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Elk River Municipal Utilities
<br />Elk River, Minnesota
<br />Notes to the Financial Statements
<br />December 31, 2023
<br />Note 2: Detailed Notes on All Funds (Continued)
<br />The investments of the Utilities are subject to the following risks:
<br />• Credit Risk. Is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Ratings
<br />are provided by various credit rating agencies and where applicable, indicate associated credit risk. Minnesota
<br />statutes and the Utilities' investment policy limit the Utilities' investments to the list on page 30 of the notes.
<br />Custodial Credit Risk. The custodial credit risk for investments is the risk that, in the event of the failure of the
<br />counterparty to a transaction, a government will not be able to recover the value of investment or collateral
<br />securities that are in the possession of an outside party. According to their investment policy the Utilities'
<br />portfolio maturities shall be staggered to avoid undue concentration of assets with one broker -dealer or financial
<br />institution.
<br />Concentration of Credit Risk. Is the risk of loss attributed to the magnitude of a government's investment in a
<br />single issuer. According to their investment policy the Utilities' portfolio maturities shall be staggered to avoid
<br />undue concentration of assets in any one type of instrument. As of December 31, 2023 the Utilities has invested
<br />5.0 percent or more of its total investment portfolio in the following issuers: FHLMC (7.9%), State Bank of Indi NY
<br />(6.6%), Customers Bank PA (6.6%), Morgan Stanley PRI NY (6.5%), New York Community Bank NY (6.3%), Popular
<br />Bank NY (6.2%), Texas Exchange Bank TX (6.2%), Goldman Sachs Bank UT (6.1 %), Institution for SV MA (6.1 %),
<br />Sallie Mae Bank UT (6.0%), Beal Bank — Plano TX (6.0%), BMO Harris Bank NA IL (5.9%), JPMorgan Chase Bank
<br />OH (5.8%), Celtic Bank UT (5.6%), and Ally Bank UT (5.2%).
<br />• Interest Rate Risk. Is the risk that changes in interest rates will adversely affect the fair value of an investment.
<br />According to their investment policy the Utilities' will stagger maturities to avoid undue concentration of assets at
<br />a specific maturity sector.
<br />B. Lease Receivable
<br />The Utilities has multiple leases with Sprint and Verizon that allows them to place antennas on water towers. The lease
<br />payments increase yearly. As of December 31, 2023, the Utilities' lease receivable balance was $5,009,845. This is
<br />partially offset with deferred inflow of lease resources.
<br />Lease
<br />Receivable
<br />Interest
<br />Authorized
<br />Interest
<br />Issue
<br />Maturity
<br />Balance at
<br />Receivable at
<br />Balance at
<br />Description
<br />and Issued
<br />Rate
<br />Date
<br />Date
<br />Year End
<br />Year End
<br />Year End
<br />Sprint Lease on Johnson St.
<br />$ 741,068
<br />1.41 i
<br />06/01 /10
<br />05/31 /35
<br />$ 655,154
<br />$ 5,408
<br />$ 660,562
<br />Sprint Lease on Gary St.
<br />694,752
<br />1.41
<br />06/01 /10
<br />05/31 /35
<br />614,207
<br />5,070
<br />619,277
<br />Sprint Lease on Auburn St.
<br />694,752
<br />1.41
<br />06/01 /10
<br />05/31 /35
<br />614,207
<br />5,070
<br />619,277
<br />Verizon Lease on Johnson St.
<br />837,781
<br />1.60
<br />09/01 /14
<br />08/31 /39
<br />775,850
<br />4,120
<br />779,970
<br />Verizon Lease on Gary St.
<br />837,781
<br />1.59
<br />09/01 /14
<br />08/31 /39
<br />775,850
<br />4,120
<br />779,970
<br />Verizon Lease on Auburn St.
<br />909,094
<br />1.70
<br />01/01/17
<br />12/31/42
<br />849,585
<br />14,555
<br />864,140
<br />Verizon Lease on Freeport St.
<br />724,310
<br />1.78
<br />10/01 /20
<br />09/30/45
<br />683,602
<br />3,047
<br />686,649
<br />Total Lease Receivable
<br />$ 5, 009,845
<br />37
<br />102
<br />
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