Smithers is taking the safe bet with its legacy fund.
At its June 25 meeting, council agreed to move $5 million from the Town’s Northern Planning and Capital Grant as a “legacy fund” and invest it in a one-year, fixed-rate guaranteed investment certificate (GIC).
The investment is being made at a 2.55 per cent interest rate with investment firm Cash Management Group.
Coun. Frank Wray said he was initially against the risk of tying up the money for a prolonged period of time due to the possibility the Town would have to cash out on the GIC and lose out on potential interest.
He said it was Coun. Casda Thomas’s comment about how it will likely be at least a year until the Town has any reason to use the funds that helped change his mind.
“I would be remiss if I didn’t say … I actually [think] this is the most forward-thinking council has been about finances in a long time,” Wray said.
“We do have a million that we’re not investing, that can still be a third of a three million dollar project, so it’s not like we’re putting all our eggs in one basket [and] I do acknowledge that.”
Councillor John Buikema said the $5 million at one year was the obvious choice to him because the longer-term GICs did not offer enough of an incentive to justify the increased time frame and added risks associated with them.
“I only see a $6,000 difference in interest and I think [scenario two] just gives us more flexibility … the difference in interest, to me, is so small that I [prefer] scenario two.”
Mayor Taylor Bachrach and Councillor Gladys Atrill voted against the motion, citing concerns that the plans were different from what they had originally envisioned.
“I think my recollection that got us to this point is [having] this legacy fund generating interest, so my preference is still that,” said Coun. Atrill.
Bachrach also pointed out that fears expressed by councillors about the potential for the Town to have to cash out of the loan prematurely would actually go against the bylaw.
“[It] says that we’re going to maintain a balance of $5 million dollars in the reserve so … that precludes us going into the piggy bank.”
Councillor Greg Brown also echoed Coun. Atrill’s concerns about the original intention of the fund being a long-term investment that would generate interest the Town could use for various projects.
Brown said he was willing to support the year-long investment now but added that he mostly saw the decision as a temporary solution that they could come back to.
“We’re going to be here a year from now,” he said.
On April 1 the Town received a $6,218,000 Northern Capital and Planning Grant from the province.
Shortly after they created a new reserve bylaw (known as the “Northern Capital and Planning Grant Reserve”) which they reviewed at their May 21 meeting, along with a new motion to add language to the bylaw specifying a minimum threshold of $5 million dollars must be maintained within the reserve.
That additional motion was adopted at their June 11 meeting, with Coun. Wray opposed.