Frustrated at small returns on low-risk investments in U.S. treasury bonds and fixed-income securities, some city council members have been pushing the city to invest some funds in well-established corporations with a track record of paying large dividends.
The first step is likely to be an investment of
"We have a policy that guarantees that, after inflation, we will always lose money," Nurse said. "There are high-quality dividends that will pay at least three times what we're earning."
Returns on investment would go toward reducing the cost of residents' water bills.
The city likely would use mutual funds to spread investments over a number of companies. Investment decisions would be made by an investment consultant. Guidelines for investments are being reviewed by the city's investment oversight committee and must still be approved by city council.
Of course, as the oft-used disclaimer has it, the value of investments can go down as well as up.
The city sued its then-financial adviser
City Finance Director
"We don't want to put the city at risk if there was some kind of market correction," she said.
Another concern is that future councils may pull the plug on investments and sell their portfolio if share prices take a dive and they receive negative publicity as a result.
"This policy is being adopted knowing that day will come, but hoping a future city council doesn't panic and sell low," Councilman
The city already invests the principal from its
Other funds that could be considered for higher-return investments include the city's insurance fund, which is used for worker's compensation claims.
"We're trying to do it very selectively," Fritz said.
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