.60%, matures May 17, 2020 | $5,300,000 | 2.00% |
| GIC – 5 years, 2.71% matures November 1, 2024 |
$20,300,000 | 7.80% |
| GIC – 2 years, 2.89% matures January 4, 2021 | $30,000,000 | 11.60% |
| Term deposit – 2 years, 3.2%, matures March 26, 2020 |
$14,448,000 | 5.60% |
| Total Deposit Investments | $258,691,662 | 100.00% |
For the year ending December 31, 2019, the City’s general portfolio held in deposit investments generated returns of $6,212,407, an average yield of 2.59%. An additional $2,040,455 (yield 2.20%) was earned on the monies held in the general bank account for an overall investment yield of 2.48%. This is greater than our average yield in 2018 of 2.02%.
For comparison purposes, as reported in the 2018 Municipal Benchmarking Network Canada data, our peer municipalities realized average yields of 2.23% which was slightly higher than the City’s 2018 overall yield of 2.02%. At time of writing, the results for the 2019 year were not available but are expected to be similar. The main reason for the lower yield is that, by necessity, a substantial portion of the City’s investment portfolio is held in short-term (90 day - 180 day) instruments and high interest savings accounts at various financial institutions. Where longer-term instruments are recommended, a cashable component is included as a risk mitigation measure. This effectively lowers the annual yield that would otherwise be achieved.
The reason for this conservative investment approach is twofold:
Despite recent efforts to enhance the level of Corporate reserves, traditionally the City has lower reserve balances, as a percentage of taxation and as a percentage of its’ own source revenues, than peer municipalities.
The City operates on a pay as you go basis and does not issue debt to finance capital projects; therefore, internal cash balances are used (largely reserves) for interim financing of projects.
This approach saves significant interest charges on external debt that would otherwise be incurred; however, it negatively impacts the ability to invest in long term instruments which are the only viable way to increase investment returns. Overall, there are significant net savings associated with this approach as borrowing rates are generally much higher than investment yields. Where possible and as projected cash flows permit, Administration will continue to seek opportunities to yield higher investment returns within the general investment portfolio while adhering to the priorities as established by Council.