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CITY OF LINO LAKES, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />December 31, 2019
<br />At December 31, 2019, the City had the following invesbnents and maturities:
<br />ftMstment_~ties (in Years)
<br />Inwstment:!l'.i!!?.
<br />Brokered certificates of deposit
<br />Municipal bonds
<br />Federal Home Loan Mortgage Corp.
<br />4Mlimd
<br />First American Govt Obligation fund
<br />Total
<br />• AAA $2,312,282; AA+ $2,599,103
<br />AA $2,607,390;AA-$1,974,259
<br />A+ $2,144,214;A$614,244
<br />.!!!!!!!&
<br />Not rated .
<br />AA+
<br />Not rated
<br />AAAm
<br />Fair
<br />Value
<br />$22,924,803
<br />12,251,492
<br />1,499,855
<br />4,457,891
<br />3,092,898
<br />$44.226,939
<br />Less
<br />Than! 1-3
<br />$7,881,574 $10,456,546
<br />2,685,184 5,973,762
<br />4,457,891
<br />3,092,898 _
<br />$18,117,547 $16,430,308
<br />Total iDYCstments
<br />Deposits
<br />Petty cash
<br />Total cash and investments
<br />3-6
<br />$4,586,683
<br />3,592,546
<br />1,499,855
<br />$9,679,084
<br />$44,226,939
<br />4,768,651
<br />940
<br />$48,996,530
<br />The City categorizes its fair value measurements within the fair value hierarchy established hy 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 invesbnents are valued using inputs that are
<br />based on quoted prices in active markets for identical assets. Level 2 invesbnents 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 invesbnents are valued using inputs that are unobservable.
<br />The City has the following recurring fair value measurements at December 31, 2019:
<br />ln"'stmentlll!!!.
<br />lnwsnnents at fair value:
<br />Brokered certificates of deposit
<br />Municipal bonds
<br />Federal Home Loan Mortgage Corp.
<br />tnwsnnents not categorized:
<br />12/31/2019
<br />$22,924,803
<br />12,251,492
<br />1,499,855
<br />4M fimd 4,457,891
<br />First American Govt Obligation fund 3,092,898
<br />Total inwstments $44,226,939
<br />Fair Value Measurement Usi.!Y!_
<br />~ Le"'12 Le"'l3
<br />$22,924,803
<br />12,251,492
<br />1,499,855
<br />___ s_o_ S36,676,1so £0
<br />The 4M fund is an external invesbnent pool invesbnent 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 $1 per share. The pool measures its invesbnents at amortized cost in accordance with GASB
<br />Statement No. 79. The 4M Plus fund requires funds to be deposited for a minimum of 14 calendar
<br />days. Withdrawals prior to the 14-day restriction period are subject to penalty equal to 7 days interest
<br />on the amount withdrawn.
<br />The First American Government Obligation money market fund is an external invesbnent pool. The
<br />fund seeks to maintain a constant net asset value (NAV) of$! per share. The securities held by the
<br />CITY OF LINO LAKES, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />December 31, 2019
<br />fund are valued on the basis of amortized cost. Shares may be redeemed without penalty on any
<br />business day.
<br />C. INVESTMENT RISKS
<br />Custodial Credit Risk -Invesbnents -For invesbnents in securities, custodial credit risk is the risk
<br />that in the event of failure of the counterparty to a transaction, the City will not be able to recover
<br />the value of its invesbnent securities that are in the possession of an outside party. Invesbnents
<br />in invesbnent 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 />invesbnent 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 />Invesbnents 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 invesbnent. Generally, the longer the maturity of an invesbnent, the greater the
<br />sensitivity ofits fair value to changes in market interest rates. The City's policy to minimize interest
<br />rate risk includes investing primarily in short-term securities and structuring the invesbnent 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 invesbnent will not fulfill its obligation to the
<br />holder of the invesbnent. 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 />invesbnents are held, and diversifying the invesbnent portfolio. This is measured by the assignment of
<br />a rating by a nationally recognized statistical rating organization.
<br />Concentration of Credit Risk Concentration of credit risk is the risk of loss that may be attributed to
<br />the magnitude of a government's invesbnent in a single issuer. The City places no limit on the amount
<br />it may invest in any one issuer. At December 31, 2019, no individual invesbnents exceeded 5% of the
<br />City's total invesbnent portfolio. IV-23
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