|
City of Elk River
<br />Notes to Basic Financial Statements
<br />NOTE 3 — DEPOSITS AND INVESTMENTS (CONTINUED)
<br />A. Deposits
<br />Custodial Credit Risk — Deposits: This is the risk that in the event of a bank failure, the City's deposits
<br />may not be returned to it. The City (including Elk River Municipal Utilities) has an investment policy in
<br />place to address custodial credit risk for deposits, stating all deposits and investments must be in
<br />compliance with Minnesota Statutes 118A, with collateralization levels of 110% of the market value of
<br />the principal and accrued interest. As of December 31, 2022, the City's bank balance of $24,582,649
<br />was not exposed to custodial credit risk because it was insured and fully collateralized by federal
<br />depository insurance and collateral pledged. The book balance as of December 31, 2022, was
<br />$25,621,047.
<br />Discretely Presented Component Unit
<br />As of December 31, 2022, the HRA's bank balance of $794,556 was not exposed to custodial credit risk
<br />because it was fully collateralized. The HRA's book balance of all deposits at December 31, 2022,
<br />totaled $794,508.
<br />B. Investments
<br />Investment Maturities
<br />Credit
<br />Fair
<br />Less than
<br />Greater than
<br />Investment Type
<br />Rating
<br />Value
<br />One Year
<br />1-5 Years
<br />5 Years
<br />No Maturity
<br />Negotiable certificates of deposit
<br />N/A
<br />$ 8,024,458
<br />$ 2,375,460
<br />$ 5,442,896
<br />$ 206,102
<br />$
<br />Municipal bonds
<br />AA to AAA
<br />36,606,044
<br />4,110,996
<br />20,343,544
<br />12,151,504
<br />Government Securities
<br />N/A
<br />484,740
<br />-
<br />484,740
<br />-
<br />UBS Select Prime Institutional Money Market
<br />N/A
<br />1,254,706
<br />-
<br />1,254,706
<br />Minnesota Municipal Money Market (4M Fund)
<br />N/A
<br />12,442,173
<br />12,442,173
<br />Other money market funds
<br />N/A
<br />46,685
<br />-
<br />-
<br />46,685
<br />Total
<br />$ 58,858,806
<br />$ 6,486,456
<br />$ 26,271,180
<br />$ 12,357,606
<br />$ 13,743,564
<br />Concentration Risk: This is the risk associated with investing a significant portion of the City's
<br />investment (considered 5% or more) in the securities of a single issuer and no more than 50% of the
<br />City's total investment portfolio may be invested in certificates of deposit or commercial paper. As of
<br />December 31, 2022, the City had invested 5% or more of its total investment portfolio in one single
<br />issuer, the Minnesota Municipal Money Market (4M Fund).
<br />Credit Risk: Credit risk is the risk that an issuer to an investment will not fulfill its obligation. State law
<br />limits investments in state and local securities and commercial paper to those with specified rating by
<br />nationally recognized rating agencies. U.S. treasury obligations are not considered to have credit risk.
<br />The City's investment policy does not further limit the ratings of their investments.
<br />Interest Rate Risk: This is the risk that fair values of securities in a portfolio would decrease due to
<br />changes in fair value interest rates. The City's investment policy uses diversification of maturity dates as
<br />a means of managing exposure to fair value by stating that no more than 30% of the City's investments
<br />may extend beyond a five-year maturity.
<br />65
<br />
|