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Prudent Investor Update, March 7, 2018

Next Steps for Municipal Governments

Starting January 1, 2019, a municipal government can pass a by-law authorizing the use of new investment powers under the prudent investor standard.  In the short-term, there are a few steps municipal governments can take if they think prudent investor makes sense for the long-term financial future of their communities.

1)    Review existing finances and investment holdings.

Municipalities who want to invest under the prudent investor standard – either independently or jointly with other municipal governments – need to invest “money that it does not require immediately” such as:
  • money in a sinking, retirement or reserve fund;
  • money raised or received for the payment of a debt of the municipality or interest on the debt; and/or,
  • proceeds from the sale, loan or investment of any debentures.
Now is a good time to determine what money is required for immediate needs and what would be appropriate for long-term investments.

2)    Review the strategy for funding your asset management plan.

The prudent investor standard may provide you with more options to expand your investment dollars and reduce the tax burden. You need to consider how much money would be available to invest and when you would need to access money to fund capital projects. This would help determine if investing under the prudent investor standard could offer you the right mix of securities to get optimal returns over the required timeframe.

3)    Review what funds are available for investment.

Once you know your overall financial position and financial needs over the short and long-term, take a more detailed look at the current and emerging investment options. In particular, review positions in longer-term holdings. Municipalities may wish to make adjustments so that funds are available to move into new securities in 2019, if they are interested in pursuing the benefits of prudent investor.

4)    Stay informed on the options.

Municipalities will be able to invest independently or jointly with others. What will work best for your municipal government will depend on your financial position, as well as staff capacity.

The ONE Investment Program will ensure that all municipalities, regardless of financial assets, will have options to access investing under the prudent investor standard. ONE’s Prudent Investor e-newsletter will regularly share updates on these new options, and insights on investing under the new standard.

ONE Investment to Offer New Options

The ONE Investment Program is preparing for the prudent investor standard. ONE has been providing turnkey investment solutions to the municipal community for 25 years. It will build on this track record of successfully helping municipalities gain strong returns while complying with provincial regulations.

Municipalities, regardless of their financial assets, will have an option to invest jointly through ONE – either via prudent investor standard or by remaining with the prescribed list.

To enhance ONE’s current offering to municipalities, it is looking into how to comply with Ontario Securities regulations and expand its turnkey service to possibly include providing professional advice to municipalities on investing, including:
  • Building investments into a municipal capital financing strategy; and,
  • Providing advice on the appropriate Investment Policy and portfolio structure.
ONE would also offer municipalities the opportunity to participate in a prudent investor joint Investment Board. The ONE Investment Program will continue to oversee the current ONE products and offer new options under prudent investor. ONE staff will update you on our progress through the newsletter.