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CITY OF LINO LAKES, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />December 31, 201 7
<br />At December 31, 2017, the City had the following investments and maturities:
<br />Investment Maturities (in Years}
<br />Investment T1E,e
<br />Wells Fargo money market
<br />Morgan Stanley money market
<br />4MFund
<br />Brokered CD's
<br />Municipal bonds
<br />Federal Home Loan Mortgage Corp.
<br />Total
<br />NR -Not Rated
<br />~
<br />NR
<br />NR
<br />NR
<br />NR .
<br />AAA
<br />Fair Less
<br />Value Than 1
<br />$4,275,289 $4,275,289
<br />24,165 24,165
<br />7,207,927 7,207,927
<br />16,419,585 6,887,755
<br />l0,908,237 1,568,897
<br />11482JIO
<br />$40,3171413 $19,964,033
<br />Total investments
<br />Deposits
<br />Petty cash
<br />1-5
<br />8,413,876
<br />8,746,306
<br />$17,160,182
<br />• AAA $1,975,589; AA+ $463,359
<br />AA $3,507,002; AA-$2,967,505
<br />A+ $710,532 Total cash and investments
<br />These amounts are presented in the financial statements as follows:
<br />Cash and investments:
<br />Governmental and business-type (Statement 1)
<br />Fiduciary (Statement 10)
<br />Total
<br />$38,856,678
<br />1,719,511
<br />$40,576,189
<br />6-8
<br />1,117,954
<br />593,034
<br />1,482,2IO
<br />~
<br />$40,317,413
<br />257,836
<br />940
<br />$40,576,189
<br />The City categorizes its fair value measurements within the fair value hierarchy established by generally
<br />accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair
<br />value of the asset. The hierarchy has three levels. Level I investments are valued using inputs that are
<br />based on quoted prices in active markets for identical assets. Level 2 investments are valued using
<br />inputs that are based on quoted prices for similar assets or inputs that are observable, either directly or
<br />indirectly. Level 3 investments are valued using inputs that are unobservable.
<br />CITY OF LINO LAKES, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />December 31, 2017
<br />The City has the following recurring fair value measurements at December 31, 2017:
<br />Investment TlP_e
<br />Investments at fair value:
<br />Brokered CD's
<br />Municipal bonds
<br />Federal Home Loan Mortgage Corp.
<br />Investments not categoriud:
<br />Wells Fargo money market
<br />Morgan Stanley money market
<br />4MFund
<br />Tot.al investments
<br />12/31/2017
<br />$16,419,585
<br />10,908,237
<br />1,482,210
<br />4,275,289
<br />24,165
<br />7,207,927
<br />$40,317,413
<br />Fair Value Measurement Usin,&
<br />~ Level 2 Level 3
<br />$0
<br />$16,419,585
<br />10,908,237
<br />1,482,210
<br />~
<br />The 4M Fund is an external investment pool investment which is regulated by Minnesota Statutes and
<br />the Board of Directors of the League of Minnesota Cities. It is an unrated pool and the fair value of the
<br />position in the pool is the same as the value of pool shares. The pool is managed to maintain a portfolio
<br />weighted average maturity of no greater than 60 days and seeks to maintain a constant net asset value
<br />(NA V) of$ I per share. The pool measures its investments at amortized cost in accordance with GASB
<br />Statement No. 79. The 4M Plus Fund requires funds to be deposited for a minimum of 14 calendar
<br />days. Withdrawals prior to the 14-day restriction period are subject to penalty equal to 7 days interest
<br />on the amount withdrawn.
<br />C. INVESTMENT RISKS
<br />Custodial Credit Risk -Investments -For investments in securities, custodial credit risk is the risk
<br />that in the event offailure of the counterparty to a transaction, the City will not be able to recover
<br />the value of its investment securities that are in the possession of an outside party. Investments
<br />in investment pools and money markets are not evidenced by securities that exist in physical or
<br />book entry form, and therefore are not subject to custodial credit risk disclosures. The City's
<br />investment policy requires its brokers be licensed with the appropriate federal and state agencies. A
<br />minimum capital requirement of $5,000,000 and at least five years of operation is mandatory.
<br />Investments in securities are held by the City's broker-dealers. The securities at each broker-dealer are
<br />insured $500,000 through SIPC. Each broker-dealer has provided additional protection by providing
<br />additional insurance. This insurance is subject to aggregate limits applied to all of the broker-dealer's
<br />accounts.
<br />Interest Rate Risk -Interest rate risk is the risk that changes in interest rates will adversely affect the
<br />fair value of an investment. Generally, the longer the maturity of an investment, the greater the
<br />sensitivity of its fair value to changes in market interest rates. The City's policy to minimize interest
<br />rate risk includes investing primarily in short-tenm securities and structuring the investment portfolio so
<br />that securities mature to meet cash requirements for ongoing operations.
<br />Credit Risk -Credit risk is the risk than an issuer of an investment will not fulfill its obligation to the
<br />holder of the investment. The City's policy to minimize credit risk includes limiting investing funds to
<br />those allowable under Minnesota Statute 118A, annually appointing all financial institutions where
<br />$0 IV-24
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