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7 <br /> SECTION 4 - INVESTMENTS <br /> <br />Purpose <br />The City is committed to managing investments in a manner that protects investment capital, <br />provides liquidity for adequate cash flow, and provides an acceptable rate of return. Investment <br />earnings also generate a predictable source of annual revenue for the City. <br /> <br />Policy <br /> <br />The City will maintain a program for the investment of funds in a manner which maximizes <br />security, provides a maximum return, and meets daily cash flow demands. The investments will <br />conform to all applicable federal and state statutes regarding the investment of public funds. The <br />Finance Director will exercise investment strategy and monitoring, and the investment results <br />shall be presented to the City Council at least quarterly. <br /> <br />Objectives <br /> <br />The primary objectives of investment activities, in order of priority, shall be safety, liquidity, and <br />return: <br /> <br />1. Safety <br />Investments shall be administered in a manner that seeks to ensure the preservation of capital <br />in the overall portfolio. The objective will be to mitigate credit risk and interest rate risk. <br /> <br />A. Credit Risk <br />The City will minimize credit risk, which is the risk of loss of all or part of the investment <br />due to the failure of the security issuer or backer, by: <br /> Limiting investments to the types of investments authorized by Minnesota State <br />Statutes. These investments are listed under Authorized Investments. <br /> The City will minimize deposit Custodial Credit Risk, which is the risk of loss due to a <br />depository bank failure (or credit union) by obtaining collateral or bonds for all <br />uninsured deposits, and by obtaining necessary documentation to show compliance <br />with state law and federal law. <br /> The City will eliminate investment Custodial Credit Risk by permitting brokers that <br />obtained investments for the City to hold them only to the extent there is Securities <br />Investment Protection Corporation (SIPC) and excess SIPC coverage available. <br />Securities purchased that exceed available SIPC coverage shall be held in safekeeping. <br /> Diversifying the investment portfolio so that the impact of potential losses from any <br />one type of security or from any one individual issuer will be minimized. <br /> <br />B. Interest Rate Risk <br />The City will minimize interest rate risk, which is the risk that the market value of <br />securities in the portfolio will fall due to changes in market interest rates, by: <br /> Structuring the investment portfolio so that security maturities match cash <br />requirements for ongoing operations. This will avoid the need to sell securities on the <br />open market prior to maturity. <br /> Investing operating funds primarily in shorter-term securities, money market mutual