07 Jun, 2017

IMFG Perspectives Paper: Cities as Prudent Investors: New Rules for Investment by Ontario Municipalities

New paper from the Institute on Municipal Finance and Governance explores the changing landscape of financial investments as a source of income for municipalities in Ontario.

Toronto, June 7, 2017 – In light of the recently passed Modernizing Ontario’s Municipal Legislation Act, a newly released publication by the Institute on Municipal Finance and Governance explores the changing landscape of municipal investments in Ontario.

Financial investments are an important part of the fiscal tools available to Canadian municipalities. A well-executed investment strategy can provide a source of income to municipalities, helping them prepare for future budgetary pressures and revenue fluctuations.

Yet until recently, regulations in Ontario allowed investments only in a limited number of financial instruments deemed creditworthy and relatively liquid. As a result, most of the province’s 444 municipalities either have no investments whatsoever or have investments that represent a very low percentage of their total revenues.

This is about to change.

At the end of May, the Province of Ontario set new rules for investments, replacing the long-standing list of authorized investments for municipalities that meet certain requirements with the “prudent investor” standard. This new standard does not place hard limits on what cities can do, requiring instead that, when making investments, they exercise the care, skill, diligence, and judgement of a prudent investor.

What does this all mean? What are municipal investments and what are the benefits and risks of the new rules? Why is this important? This new report sheds light on these and other questions. According to report’s author, Gustavo Carvalho, “under the new rules, financial systems may become an important source of income for Ontario municipalities, and may even transform how infrastructure investments and other expenditures are funded in the future.”


About the Author

Gustavo Carvalho is the 2016-2017 Postdoctoral Fellow at the Institute on Municipal Finance and Governance, Munk School of Global Affairs, University of Toronto. He has a Ph.D. in Political Science from the University of Toronto and a law degree from the Federal University of Rio de Janeiro. Prior to moving to Canada, Dr. Carvalho worked as a corporate lawyer in a Brazilian hedge fund.

About the Institute on Municipal Finance and Governance (IMFG)

The Institute on Municipal Finance and Governance is a research hub and think tank that focuses on the fiscal and governance challenges facing large cities and city-regions. It is located within the University of Toronto’s Munk School of Global Affairs.

For more information, please contact:
Selena Zhang | Manager, Programs and Research
Institute on Municipal Finance and Governance, Munk School of Global Affairs, University of Toronto
selena.zhang@utoronto.ca | 416-978-2168
www.munkschool.utoronto.ca/imfg