Modernization of Municipal Investment Authorities Under the Municipal Investment Regulation
IT IS THEREFORE RESOLVED THAT Alberta Municipalities advocate to the Government of Alberta to amend the Municipal Investment Regulation to expand investment authorities available to municipalities by implementing a scalable, capacity-based framework that includes:
- Direct Governance-Based Authority: Extending broader investment eligibility to municipalities that demonstrate independent capacity through a prudent-investor policy, professional oversight, and robust risk-reporting practices;
- Pooled and Collaborative Authority: Permitting municipalities to access expanded, diversified asset classes for a policy-defined portion of municipal funds without extensive internal administrative requirements, provided such investments are made through approved, municipally geared pooled funds, collaborative arrangements, or institutional services; and
- An Opt-In Mechanism: Providing a clear designation process subject to Ministerial approval or defined criteria that allows municipalities to choose the tier of investment authority that best matches their local governance capacity, financial needs, and strategic goals.
FURTHER BE IT RESOLVED THAT any amendments to the Municipal Investment Regulation maintain appropriate safeguards to ensure:
- preservation of capital,
- prudent risk management, and
- transparency and accountability to Council and the public.
WHEREAS Alberta municipalities are authorized under the Municipal Government Act to invest in accordance with provincially prescribed regulations;
WHEREAS the Municipal Investment Regulation establishes a prescriptive investment framework that limits the range of eligible investment instruments available to most municipalities, effectively restricting portfolios to fixed‑income investments and limiting opportunities to enhance long‑term investment returns in support of municipal financial sustainability;
WHEREAS many municipalities in Alberta have developed significantly in financial capacity, governance maturity, and access to professional investment management, including:
- Established investment policies;
- Oversight by senior financial officers and committees, and
- Access to external advisors and institutional investment services;
WHEREAS modern public sector investment practices increasingly emphasize a “prudent investor” approach, which enables diversification within a strong governance and risk management framework rather than relying solely on a prescriptive list of allowable investments; and
WHEREAS enhancing investment flexibility for municipalities can support long-term financial sustainability and reduce reliance on property taxation.
BACKGROUND:
Under the Municipal Government Act, the Municipal Investment Regulation governs how Alberta municipalities may invest public funds. While the regulation was modernized in recent years, it continues to apply a largely prescriptive approach for most municipalities, limiting investments primarily to highly conservative instruments.
At the same time, the regulation provides expanded investment authority to select large municipalities, including the City of Calgary, City of Edmonton and the City of Medicine Hat, allowing access to a broader range of asset classes and investment strategies. This has created an uneven regulatory environment across the province.
Even a limited exposure to equities, real assets, and pooled, diversified portfolios has been shown to produce materially higher long‑term returns than portfolios focused exclusively on AAA‑rated fixed‑income investments. Over extended time horizons, equities have historically outperformed government bonds, real assets such as real estate have outperformed bonds on a risk‑adjusted basis, and blended portfolios have consistently outperformed fixed income alone. Evidence indicates that even a modest allocation of total municipal reserves to diversified investments can outperform a fully fixed‑income, AAA‑focused portfolio over the long term, typically generating an additional 2–3 percentage points in annual returns. Higher long‑term returns support improved fiscal sustainability, reduce pressure on property taxation, and strengthen overall municipal financial positions.
Canadian public‑sector pension plans provide a well‑established example of how long‑term public funds can be responsibly managed through diversified investment portfolios. Rather than relying exclusively on low‑risk, fixed‑income instruments, these plans invest across a broad mix of asset classes—including equities and real assets—within strong governance frameworks to achieve sustainable long‑term returns while managing risk. This diversified approach has been essential to maintaining fiscal sustainability over multi‑decade horizons and mitigating inflation risk. The experience of public‑sector pensions demonstrates that appropriate governance, oversight, and pooling of funds can allow public institutions to prudently enhance returns beyond those achievable through AAA‑rated investments alone.
In Saskatchewan, recent legislative and policy changes have enabled municipalities to improve the management of municipal reserves through pooled and diversified investment structures. In partnership with the Saskatchewan Urban Municipalities Association, Saskatchewan municipalities may now invest a limited portion of unappropriated reserves through SUMAInvest, a provincially approved pooled investment program overseen by professional investment managers. This framework allows municipalities to access diversified portfolios—including equities, real assets, and fixed income—while maintaining governance safeguards, investment limits, and transparency requirements. Saskatchewan’s approach demonstrates that limited, well‑governed diversification of municipal reserves can be implemented without replacing provincial funding programs or compromising fiscal oversight.
Most municipalities now operate with significantly greater financial complexity than when earlier regulatory frameworks were established. Many manage substantial reserve balances and capital funds, supported by experienced finance teams, robust governance structures, and access to professional investment expertise.
The current regulatory limitations:
- constrain diversification opportunities,
- expose municipalities to inflationary erosion of reserve values, and
- limit the ability to achieve risk-adjusted returns comparable to institutional standards.
Modernizing the regulation to reflect a governance- and capacity-based model—rather than a size-based distinction—would align Alberta with leading public sector investment practices. Such an approach would allow municipalities to responsibly enhance investment performance while maintaining strong safeguards for public funds.
ABmunis is preparing correspondence to the appropriate ministry.