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investment policy

Among several new initiatives included in last week’s municipal budget was a new investment policy that is conservatively estimated to bring the RMOW $1 million in revenue in 1998. The new investment policy — the policy hadn’t been updated since 1983 — works in conjunction with the Vision 2002 plan, a five year business plan that is being finalized, the entrepreneurial directive given municipal staff and, perhaps most importantly, council defining priorities for municipal staff and projects. The long-range financial planning is becoming more important as the municipality approaches buildout and traditional sources of revenue decline. As well, transfers from senior levels of government are also declining and costs are being passed on to municipalities. Whistler has approximately $20 million available for investment this year — funds that are in excess of current needs. They may be surplus funds carried over from previous years or funds not required until later in the current fiscal year. "If the municipality can earn an extra 1 per cent on those funds through better investments, that’s an additional $200,000 for Whistler," says Councillor Ted Milner. "If we do that three or four years in a row, that’s another park." One of the keys to making the most on those investments is knowing how much money is available and for how long. Administrator Jim Godfrey has stressed to council that capital projects and initiatives be listed according to priority. The list of priorities, determined by council, staff and the community, is matched with the human resources available so that staff and council have a better idea of what can be accomplished and in what time frame. If council decides an issue should go to the top of the priority list then something else will have to drop down the list. "If a department can only spend $2 million in a year when there’s been $4 million budgeted, we can invest that other $2 million," says Ken Derpak, director of finance. The municipality has four primary funds — General, Water, Sewer and Solid Waste — and has operating and capital budgets for each fund. If the municipality knows the water capital fund, for instance, won’t be required for a major project for several years, those funds can go into longer-term deposits and earn a higher rate of return, at least according to current interest rates. The municipality has three investment portfolios: short term (up to one year), intermediate (one-two years), and long term (two-seven years). The current interest rates are about 2.5 per cent for short term deposits, 3.5 per cent for intermediate terms, and up to 8.5 per cent for long-term deposits. Under the Municipal Act, investments can only be made in chartered banks, credit unions or the Municipal Finance Authority of B.C., a Crown corporation that operates pooled investment funds in government mutual funds for municipalities and regional districts. The MFA also provides financing for members. The municipality considers return, liquidity and safety of capital, or risk when making investments. What the 1998 budget has done is provide the municipality with the tools to maximize its investments by keeping track of all the variables. The budget includes $30,500 for a full-time financial analyst, a position that will pay for itself and then some. Part of the analyst’s job will be to get the financial institutions to compete with one another for the best rate of return on each investment. As well, the budget provides for a new computer system, which allows the analyst to keep track of performance targets, forecast rates and returns and print quarterly reports, so that everyone will have a better idea of where they stand. "A lot of people don’t understand the type of finances Ken (Derpak) is managing," Milner says, adding the City of Vancouver has a whole department to keep track of its investments. In the corporate world an army of financial analysts would be on staff to make sure the company’s money is working as hard as it can. But Derpak hastens to add, that’s not to say the municipality has done poorly on its investments in the past. Indeed, with no one specifically in charge of investments on a full-time basis, municipal finance staff last year averaged nearly 5 per cent return on investments. "We’ve done well on investments in the past, with the tools we’ve had," Derpak says. "But this will provide a clearer, more accurate picture of long-term funding."

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