How Prudent Investing Helps Municipal Treasurers

April 17, 2019

Municipal treasurers and finance directors have a lot on their plate: managing day-to-day financial operations, reporting to Council and always trying to stretch dollars to do more with less.

The “legal list’ has traditionally been focused on parking municipal money safely. Prudent investing, on the other hand, is about growing your money responsibly, says Keith Taylor, ONE’s Investment Manager. Municipal governments can build more diverse portfolios, with the potential to earn better returns and better manage risk under prudent investing.

While trying to manage long-term investments can seem like a daunting task, prudent investing actually provides solutions to some key challenges:

(1)    Expert advice is part of the framework of prudent investing

The prudent investor regulation embeds expert investment advice into the process. Municipal treasurers are experts in municipal finance - not investments and financial markets. That’s why the creation of an expert Investment Board (IB) or Joint Investment Board (JIB) to manage and implement municipal investing helps the municipal treasurer.

Furthermore, ONE Investment has taken up the task of ensuring municipalities have access to expert advice for in-depth financial planning and investment knowledge. A customer service team comprised of investment and municipal finance experts, will help municipalities with the important behind-the-scenes planning work.

ONE is also creating a Joint Investment Board, so that municipalities don’t have to navigate the task, which requires finance and legal expertise and the recruitment of qualified individuals with a balanced set of skills.

Furthermore, ONE is developing turnkey investment solutions and investment products that are well suited to meeting a variety of municipal financial objectives. That means a lot of the groundwork and investment research is being completed – and all through a municipal lens that understand the unique needs of investing property tax dollars.

(2)    Policy statements, compliance and reporting

Municipal governments retain control of their investments through the Investment Policy Statement which outlines financial objectives, risk tolerance, and timeframes for different needs and projects. For those investing with ONE, the customer service team will be able to provide expertise to help treasurers develop an IPS that meets local needs and objectives.

The Municipal Finance Officers Association (MFOA) has also established a working group to look at how to develop the detailed cash flows needed to help with the process, noted Executive Director Donna Herridge.  

The IB or JIB translate the IPS into the right mix of investment products. The important thing will be to maintain ongoing, two-way communication between the Board and the treasurer. The upside is that the treasurer has the expertise of the Board behind them.  The fact that the Board is making decisions as an expert group, rather than one individual treasurer, is an important benefit with added due diligence and accountability.

The regulation also requires ongoing review and oversight, which ensure that plans are revisited on a regular basis. Reporting requirements help make reporting to Council easier as well. Backed with the expertise of the Board, municipal finance directors and treasurers can better communicate the highs and lows of investing more effectively to elected officials.

Prudent investing is a major opportunity for municipalities. The potential for increased investment returns will help fund long-term infrastructure needs. Moving to this new regime is a project unto itself which requires effort and planning, but support is available. ONE Investment’s role is to act as a partner and to help with a smooth and orderly transition. We are always available to answer questions or provide advice as municipalities move toward this new prudent investor regime.

Prudent Investor
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