Investments were placed for terms of 6 months or less in guaranteed investment certificates and deposits.

2020 Investment Strategy

Prior to March 2020, the Scotia economics team forcasted economic growth rebounding to 2.0% in 2020. Notwithstanding the projected growth in the economy, the general consensus within the investment community would call for a possible reduction in the overnight rate of 0.25% middle of 2020. For purposes of budget development, Administration took a conservative approach using assumptions that upcoming maturities would reinvested at rates of 2.48%. Given very healthy projected cash positions over the next 12 to 18 months, Administration was further looking at alternative investment options that would maximize market yield through longer-term deposits.

Following the outbreak of COVID-19 which closed many City facilities and stopped many City services which generated revenue, Administration immediately ceased any attempts to proactively invest available funds in higher yielding deposits. This action was necessary to protect and maintain existing cash reserves so as to ensure that the City had sufficient funds to support ongoing operations without the need to obtain financing by way of the existing Line of Credit. The City is currently in a very strong financial position with strong liquidity and as such, it is not expected at this time that we will need to access the line of credit in the near term. Finance staff are continuing to monitor corporate cash flows on a more frequent basis to ensure our liquidity remains strong.

In addition to the actions taken by Administration and as the effects of COVID-19 unfolded, the Bank of Canada responded by cuts to interest rates. The impacts on the City’s investment income is twofold:

a) Lower interest rate offerings on deposit investments b) Very nominal interest rate on cash held in the bank

As previously reported to City Council, the reduction of interest rates as well as reduced cashflows could result in an additional revenue shortfall for our investment income of an estimated $1.3M for the year.

Administration will be monitoring the investments and mitigating this risk to the extent possible. Where opportunities exist, which will not impact the City’s forecasted cash requirements, Administration will continue to place funds in various financial instruments as allowed by the Investment Policy.

Risk Analysis:

Failure to have an appropriate Investment Policy and reporting mechanism in place could expose the City to financial risks. This risk is mitigated to a large extent as the City’s Investment Policy has been written to achieve the four stated objectives; ensuring that investments are made in accordance with prescribed legislative requirements, preservation of capital (credit/interest risk), maintenance of liquidity and to maximize investment yields and is considered to be more conservative than the Act.