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Mandatory Policy, Municipal Act: No
Policy Administration Team, Review Date: October 18, 2024
Corporate Management Team, Review Date: October 16, 2024
Policy Title:
Investment Policy
Policy Category:
Financial Control Policy
Policy No.:
FC-024
Department:
Corporate Services
Approval Date:
September 19, 2005
Revision Date:
December 9, 2024
Author:
Kim Reger
Attachments:
Related Documents/Legislation:
Municipal Act, 2001, S.O. 2001, c.25
O. Reg. 438/97: Eligible Investments, Related Financial Agreements and Prudent
Investments
POLICY STATEMENT:
The Council for the City of Waterloo is committed to demonstrating financial leadership
and sustainability. This policy will govern the investment of excess cash from all funds
including, but not limited to, operating funds, capital funds, reserve and reserve funds,
sinking funds, retirement funds, and trust funds, if any, of the City of Waterloo (herein
"City") in accordance with the Municipal Act, 2001 (herein "Act") and related Ontario
Regulation 438/97 (herein "Regulation"), as amended or updated by the Province of
Ontario from time to time.
PURPOSE:
To outline the investment goals and objectives of the City of Waterloo and define the
parameters within which staff may invest excess funds not required immediately.
DEFINITIONS:
Active Investment Management: an investment strategy that uses expectations about
individual securities and the overall investment environment to build a portfolio aligned
with those expectations. Focus is on buying and selling specific securities based on
current expectations.
Asset Backed Securities: fixed income securities (other than a government security)
issued by a special purpose entity, comprised of a pool of underlying assets.
City: The Corporation of the City of Waterloo
Appendix D
CORPORATE POLICY
POLICY NUMBER: FC-024
Page 2
City Treasurer: the individual appointed by the City as treasurer.
Chief Financial Officer (CFO): senior executive responsible for managing the financial
actions of the municipality.
Diversification: a process of investing assets among a range of security types by
sector/category, maturity, and quality rating.
ESG Investments: Environmental, Social and Governance investments.
Laddering: buying multiple financial products of the same type--such as bonds or
certificates of deposit (CDs)--each with different maturity dates. By spreading an
investment across several maturities, investors seek to reduce their interest rate and
reinvestment risks.
Liquidity: a measure of an asset's convertibility to cash.
Market Value: the market price of a security.
Maturity: the date on which payment of a financial obligation is due. The final stated
maturity is the date on which the issuer must retire a bond and pay the face value to the
bondholder.
One Investment: a professionally managed group of investment funds composed of
pooled investments that meet the eligibility criteria defined by Regulation. The program
is operated by LAS (Local Authority Services Ltd. a subsidiary of the Association of
Municipalities of Ontario) and the CHUMS Financing Corporation (a subsidiary of the
Municipal Finance Officers' Association of Ontario).
Passive Investment Strategy: an investment strategy that does not lead to individual or
specific security changes when expectations change. Focus is on indexed investing or
utilization of a buy and hold strategy of securities.
Schedule I Banks: domestic banks that are authorized under the Bank Act to accept
deposits, which may be eligible for deposit insurance provided by the Canadian Deposit
Insurance Corporation.
Schedule II Banks: foreign bank subsidiaries authorized under the Bank Act to accept
deposits, which may be eligible for deposit insurance provided by the Canada Deposit
and Insurance Corporation. Foreign bank subsidiaries are controlled by eligible foreign
institutions.
Schedule III Banks: foreign bank branches of foreign institutions that have been
authorized under the Bank Act to do banking business in Canada. These branches have
certain restrictions.
POLICY NUMBER: FC-024
Page 3
Supranational Bonds: bonds issued by entities formed by two or more central
governments.
SCOPE:
This investment policy shall govern the City's investment activities and portfolio which
consists of:
i)
Operating Funds;
ii)
Reserves;
iii)
Reserve Funds; and
iv)
Trust Funds.
This policy applies to all members of the City's organization including members of
Council, full, part-time and contract staff.
POLICY COMMUNICATION:
Council will receive this policy for approval. The approved policy will be posted on the
City's intranet. Staff will be advised of the policy via distribution to leadership teams.
The administration and management of investments is done within the Financial
Planning section and the policy will affect a limited number of staff overall.
POLICY:
Investment Goal
The goal of this policy is to invest all available excess funds of the City in a prudent
manner so as to maximize the rate of return while minimizing the degree of risk, ensuring
an adequate level of liquidity, and investing in accordance with the Act and Regulation.
Investments shall be made with judgement and care under the circumstances then
prevailing.
Objective of Investment Policy
The objectives of the City's investment policy are as follows:
- To meet the legislative requirement of the Act and Regulation.
- To preserve principal and to ensure that default of principal does not occur.
- To maintain adequate liquidity by ensuring that investment instruments are easily
converted to cash.
- To maximize the rate of return on the investment portfolio with due consideration
for minimizing risk.
POLICY NUMBER: FC-024
Page 4
- To actively support ESG investments.
It is only after the first three objectives have been satisfied that the markets should be
examined for the optimal rate of return.
The Act and Regulation establishes minimum credit ratings for eligible investments. The
minimum ratings established by the Act and Regulations supersede the City investment
policy and is deemed to be the minimum rating for the City investment policy.
Standard of Care
Investments shall:
i) be made with judgment and care;
ii) not be for speculation, but for investment;
iii) be made with the best interests of the City.
Delegation of Authority and Authorization:
The City CFO and Treasurer are responsible for the investment of all excess cash not
required immediately by the City. The City CFO or Treasurer may delegate investment
functions, as appropriate, to subordinate staff and will ensure adequate internal controls
over investment policies and procedures.
The purchase of investments requires at least two individuals to process such a
transaction, those being either of: Chief Financial Officer (CFO) or Treasurer, with the
Manager, Financial Planning and the Manager, Payroll & Accounting being authorized
alternates for approval purposes and a Financial Analyst for investment transaction
processing. In a typical example, the Financial Analyst would review and recommend a
purchase, and either the CFO or Treasurer would approve it, with some financial
institutions required approval from two parties (CFO & Treasurer or authorized
alternate).
Eligible Investments
All investments by the City will by subject to Sections 418 and 420 of the Act and Ontario
Regulation made under the Act, as amended or updated by the Province of Ontario from
time to time.
If the City investment policy contravenes the Act and/or Regulation as a result of
amendments to those governing authorities, or if the City investment policy does not
specifically address an issue, the Act and/or Regulation will be the authority and is
deemed to supersede the City investment policy.
The City's eligible investment indebtedness ratings are the same as the indebtedness
ratings for securities that are outlined in O.Reg., Section 3 'Ratings, Financial Indicators'.
No further restrictions are applied via this policy.
POLICY NUMBER: FC-024
Page 5
Limits
A diversified portfolio is a strong measure in preserving the City of Waterloo's investment
principal and interest revenue stream. Portfolio limits for each investment type is
attached to this policy.
The percentage limitation applies at the time the investment is purchased. In between
purchases, the investment portfolio mix can change due to maturing of investments or
change in bond prices because of yield fluctuations. This could cause investments to
exceed their limits. In those circumstances staff should not divest investments simply to
meet investment limits since that is not the objective of the policy. The investment
policy establishes a framework for purchasing good investments. Therefore, selling
them prematurely would deprive the City of higher returns from good investments in
order to simply meet a limit.
Currency
As per Section 6 of the Regulation, the City of Waterloo will not invest in a security that is
expressed or payable in any currency other than Canadian dollars.
Reporting Requirements
The Treasurer will provide an investment report to Council on an annual basis. The
investment report should include all required reporting specified in the Regulation at a
minimum (see Section 8 of the Regulation for reporting requirements).
Surplus Allocation
When actual investment income exceeds budgeted investment income, the surplus is
transferred to the following reserves at the end of each fiscal year:
- 25% to the Climate Action Reserve Fund (CARF)
- 25% to the Capital Infrastructure Reinvestment Reserve Fund (CIRRF)
- 25% to the Capital Reserve Fund (CRF)
- 25% to the Library Expansion and Rehabilitation Reserve Fund (LXPR)
COMPLIANCE:
In cases of policy violation, the City may investigate and determine appropriate
corrective action.
POLICY NUMBER: FC-024
Page 6
Appendix - Portfolio Limits
Category
Sub-Category
Max
Portfolio
Limit
Limit per
Issuer
1
Government of
Canada
No Limit
No Limit
2
Provincial
Governments
No Limit
No Limit
3
Countries other than
Canada
50%
20%
4
Municipalities
A Municipality with
Region of Waterloo
50%
No Limit
B Any other
Municipalities in
Canada
20%
No Limit
5
The Ontario Strategic
Infrastructure
Financing Authority
20%
20%
6
School Board (in
Canada)
A Within Region of
Waterloo
50%
20%
B Outside of Region
of Waterloo, within
Canada
20%
No Limit
7
University in Ontario
A Within Region of
Waterloo
50%
No Limit
B Outside of Region,
within Ontario
20%
No Limit
8
Ontario Colleges
A Colleges in Region
of Waterloo
50%
No Limit
B Ontario Colleges
outside of the
Region of Waterloo
20%
No Limit
9
Local Board or
Conservation
Authority
20%
No Limit
10 Board of Public
Hospital
A Public Hospital
within Region of
Waterloo
50%
No Limit
B Public Hospital
outside of the
Region of Waterloo
20%
No Limit
11 Non-Profit Housing
Corporation
10%
No Limit
12 Local Housing
Corporation
10%
No Limit
13 Schedule I Banks
No Limit
35%
14 Schedule II Banks
50%
20%
15 Schedule III Banks
50%
20%
POLICY NUMBER: FC-024
Page 7
Category
Sub-Category
Max
Portfolio
Limit
Limit per
Issuer
16 Credit Unions
20%
No Limit
17 Loan or Trust
Corporation
20%
No Limit
18 Supranational
Financial Institution
or Supranational
Government
Organization
20%
No Limit
19 Asset Backed
Securities*
50%
20%
21 ESG Investments
$10
million
35%
20 ONE FUND
A Money Market
Fund
No Limit
No Limit
B Bond Fund
No Limit
No Limit
C Universe Corporate
Bond Fund
No Limit
No Limit
D Equity Fund
20%
No Limit
E HISA
No Limit
No Limit
Note: All investment categories are subject to required financial ratings and
restrictions outlined in the Regulation.