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Factors Affecting Financial Condition (Continued) <br />Long -term financial planning. The city's current five -year financial plan, adopted in January, 2008, identifies <br />street and utility improvements totaling $23,287,990 over the period of 2008 through 2012. These improvements <br />are anticipated to be funded through a number of funding sources, including special assessments, municipal state <br />aid road funds, the area and unit trunk fund, the stormwater management fund and voter - approved tax levies. Also <br />included in the final year of the plan is a feasibility study for a new public works facility. Scheduled capital <br />equipment and office equipment needs and the financing for those needs are also included in the plan. The five - <br />year plan also includes funding projections for operations and operating impacts for the period of 2008 -2012. This <br />plan is in the process of being revised to reflect the anticipated activity through the year 2016. <br />Cash management policies and practices. The City's policy is to invest all available moneys at competitive <br />rates in accordance with Minnesota law. Investments are made by minimizing credit and market risks while <br />maintaining a competitive yield. Funds are invested in certificates of deposit, commercial paper and U.S. <br />government agencies. Cash is pooled in one account to provide maximum return. The City Council reviews the <br />investment policy annually. <br />The City's investment policy's primary objective is safety of principal. Therefore, all deposits were either insured <br />by Federal depository insurance or were collateralized as required by State Statute. Due to the weakened <br />economy, a historically low interest rate environment has persisted over the last few years and has had a dramatic <br />impact on the city's investment earnings. The average yield on investments for 2011 was 1.51 %. Investment <br />income includes positive or negative changes in the fair value of investments. Changes in fair value during the <br />current year, however, do not necessarily represent trends that will continue; nor is it always possible to realize <br />such amounts, especially in the case of temporary changes in the fair value of investments the City intends to hold <br />to maturity. <br />Risk management. The City's general property, liability and worker's compensation coverage is provided <br />through the League of Minnesota Cities Trust (LMCIT). <br />At the beginning of the insurance year, the city deposits with LMCIT a premium determined by calculating <br />estimated payroll and applying experience modification ratios. An audit is performed at the end of the insurance <br />year, which may produce a refund or an adjustment due. LMCIT's reserves and rates are reviewed annually by an <br />actuary to assure that the program remains financially strong. <br />6 <br />