The City of Moose Jaw’s stock investments lost more than $8 million during the second quarter, but the investment report makes the loss look closer to $20 million.
During city council’s Sept. 12 regular meeting, council received the investment committee’s report with results from Q2 of 2022. Council then voted unanimously to receive and file the document.
There was $23,769,314.80 in the moderate-term portfolio and $67,471,316.63 in the long-term portfolio as of June 30, for a total of $91,240,631.43, the report showed. In comparison, as of March 31, those numbers were $29,485,162.61, $79,923,836.46 and $109,408,999.07, respectively.
The report showed that from April 1 to June 30, the moderate-term portfolio decreased by five per cent and lost $5,715,847.81. This dropped the portfolio to $23,769,314.80 from $29,485,162.61.
Year-to-date, this portfolio has declined 7.30 per cent.
From April 1 to June 30, the long-term portfolio decreased by 8.66 per cent and lost $12,452,519.83, the report showed. This dropped the portfolio to $67,471,316.63 from $$79,923,836.46.
Year-to-date, this portfolio has declined 12.95 per cent.
Combined, both portfolios appear to have lost $18,168,367.64 during the second quarter, equal to 58.4 percentage points in municipal taxation.
One percentage point this year equalled $310,755.26 in municipal taxation.
In comparison, both portfolios lost $4,766,096.17 during the first quarter, equal to 15.3 percentage points in municipal taxation.
In an email to the Moose Jaw Express, the city’s communications manager, Craig Hemingway, said that the investments did not lose nearly $20 million as the report suggests.
Instead, he explained, there was a drawdown of funds of $7,403,258 that council approved in the 2022 operating budget, while $2,715,995 was transferred to the city’s bank account to acquire a greater interest rate.
By including the March 31 total of $109,406,904, the drawdown, the transfer, and the closing balance on June 30 of $91,240,631, the real drop in the portfolio’s combined value was roughly $8.05 million, he continued.
“And this drop in values would only be realized if the city were to sell its investments, which it has no intention of doing,” Hemingway said.
Hemingway added that while there was a decrease in the second quarter, by June 30, 2022, the portfolios combined had risen by $10.4 million since the inception of the current investment strategy in 2019.
Coun. Dawn Luhning, a member of the investment committee, said during the council meeting that 4.25 per cent is the annual return percentage objective for the moderate-term portfolio. Since the portfolio’s inception, the return has been 3.33 per cent, indicating the markets are “volatile.”
“Lots of uncertainty out there,” she said.
Meanwhile, six per cent is the annual return percentage objective for the long-term portfolio. Since its inception, the return has been 3.8 per cent.
Luhning then read notes that finance director Brian Acker provided during the investment committee’s meeting.
The first half of 2022 saw financial markets experience volatility, which city hall anticipated when it invested money in the market, she said.
“We knew that we were going to have ups and downs, and so we have taken this into consideration,” Luhning stated. “It’s based upon a long-term investment horizon and short periods of volatility resulting in fluctuation of market values of the city’s portfolios are expected.”
The investment committee takes a long-term view of the investments, which allows the municipality to weather short-term market downturns, she continued. The committee has structured the investments so there are liquid assets — Guaranteed Investment Certificates (GICs) — that mature over time, while equity or bond investments do not need to be sold during down-markets.
Meanwhile, the committee moved $2.71 million in cash from the long-term portfolio to the city’s bank account to earn a higher return.
“The city’s bank account pays a higher return of 3.85 per cent than do current short-term money market instruments,” said Luhning. “The city’s investment adviser is anticipating a continued increase in interest rates over the next several months … at which time the monies will be transferred back to RBC Dominion Securities to be invested in GICs or bonds.”
Luhning added that when the market strengthens, RBC Dominion Securities will re-balance the portfolios to a “neutral asset mix, adding to actively manage bonds and quality dividend funds.”
The next regular council meeting is Monday, Sept. 26.