INFORMATION #2 10-17-2016 - Laserfiche WebLink

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Information Memorandum To: Mayor and City Council From: Lori Ziemer, Finance Director Date: October 17, 2016 Subject: Quarterly Investment Report (July – September, 2016) _______________________________________________________________________ Introduction The purpose of this report is to update the City Council on the status of the various investments the city maintains. This report is as of September 30, 2016. Background The investment policy was originally adopted in April, 1998, with subsequent modifications in February, 2007, and April 7, 2014. The policy complies with state statutes and generally follows the Government Finance Officers Association (GFOA) model. The investment goals for the City of Elk River are passive in nature due to the allowable investments permitted under state statutes. The city has four objectives for investing, in order of importance, they are: 1) safety of principal, 2) liquidity, 3) return on investment, and 4) maintaining the public trust. This means we are focused on not losing on the original investment, having sufficient funds on hand to meet ongoing operating cash needs, getting a market rate of return, and not purchasing speculative investments. State statutes limit the city’s ability to invest in many risky types of investments. The city does not purchase stocks or mutual funds. The city is generally limited to federal and state government obligations or agencies backed by them. The city can invest in short-term commercial paper (highly rated), certificates of deposit or money market accounts (with collateralization if in excess of FDIC insurance amounts), and the rated debt of local governments. The city intends to hold investments until maturity, which means we will get the rate of return for which we invest our funds. Our goal is not to extend our maturities beyond 10 years unless we are matching cash flow to a specific debt service payment. While the intent is to hold to maturity, bonds are subject to interest rate risk as yields change in opposite direction of the bond price. While we record at year-end unrealized gains and losses we hold the investments to maturity and don’t realize any gains or losses. Interest income is the revenue source we budget, but yet knowing prices of bonds are always changing.