NEWS FILE PHOTO
Coun. Darren Hirsch is seen during a debate on budget assupmtions on July 3, 2018. Hirsch, the chair of the cityÕs audit committee said he's very pleased with the treasury department following news the city's investment fund has posted a 10.2 per cent return for the first nine months of the year.
cgallant@medicinehatnews.com@CollinGallant
The sails of the city’s new investment fund have billowed as the stock market rose in 2019, but administrators warn that the same fears of a global slowdown – which shrunk the fund last year – are still in play.
Financial statements released this week show that the fund, managed by provincial investment management agency AIMCo., have posted a 10.2 per cent return for the first nine months of the year, and initial analysis shows stronger performance this fall.
Most of the now $169-million fund is generally earmarked for gas-well abandonment, which was thought to be in a 20-year time range when the fund was created three years ago.
Now, an accelerated program could require much of the cash over the next three years.
The chair of the city’s audit committee said that even with juggling priorities, the increased revenue is welcomed, as the long-term priority is to improve the city’s bottom line.
“I’m very pleased with our treasury department,” said Coun. Darren Hirsch.
“We’ll have needs with NPGR and with other utilities … Once we get a handle on what those liabilities are, we can determine what happens (with the fund).”
A general budget update is due late this year to reflect changes in the provincial budget and the potential affects of the city’s major gas-well abandonment program, both on income and capital requirements to shutter the wells..
That type of work is paid for on an ongoing basis within the division budget. But earlier this fall council approved shutting down 80 per cent of the city’s wells to stem losses from low gas prices.
The city will need to determine how to best fund major abandonment plans for the natural gas division.
In terms of the AIMCo. funds, the value dipped in late 2018 during a general stock market correction, but posted a greater than 10 per cent positive return for the first nine months of 2019.
“It’s a good number,” said corporate services commissioner Dennis Egert, stressing that the investment needs to be considered in a long-term window.
“In 2018 we lost 2.2 per cent, but when you look at longer-term investments, you’re looking more over time performance. You have ups and downs.”
Put another way, the city has deposited a total of $154.2 million since it was created by provincial ministerial order in 2017, and the current value is $169.7 million.
That equates to a 6.07 per cent return over the life of the investment, which was invested in blocks over time.
The rate is slightly higher than the target return of inflation plus 4 per cent, which equals 5.33 per cent.
It’s also much higher than that if the money had remained in traditional vehicles available to most cities, mostly high rated bonds and GICs. City funds still managed by those protocols earned between 1.4 and 2.5 per cent annually since 2017.
Those funds, totalling $287 million, comprise working and borrowed capital, grants from other governments and money in more active reserve funds.
According to interim statements the funds are invested 39 per cent in foreign equities, 20 per cent in Canadian equities and 40 per cent in fixed income programs.
That money is comprised of $146 million in an unrestricted reserves from NPGR generally described for use in abandoning well liabilities.
Another $22 million of the AIMCo. total is the city’s two-year-old Heritage Savings Reserve, but that will grow to more than $43 million when its portion of the power plant dividend is deposited for 2019.
