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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2021 <br /> <br /> <br /> <br /> <br /> <br />C. INVESTMENT RISKS <br /> <br />Custodial Credit Risk – Investments – For investments 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 investment securities that are in the possession of an outside party. Investments in <br />investment pools and money markets are not evidenced by securities that exist in physical or book <br />entry form, and therefore are not subject to custodial credit risk disclosures. The City’s investment <br />policy requires its brokers be licensed with the appropriate federal and state agencies. A minimum <br />capital requirement of $5,000,000 and at least five years of operation is mandatory. Investments in <br />securities are held by the City’s broker-dealers. The securities at each broker-dealer are insured <br />$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- <br />dealer’s accounts. <br /> <br />Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect <br />the 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 <br />interest rate risk includes investing primarily in short-term securities and structuring the investment <br />portfolio so that securities mature to meet cash requirements for ongoing operations. <br /> <br />Credit Risk – Credit risk is the risk than an issuer of an investment will not fulfill its obligation to <br />the holder of the investment. The City’s policy to minimize credit risk includes limiting investing <br />funds to those allowable under Minnesota Statute 118A, annually appointing all financial <br />institutions where investments are held, and diversifying the investment portfolio. This is measured <br />by the assignment of a rating by a nationally recognized statistical rating organization. <br /> <br />Concentration of Credit Risk – Concentration of credit risk is the risk of loss that may be attributed <br />to the magnitude of a government’s investment in a single issuer. The City places no limit on the <br />amount it may invest in any one issuer. At December 31, 2021, no individual investments <br />exceeded 5% of the City’s total investment portfolio. <br /> <br /> <br />Note 3 RECEIVABLES <br /> <br />Significant receivable balances not expected to be collected within one year of December 31, 2021 are as <br />follows: <br /> <br />Property Special <br />Taxes Assessments <br />Receivable Receivable Total <br />Major Funds: <br /> General Fund $29,134 $ - $29,134 <br /> G.O. Improvement Note of 2009A - 2,150,712 2,150,712 <br /> G.O. Improvement Bonds of 2016B - 2,994,379 2,994,379 <br /> Area and Unit Charge - 2,044,809 2,044,809 <br />Nonmajor Funds - 1,515,668 1,515,668 <br /> Total $29,134 $8,705,568 $8,734,702 <br /> <br />55