Item - 2016.EX16.19

The Executive Committee recommends that:

1.  City Council amend the City's Investment Policy by adding "Deposit of cash in the High Interest Savings Account (HISA) program through the Municipal Finance Officers' Association of Ontario's ONE Investment Program" to the list of Authorized and Suitable Investments.

2.  City Council grant authority to staff to incorporate the changes into the City's Investment Policy.

This report provides a review of the annual investment returns realized in 2015 on the funds invested in the City's General Group of Funds. In 2015, the City's investment portfolio of $5.1 billion earned $137.8 million and yielded a return of approximately 2.7 percent.  These portfolios hold the City's working capital and the amounts designated for the City's reserves and reserve funds.  The investment results for other funds, such as sinking, pension and trust funds are reported separately.

Municipal Finance Officers' Association of Ontario's One Investment Program (ONE) is an eligible investment for the City under Ontario Regulation 610/06, Financial Activities (the "Regulation")  under the City of Toronto Act, 2006 (COTA).  Recently, ONE offers a High Interest Savings Account with interest rates for deposits more attractive than the rates offered by the City's bank. The proposed change to the Investment Policy is to add cash deposit in ONE's High Interest Savings Account program to the list of Authorized and Suitable Investments.

In compliance with the Regulation, a record of each transaction in the City's own securities is listed in Appendix A of this report.

Under the current Ontario legislation, municipalities are permitted to invest in either short-term money market fixed income securities or long-term bonds under prescribed rules.  Municipalities are limited in investing in equities, only through the One Equity Portfolio (jointly administered by Association of Municipalities of Ontario and The Municipal Finance Officers' Association).

A staff report, submitted earlier this year, notified City Council that the Province of Ontario has approved reforms to the Regulation late in 2015.  The reforms provide the City of Toronto with a framework to invest according to the prudent investor standard and are expected to enable the City to earn better risk-adjusted returns on its investments. This authority will come into force on January 1, 2018.  During the transition period before this date, a mandated independent investment board will be created and a new investment policy will be developed.