The City of St. Albert is hoping to achieve better returns on its excess cash by hiring a management firm to handle medium and long-term investments.
The city's finance department is currently sifting through 11 submissions to a request-for-proposals (RFP) issued Aug. 11, city council heard Monday while sitting as the standing committee on finance.
City staff hopes to have a short list by the end of the week and a contract in place by the end of the month, said chief financial officer Dean Screpnek.
"The whole purpose of hiring an investment fund manager is to allow them to explore markets that aren't accessible to city treasury staff, like bond markets," Screpnek told council at Monday's meeting of the standing committee on finance.
"We do a great job managing our short term cash. What we want is a partner to come in and invest in the medium and long term," Screpnek said.
The submissions to the RFP vary in how they approach fees so it's too soon to know whether or how much the move will cost the city, Screpnek said. An analysis of the cost structure will be part of the overall assessment of the proposals, he said.
City council first approved the hiring of an outside investment firm about a year ago. At the time council was hearing that the city had fallen about $800,000 short of its investment expectations for the first two quarters of 2009.
The city's cash holdings tend to swell every summer when property taxes file in, leaving the city with cash to invest in the short term, said finance director Gene Peskens. Currently, city finance staff invests cash reserves in short-term vehicles. Since cash holdings historically don't dip below $20 million, the finance department feels comfortable allocating this amount toward medium and long-term investments, which have the potential to generate better returns, he said.
"You need very specific knowledge and we don't have any people in the department with that," Peskens said. "We can use our time more efficiently doing other stuff. Otherwise I would need one staff member in the finance department just looking after long-term investments."
The bottom line is money and the city stands to do better by contracting out, said Mayor Nolan Crouse.
"There's a lot of money at stake. A quarter of a per cent or a 10th of a per cent of millions of dollars can potentially be a lot of money," he said.
Debt policy
The standing committee on finance also adjusted the city's debt policy, which limits city borrowing based on provincial regulations. These limit municipal debt to 1.5 times the annual operating revenue and debt servicing costs to 25 per cent of annual operating revenue.
The city's previous practice was to specify dollar limits in its policy but the revised policy will stick with the relative terms listed above.
The change eliminates the need to adjust the policy to account for fluctuations in city revenues, said chief financial officer Dean Screpnek.
"To constantly change the policy for the changes in those numbers didn't seem to make sense," Screpnek said.
Coun. Len Bracko was the lone council member to vote against the policy change, saying that cities shouldn't be using debt at all.
"What we need is more funding from the feds and the province. This is sending the wrong message simply by having a debt policy," Bracko said.
Levies
The standing committee on finance also updated city policies to account for two new levies put in place within the past year.
One of those levies sees residents pay $1 for every $100,000 of assessed property value into a reserve for light rail or bus transit initiatives. Council adopted the levy in March and the levy was assessed for the first time when 2010 tax notices went out. It raised $88,034.
The other levy was adopted last November. This policy allocates between 0.5 and one per cent of the budgets for new municipal buildings and restoration projects toward a public art and maintenance fund. This is aimed at providing the city with consistent funding for the acquisition, maintenance and preservation of public art.
