Council_Mark_POS_RGB

4 August 2021

 

Dear Councillor,

In pursuance of the provisions of the Local Government Act, 1993 and the Regulations thereunder, notice is hereby given that a POLICY REVIEW COMMITTEE MEETING of Penrith City Council is to be held remotely using audio visual links on Monday 9 August 2021 at 7:00PM.

Attention is directed to the statement accompanying this notice of the business proposed to be transacted at the meeting.

Yours faithfully

 

Warwick Winn

General Manager

 

BUSINESS

 

1.           LEAVE OF ABSENCE

 

2.           APOLOGIES

 

3.           CONFIRMATION OF MINUTES

Policy Review Committee Meeting - 7 June 2021.

 

4.           DECLARATIONS OF INTEREST

Pecuniary Interest (The Act requires Councillors who declare a pecuniary interest in an item to leave the meeting during discussion of that item)

Non-Pecuniary Conflict of Interest – Significant and Less than Significant (The Code of Conduct requires Councillors who declare a significant non-pecuniary conflict of interest in an item to leave the meeting during discussion of that item)

 

5.           ADDRESSING THE MEETING

 

6.           MAYORAL MINUTES

 

7.           NOTICES OF MOTION TO RESCIND A RESOLUTION

 

8.           NOTICES OF MOTION

 

9.           DELIVERY PROGRAM REPORTS

 

10.         REQUESTS FOR REPORTS AND MEMORANDUMS

 

11.         URGENT BUSINESS

 

12.         CONFIDENTIAL BUSINESS


POLICY REVIEW COMMITTEE MEETING

 

Monday 9 August 2021

 

table of contents

 

 

 

 

 

webcasting notice

 

 

meeting calendar

 

 

confirmation of minutes

 

 

DELIVERY program reports

 


 

 

 

 

 

 

WEBCASTING NOTICE

 

Please note that tonight’s meeting other than the

confidential sessions are being recorded and will be

placed on Council’s website. All in attendance should

refrain from making defamatory statements. Council

takes all care when maintaining privacy, however

members of the public gallery and those addressing

Council should be aware that you may be recorded.

 


Council_Mark_POS_RGB2021 MEETING CALENDAR

January 2021 - December 2021

(Adopted by Council – 14 December 2020, amended 29 July 2021)

 

 

 

TIME

JAN

FEB

MAR

APRIL

MAY

JUNE

JULY

AUG

SEPT

OCT

NOV

DEC

Mon

Mon

Mon

Mon

Mon

Mon

Mon

Mon

Mon

Mon

Mon

Mon

 

Ordinary Council Meeting

7.00pm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22@

22

26v

24#

28*

26

23@

  27^

25ü

22#+

 

Policy Review Committee

7.00pm

 

8

 

19

 

7

 

9

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 v

Meeting at which the draft corporate planning documents (Delivery Program and Operational Plan) are endorsed for exhibition

 *

Meeting at which the draft corporate planning documents (Delivery Program and Operational Plan) are adopted

 #

Meetings at which the Operational Plan quarterly reviews (March and September) are presented

 @

Meetings at which the Delivery Program progress and end of term reports (including the Operational Plan quarterly reviews for December and June) are presented

 ^

Election of Deputy Mayor

 ü

Meeting at which the 2020-2021 Annual Statements are presented

 

Meeting at which any comments on the 2020-2021 Annual Statements are adopted 

 +

Meeting at which the Annual Report is presented

-            Extraordinary Meetings are held as required.

-            Members of the public are invited to observe meetings of the Council (Ordinary and Policy Review Committee).

Should you wish to address Council, please contact Governance Coordinator, Adam Beggs on 4732 7597.

 



UNCONFIRMED MINUTES

 OF THE POLICY REVIEW COMMITTEE MEETING OF PENRITH CITY COUNCIL HELD REMOTELY USING AUDIO VISUAL LINKS AND IN THE PASSADENA ROOM, PENRITH

ON MONDAY 7 JUNE 2021 AT 7:00PM

 

 

PRESENT

Her Worship the Mayor, Councillor Karen McKeown OAM, Deputy Mayor, Councillor Tricia Hitchen, and Councillors Bernard Bratusa, Todd Carney, Robin Cook, Kevin Crameri OAM, Greg Davies, Mark Davies, Ross Fowler OAM, Kath Presdee and John Thain.

 

LEAVE OF ABSENCE

Leave of Absence was previously granted to Councillor Aaron Duke for the period 24 May 2021 to 7 June 2021 inclusive.

PRC7  RESOLVED on the MOTION of Councillor Todd Carney seconded Councillor Ross Fowler OAM that Leave of Absence be granted to Councillor Jim Aitken OAM from 7 June 2021 to 16 June 2021 inclusive.

 

APOLOGIES

PRC8  RESOLVED on the MOTION of Councillor Kevin Crameri OAM seconded Councillor Bernard Bratusa that apologies from Councillors Marcus Cornish and Brian Cartwright be accepted.

 

CONFIRMATION OF MINUTES - Policy Review Committee Meeting - 19 April 2021

PRC9  RESOLVED on the MOTION of Councillor Ross Fowler OAM seconded Councillor Kevin Crameri OAM that the minutes of the Policy Review Committee Meeting of 19 April 2021 be confirmed.

 

DECLARATIONS OF INTEREST

 

Councillor Bernard Bratusa declared a Non-Pecuniary Conflict of Interest – Less than Significant in Item 1 - Park & Ride at Penrith Railway Station, as he is an employee of the Minister for Sport.

 

DELIVERY PROGRAM REPORTS

 

Outcome 3 - We can get around the City

 

2        Footpath Condition Assessment                                                                

PRC10  RESOLVED on the MOTION of Councillor John Thain seconded Councillor Greg Davies that the information contained in the report on Footpath Condition Assessment be received.

 

Councillor Todd Carney left the meeting, the time being 7:20pm.

 

1        Park & Ride at Penrith Railway Station                                                      

PRC11  RESOLVED on the MOTION of Councillor Ross Fowler OAM seconded Councillor Robin Cook that the information contained in the report on Park & Ride at Penrith Railway Station be received.

Councillor Todd Carney returned to the meeting, the time being 7:21pm

 

 

There being no further business the Chairperson declared the meeting closed the time being 7:21pm.

    


DELIVERY PROGRAM REPORTS

 

Item                                                                                                                                       Page

 

     

Outcome 7 - We have confidence in our Council

 

1        Annual Review of Council's Investment Policy                                                                  1

 

 

 


 

 

 

 

THIS PAGE HAS BEEN LEFT BLANK  INTENTIONALLY


 

 

Outcome 1 - We can work close to home

 

 

There were no reports under this Delivery Program when the Business Paper was compiled


 

 

 

 

THIS PAGE HAS BEEN LEFT BLANK  INTENTIONALLY


 

 

Outcome 2 - We plan for our future growth

 

 

There were no reports under this Delivery Program when the Business Paper was compiled


 

 

 

 

THIS PAGE HAS BEEN LEFT BLANK  INTENTIONALLY


 

 

Outcome 3 - We can get around the City

 

 

There were no reports under this Delivery Program when the Business Paper was compiled


 

 

 

 

THIS PAGE HAS BEEN LEFT BLANK  INTENTIONALLY


 

 

Outcome 4 - We have safe, vibrant places

 

 

There were no reports under this Delivery Program when the Business Paper was compiled


 

 

 

 

THIS PAGE HAS BEEN LEFT BLANK  INTENTIONALLY


 

 

Outcome 5 - We care about our environment

 

 

There were no reports under this Delivery Program when the Business Paper was compiled


 

 

 

 

THIS PAGE HAS BEEN LEFT BLANK  INTENTIONALLY


 

 

Outcome 6 - We are healthy and share strong community spirit

 

 

There were no reports under this Delivery Program when the Business Paper was compiled


 

 

 

 

THIS PAGE HAS BEEN LEFT BLANK  INTENTIONALLY


Outcome 7 - We have confidence in our Council

 

Item                                                                                                                                       Page

 

1        Annual Review of Council's Investment Policy                                                                  1

 

 

 



Policy Review Committee Meeting                                                                   9 August 2021

 

 

 

1

Annual Review of Council's Investment Policy   

 

Compiled by:               James Legarse, Operational Project Accountant

Authorised by:            Neil Farquharson, Financial Services Manager

Andrew Moore, Director - Corporate Services  

 

Outcome

We have confidence in our Council

Strategy

Manage our money and our assets to be sustainable now and into the future

Service Activity

Provide accurate information to Council and the community on council’s financial activities

      

 

Executive Summary

The Council’s Investment Policy (the Policy) is reviewed on an annual basis and Council officers have completed the review over recent months. It is a prudent and appropriate financial management practice that the Policy be reviewed to consider the latest economic environment and investment strategies.

The current Ministerial Investment Order was issued in 2011 and all requirements have been incorporated into the Council’s Policy revisions since 2013. The annual review and the currently proposed Policy was reported to Council’s Audit, Risk and Improvement Committee (ARIC) on the 9 June 2021. There were minor changes recommended and all were largely cosmetic in nature and have been updated in the version being presented tonight.  Other changes that were made updated the current amounts/rates/results, referenced and relevant to this financial year. These amendments do not constitute a change in Policy or Strategy.

The proposed Investment Policy and Strategy 2021-22 takes into account the following considerations:

·    Changes due to the impact of COVID-19; and

·    Strengthening governance and compliance.

 

Background

 

In May 2010 the Department of Premier and Cabinet, Division of Local Government released their Investment Policy Guidelines to assist councils in their preparation of an Investment Policy for the prudent and appropriate management of councils’ surplus funds. This was in response to concerns some funds were not invested in councils’ names, and the loss of capital from some councils investing in structured products. The Ministerial Investment Order dated 11 February 2011 removed the ability for councils to invest in mortgages of land, deposits with Local Government Financial Services and added key considerations.

On 10 October 2017 the Office of Local Government (OLG) released Circular Number 17-29 - Interim TCorp Waiver which allows councils to seek investment advice from TCorp as part of their financial and strategic planning processes. Section 5 of the Guidelines requires councils to seek advice from advisors licenced by the Australian Securities and Investments Commission, to receive written confirmation that no actual or potential conflicts of interest exist, and to undertake separate reference checks of advisors.

Council’s Investment Policy was last amended and reported to Council at its Policy Review Committee meeting, held 10 August 2020. In the 2021-22 Policy review, some of the amendments are cosmetic in nature and do not constitute a change in Policy or Strategy.

The proposed changes to the 2021-22 Investment Policy and Strategy continue to support and endorse the Council’s risk profile of a ‘conservative’ approach in investment decision making.

Variations to existing Investment Policy 

 

I.    4.1 Overview: In light of the impact of COVID-19, it is considered prudent to include ‘…in consideration of the current economic climate’, in the Overview of the Policy. The additional statement would ensure sound judgement and discretion when navigating through unprecedented economic times:

 

The Council will seek to maximise earnings from authorised investments within agreed levels of risk, return, and exposure, in consideration of the current economic climate’.

 

II.   5.2 Investment Responsibilities: Proposed new sub-point that would standardise and support the current practice already being applied in handling daily cash forecasting and/or investment recommendations:

 

The relevant Finance officer who prepares the daily cash forecast and/or investment recommendation would need to consider the following – to achieve compliance and best value for money:

o Forecast of Cash Requirements,

o Credit and Maturity Guidelines (refer to 6.1); and

o Two alternative investment options – if possible, preferably of similar credit rating.

 

The daily cash forecast and/or investment recommendation are to be authorised by one of the delegated officers mentioned in 4.3 (paragraph 3).

 

III.  6.1 Credit and Maturity Guidelines: Under ‘iii Liquidity Framework’, the following changes to the minimum and maximum thresholds are proposed. This is in consideration of the impact of the pandemic with the current interest rate market trend – interest rates for longer terms are less attractive and risky, causing the Council’s Investment Portfolio to be short term centric – being 2 to 12 months.

 

The 5% minimum for 1 to 5 years, as proposed below, is to ensure that an acceptable level of long-term investments are considered in decision making for investment recommendations. This is important for Council’s portfolio diversification, as most long-term investment vehicles are Floating Rate Notes.

 

·    2 to 12 months Maximum % of the total portfolio from 70% to 95%.

·    1 to 5 years Minimum % of the total portfolio from 15% to 5%.

 

 

 

 

 

 

 

Current 2020/21 Liquidity Threshold

 

Minimum Framework

Maximum Framework

 

Minimum % of the total portfolio

 Minimum ($)*

Maximum % of the total portfolio

Maximum ($)*

·    1 month

(incl. Call Account & General Fund)

10% or $20M
(whichever comes first)

16,000,000

100%

160,000,000

·    2 to 12 months

40%

64,000,000

70%

112,000,000

·    1 to 5 years

15%

24,000,000

40%

64,000,000

·    Over 5 years

0%

0

5%

8,000,000

*To illustrate the effects of the minimum and maximum frameworks, the table above uses the Council’s 2019/20 average Investment Portfolio amount of $160M.

 

Proposed 2021/22 Liquidity Threshold

 

Minimum Framework

Maximum Framework

 

Minimum % of the total portfolio

 Minimum ($)*

Maximum % of the total portfolio

Maximum ($)*

·    1 month

(incl. Call Account & General Fund)

10% or $20M
(whichever comes first)

15,500,000

100%

155,000,000

·    2 to 12 months

40%

62,000,000

95%

147,250,000

·    1 to 5 years

5%

7,750,000

40%

62,000,000

·    Over 5 years

0%

0

5%

7,750,000

* To illustrate the effects of the minimum and maximum frameworks, the table above uses the Council’s 2020/21 average Investment Portfolio amount of $155M.

 

Review of Investment Strategy

 

I.    Investment environment: Delete the first two paragraph as they are no longer appropriate or pressing matters under the current economic climate:

 

Financial and investment environments, both globally and domestically, continue to improve at different rates across various regions. The global financial recovery process has been aided by a more standardised international regulatory process with more stringent capital adequacy requirements for financial institutions.

 

In Australia, a history of prudent regulation of the financial institutions by the Australian Prudential Regulation Authority (APRA) has meant that Australian based regulated financial institutions have already operated for an extended period under stringent capital adequacy and liquidity requirements. The Council’s investments all fall under APRA regulation with the result that the portfolio is conservative and secure.

 

II.   Liquidity, Maturity and Returns: Revise the enhanced benchmark to 20 basis points (bps), as opposed to 45bps. This is consistent with the market trend under the current economic climate.

 

The Council’s enhanced benchmark rate to measure its investment performance by exceeding the RBA cash rate, at least by 20 additional basis points (0.20% p.a.). The 20 basis point increase is based on the average increased credit spreads (or margins) over bank bill rates on offer in relation to 30–90 day investments at the time.  The 30-90 bank bill rates represented a reflective benchmark for investment if the risk of long-term investment at fixed rates and margins was removed from the portfolio.

 

III.  Liquidity, Maturity and Returns: Replace the deletion of the above II. with the following paragraphs to reflect the current economic outlook:

 

Under the current economic climate, we have seen the spread on interest rates dissipate. The Government’s stimulus initiatives for authorised deposit-taking institutions (ADIs), under the Term Funding Facilities (TFF), caused the banks’ appetite for investors to decline – resulting in lower interest rates being offered. For example, Council’s Investment Portfolio yield pre-COVID19 (February-2020) was 1.62%; and, as at April-2021 the portfolio generated a 0.69% average return. Further contraction in the Council’s Investment Portfolio return is possible despite Government efforts to support a recovery.

 

The uncertainty of the current and future economic outlook; and the lack of attractive interest rates in the longer term, drove most investors’ strategy to be shorter term centric i.e. less than 1-year term.

 

The Investment Policy indicates a maximum limit of 40% for medium term investments (1-5 years), currently Council is holding 16% of funds invested in this tenor (term). The rates being offered for floating rate notes are only marginally higher than term deposit rates – e.g. Aa3 bank 3-year FRN offer 3months BBSW+42bps (or 0.46% for the initial interest rate) compared to 0.66% 3-year Term Deposit rate. At this point in time, desire for this type of product is not preferred. However, if higher interest rate spreads are offered in the future, the relevant FRN is to be considered for investments.

 

Conclusion

Council officers have prepared the annual Investment Policy review. The review was presented to the ARIC meeting held 9 June 2021, and the proposed minor changes have been incorporated into the review being presented tonight. This report recommends that Council adopt the proposed changes to the Investment Policy as outlined in this report.

 

 

RECOMMENDATION

That:

1.     The information contained in the report on Annual Review of Council's Investment Policy be received.

2.     Council adopts the proposed changes to the Annual Review of Council's Investment Policy tabled in this report.

 

 

ATTACHMENTS/APPENDICES

1.

2021-22 Investment Policy

8 Pages

Attachments Included

2.

2021-22 Investment Policy Attachments

12 Pages

Attachments Included

3.

2021-22 Investment Strategy

4 Pages

Attachments Included

   



 

ATTACHMENTS  

 

 

Date of Meeting:     Monday 9 August 2021

Report Title:            Annual Review of Council's Investment Policy

Attachments:           2021-22 Investment Policy

                                2021-22 Investment Policy Attachments

                                2021-22 Investment Strategy



Policy Review Committee Meeting                                                                                 9 August 2021

Attachment 1 - 2021-22 Investment Policy

 

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Policy Review Committee Meeting                                                                                 9 August 2021

Attachment 2 - 2021-22 Investment Policy Attachments

 

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Policy Review Committee Meeting                                                                                 9 August 2021

Attachment 3 - 2021-22 Investment Strategy

 

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