ADMINISTRATIVE REPORT
Date: June 3, 1997
CC File No.: 1306-5
TO: Vancouver City Council
FROM: Director of Finance
SUBJECT: New Position - Treasury Analyst
RECOMMENDATION
THAT a position of Treasury Analyst be created, subject to
classification review by the Director of Human Resources, at an
estimated cost of $70,000, with funding from the Operating Budget.
GENERAL MANAGER'S COMMENTS
The General Manager of Corporate Services RECOMMENDS approval of
the foregoing.
COUNCIL POLICY
The Vancouver City Charter sets out the City s authorities to borrow by
means of promissory notes, overdraft, and debentures. The Charter also
sets out the permitted investments for cash of the Sinking Fund,
proceeds of debenture issues, and other cash not immediately required.
The authority to invest surplus cash and borrow for a short term is
delegated to the Director of Finance, with periodic reports to Council
on the exercise of that authority.
It is Council policy that increases in expenditures related to the
addition of new programs or staffing should be offset by matching
expenditure reductions or revenue increases.
PURPOSE
This report proposes the creation of a Treasury Analyst position in
Financial Services Department to provide improved management of City
financial resources, with the expectation of improved earnings, lower
borrowing costs, and less exposure to interest rate risk.
BACKGROUND
The management of the City s financial resources and financial
liabilities is a major activity of the Director of Finance Office, with
significant financial consequences. At any one time, the City has funds
invested in temporary investments in the money market with totals
ranging from a low of $150 million (typically in January) to a high of
$750 million (after the Main tax billing). Annual earnings from short
term investments of the City s cash pool, for 1996, was $20 million.
Further, the City borrows, through long term debentures, to finance that
portion of the City s capital program not funded by other sources. Those
borrowings total about $75 million per year.
DISCUSSION
The management of a Treasury Operation involves a number of key
activities, including:
1. Cash forecasting - identifying the cash needs for the City, on a
daily basis, and identifying cash surpluses which are available for
investment
2. Short term investments - investing surplus cash in financial
instruments, in accordance with the City Charter.
3. Interest rate management - develop strategies and implement actions
which maximize interest earnings while mitigating against interest
rate fluctuations.
4. Credit risk - develop and implement policies and strategies to
prevent financial loss due to default of creditors.
5. Liquidity risk - develop strategies to prevent financial loss due
to the need to liquidate investments to meet cash flow, while
maximizing earnings and ensuring flexibility to trade investments.
6. Borrowing Decisions -develop forecasts and evaluate strategies with
regards to borrowing decisions, including timing, and structure and
term of debt.
The foregoing activities require a significant amount of analysis,
monitoring of financial markets, and maintaining personal contacts with
financial institutions. To date, this has been done by the Director or
Deputy Director, but due to the demands of other priorities, has
precluded the investment of sufficient time to attend adequately to
these Treasury functions. While it would be desirable to delegate some
of these activities to other staff, recruitment efforts over the past
two years has demonstrated that these skills and abilities are not often
linked to other skills utilized in Finance, except when high rates of
compensation are offered.
After considerable consideration, we have concluded that the best
staffing model would involve hiring a treasury analyst who would assist
the Director in the management of the Treasury function
(investing/borrowing), and who would undertake the detailed research and
analysis and computer modelling in that regard to support the financial
management decisions of the Director.
Funding
The cost for hiring a treasury analyst will be about $70,000.
Recognizing that the City earns in the order of $20 million per year in
short term investments, and expends significantly larger amounts for
borrowing through debentures, the revenue impacts of marginally improved
financial decisions would easily cover the additional salary costs for
this position.
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