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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2024 <br /> <br /> <br /> <br /> <br />The City has the following recurring fair value measurements at December 31, 2024: <br /> <br />Investment Type 12/31/2024 Level 1 Level 2 Level 3 <br />Investments at fair value: <br />Municipal bonds $25,410,740 $ - $25,410,740 $ - <br />Brokered certificate of deposits 9,337,295 - 9,337,295 - <br />Federal agency securities 5,312,124 - 5,312,124 - <br />$ - $40,060,159 $ - <br />Investments not categorized: <br />4M Liquid Asset Class 713,386 <br />4M PLUS Class 486,366 <br />First American Treasury Obligation Fund 1,270,659 <br />Total investments $42,530,570 <br />Fair Value Measurement Using <br /> <br /> <br />C. INVESTMENT RISKS <br /> <br />Custodial Credit Risk – Investments – For investments in securities, custodial credit risk is the risk that in <br />the event of failure of the counterparty to a transaction, the City will not be able to recover the value of its <br />investment securities that are in the possession of an outside party. Investments in investment pools and <br />money markets are not evidenced by securities that exist in physical or book entry form, and therefore are <br />not subject to custodial credit risk disclosures. The City’s investment policy requires its brokers be <br />licensed with the appropriate federal and state agencies. A minimum capital requirement of $5,000,000 <br />and at least five years of operation is mandatory. Investments in securities are held by the City’s broker- <br />dealers. The securities at each broker-dealer are insured $500,000 through SIPC. Each broker-dealer has <br />provided additional protection by providing additional insurance. This insurance is subject to aggregate <br />limits applied to all of the broker-dealer’s accounts. <br /> <br />Interest Rate Risk – Interest rate risk is the risk that changes in interest rates will adversely affect the fair <br />value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its <br />fair value to changes in market interest rates. The City’s policy to minimize interest rate risk includes <br />investing primarily in short-term securities and structuring the investment portfolio so that securities mature <br />to meet cash requirements for ongoing operations. <br /> <br />Credit Risk – Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder <br />of the investment. The City’s policy to minimize credit risk includes limiting investing funds to those <br />allowable under Minnesota Statute 118A, annually appointing all financial institutions where investments <br />are held, and diversifying the investment portfolio. This is measured by the assignment of a rating by a <br />nationally recognized statistical rating organization. <br /> <br />Concentration of Credit Risk – Concentration of credit risk is the risk of loss that may be attributed to the <br />magnitude of a government’s investment in a single issuer. The City places no limit on the amount it may <br />invest in any one issuer. At December 31, 2024, no individual investments exceeded 5% of the City’s total <br />investment portfolio. <br /> <br /> <br />57 <br />Page 93 of 353