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CITY OF LAKE ELMO, MINNESOTA
<br />NOTES TO THE BASIC FINANCIAL STATEMENTS
<br />DECEMBER 31, 2024
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<br />NOTE 2 DETAIL NOTES ON TRANSACTION CLASSES/ACCOUNTS (Continued)
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<br />2.A. CASH, CASH EQUIVALENTS, AND INVESTMENTS (Continued)
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<br />Investment balances at December 31, 2024 are as follows:
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<br />S & P's
<br />Credit Fair Value Fair Less
<br />Investment Type Rating Level Value Than 1 1 - 5 6 - 10
<br />Money Market Funds N/A N/A 1,157,483$ 1,157,483$ -$ -$
<br />U.S. Government Bonds AA+ to AAA Level 2 6,258,074 1,032,101 5,225,973 -
<br />Municipal Bonds A to AAA Level 2 10,288,535 511,407 7,769,914 2,007,214
<br />Brokered Certificates of Deposit NR Level 2 2,036,399 878,369 1,158,030 -
<br />Totals 19,740,491$ 3,579,360$ 14,153,917$ 2,007,214$
<br /> Investment Maturities (in Years)
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<br />The investments of the City are subject to the following risks:
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<br />• Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Ratings are
<br />provided by various credit rating agencies and where applicable, indicate associated credit risk. Minnesota Statutes
<br />limit the City’s investments. 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 are held,
<br />and diversifying the investment portfolio. This is measured by the assignment of a rating by a nationally recognized
<br />statistical rating organization.
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<br />• Custodial credit risk is the risk that in the event of a failure of the counterparty to a transaction, a government will not
<br />be able to recover the value of investment or collateral securities that are in the possession of an outside party. The
<br />City’s investment policy requires its brokers to be licensed with the appropriate federal and state agencies. A minimum
<br />capital requirement of $10,000,000 and at least five years of operation is mandatory. Investments in securities are held
<br />by the City’s broker-dealers. The securities at each broker-dealer are insured $500,000 through SIPC. Each broker-
<br />dealer has provided additional protection by providing additional insurance. This insurance is subject to aggregate
<br />limits applied to all of the broker-dealer’s accounts.
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<br />• Concentration of Credit Risk is the risk associated with the magnitude of the City’s investments (considered five
<br />percent or more) in the investments of a single issuer, excluding U.S. guaranteed investments (such as treasuries),
<br />investment pools, and mutual funds. The City’s investment policy allows no more than 5 percent of the overall
<br />portfolio to be invested in a single issuer, except for the securities of the U.S. Government, or a maximum of 25
<br />percent with any individual counter party in an external investment pool. At December 31, 2024, the City did not have
<br />a significant concentration of credit risk.
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<br />• Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The
<br />City’s investment policy states that extended maturities may be utilized to take advantage of higher yields; however
<br />no more than 25 percent of total investments should extend beyond five years and in no circumstance should any
<br />extend beyond ten years. The City’s investment portfolio is structured so that securities mature to meet cash
<br />requirements for ongoing operations.
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