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IV-26CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 At December 31, 2018, the City bad the following investments and maturities: Investment Maturities (in Years) Less Investment~ !!!l!!I. Fair Value Than 1 I - 3 _1..:..§. Brokered certificates of deposit Municipal bonds Federal Home Loan Mortgage Corp. 4Mfund First American Govi Obligation fund Invesco Govi & Agency fund Total * AAA $1,627,686; AA+ $1,671,406 AA $3,908,093; AA-$3,851,826 A+ $228,655; A $608,094 Not rated . AAA Not rated AAAm AAAm $21,764,879 11,895,760 1,481,550 9,227,709 1,478,455 599,883 ~ $5,281,248 3,630,158 9,227,709 1,478,455 599,883 $20,217,453 · $13,223,194 6,205,751 $19,428,945 Total investments Deposits Petty cash Total cash and investments These amounts are presented in the financial statements as follows: Cash and investments: Governmental and business-type {Statement 1) Fiduciazy {Statement 10) Total $49,713,561 1,450,303 $51,163,864 $3,260,437 2,059,851 1,481,550 $6,801,838 $46,448,236 4,714,688 940 $51,163,864 The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. The hierarchy has three levels. Level I investments are valued using inputs that are based on quoted prices in active markets for identical assets. Level 2 investments are valued using inputs that are based on quoted prices for similar assets or inputs that are observable, either directly or indirectly. Level 3 investments are valued using inputs that are unobservable. CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 The City has the following recurring fair value measurements at December 31, 2018: Investment~ Investtnents at fair value: Brokered certificates of deposit Municipal bonds Federal Home Loan Mortgage Corp. Investtnents not categorized: 4Mfund First American Go~ Obligation fund Invesco Govi & Agency fund Total investments 12/31/2018 $21,764,879 11,895,760 1,481,550 9,227,709 1,478,455 599,883 ~ Fair Value Measurement Us!!!s. ~ Level2 ~ $0 $21,764,879 11,895,760 1,481,550 $35,142,189 $0 The 4M fund is an external investment pool investment which is regulated by Minnesota Statutes and the Board of Directors of the League of Minnesota Cities. It is an unrated pool and the fair value of the position in the pool is the same as the value of pool shares. The pool is managed to maintain a portfolio weighted average maturity of no greater than 60 days and seeks to maintain a constant net asset value {NA V) of $1 per share. The pool measures its investments at amortized cost in accordance with GASB Statement No. 79. The 4M Plus fund requires funds to be deposited for a minimwn of 14 calendar days. Withdrawals prior to the 14-day restriction period are subject to penalty equal to 7 days interest on the amount withdrawn. The First American Government Obligation money market fund and the Invesco Government & Agency money market fund are external investment pools. Each fund seeks to maintain a constant net asset value {NA V) of $1 per share. The securities held by each fund are valued on the basis of amortized cost. Shares may be redeemed without penalty on any business day. C. INVESTMENT RISKS Custodial Credit Risk -Investments -For investments in securities, custodial credit risk is the risk that in the event of failure of the counterparty to a transaction, the City will not be able to recover the value of its investment securities that are in the possession of an outside party. Investments in investment pools and money markets are not evidenced by securities that exist in physical or book entry form, and therefore are not subject to custodial credit risk disclosures. The City's investment policy requires its brokers be licensed with the appropriate federal and state agencies. A minimwn capital requirement of $5,000,000 and at least five years of operation is mandatory. Investments in securities are held by the City's broker-dealers. The securities at each broker-dealer are insured $500,000 through SIPC. Each broker-dealer has provided additional protection by providing additional insurance. This insurance is subject to aggregate limits applied to all of the broker-dealer's accounts. Interest Rate Risk -Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates; The City's policy to minimize interest rate risk includes investing primarily in short-term securities and structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations.
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