Looking to possibly boost returns with minimal risk, the assembly has voted unanimously to amend municipal code to allow investment of the borough’s enterprise funds in stocks and bonds.
The collective balance of the five generally self-supported enterprises funds was more than $9 million last month — Municipal Light & Power, the water system, sewer system, sanitation services and port and harbors funds. Those five accounts are maintained separately from general fund government expenses.
Finance Director Mason Villarma told the assembly on Feb. 22 that investing enterprise funds in a wider range of options — lower-risk stocks, mutual funds and exchange-traded funds — could help shield investments from market volatility, while producing better returns in the long run. The borough has an investment adviser to guide them.
The changes to municipal code require that any funds invested in stocks, mutual funds and exchange-traded funds may not exceed 10% of the enterprise fund’s unrestricted fund balance at the beginning of the most recent fiscal period.
The changes also require that any investments can be sold within 30 days, if needed.
Before the amendments to the investment code, the enterprise funds were restricted to low-risk Treasury bills; federal, state or municipal bonds; or federally insured certificates of deposit at financial institutions.
“We want investments other than the (borough) permanent fund to be exposed to U.S. equities based on predetermined thresholds set by the assembly,” Villarma said in a presentation to the assembly on Jan. 25. “We want to be able to invest a small portion of funds more aggressively.”
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