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City of Mounds View Staff Report
<br /> January 30, 1997
<br /> Page 2
<br /> within the state must follow. In simplified terms, we are authorized to invest in 11111
<br /> obligations of the United States (U. S. Treasuries and other associated agencies), short
<br /> term commercial paper, collateralized investments from banks (banks pledge some of
<br /> their investments in US Government obligations as collateral on our investment with
<br /> them), and a variety of other securities such as mortgage pools, mutual funds, etc. that
<br /> meet certain preestablished investment guidelines. Cities have the option of establishing
<br /> guidelines that are more restrictive than the State Statutes.
<br /> As a general rule, the longer you invest your money,the higher the interest rate and your
<br /> return. US Treasury securities are generally deemed to be very low risk, are not subject
<br /> to state income tax, therefore their yields are generally lower than other investments.
<br /> Commercial paper is generally on the higher end of yields, but statutes limit the maturity
<br /> to 270 days or less. My philosophy for investing is to establish an investment ladder,
<br /> whereby investment maturities are staggered over a period of time, which is generally
<br /> five years, and as investments mature and revenues are received, new investments with
<br /> five year maturities are purchased. Due to uneven cash flow(majority of revenue
<br /> received in July and December), I also supplement the laddered investments with shorter
<br /> term investments such as callable certificates of deposits or government agency paper
<br /> (since these investments generally pay a higher rate of return than commercial paper and
<br /> will generally be called), commercial paper, etc. On any callable investments, I try to
<br /> avoid paying a premium since this will reduce the yield that is ultimately received. Over 410the last six months, I have been trying to obtain an understanding of existing and future
<br /> obligations prior to establishing a laddered approach to investing, and as such, most of
<br /> the City's money is being held in relatively short term investments. The following is a
<br /> summary of our investments:
<br /> By broker/institution:
<br /> Smith Barney $ 3,800,000
<br /> Dain Bosworth 3,596,000
<br /> Prudential 2,250,000
<br /> Norwest 2,672,000
<br /> State Bank 1,043,000
<br /> Dreyfus 668,000
<br /> Western Bank 200,000
<br /> Total $14,229,000
<br /> By maturities: $750,000 due in 1999, $1,550,000 due in 1998, $9,980,000 in 1997,
<br /> $595,000 in callable instruments with the first call in 1997, and the balance of$1,160,000
<br /> in mortgage backed securities (monthly payment of principal and interest; four separate
<br /> pools which were purchased at a discount, and will be sold when the amount outstanding
<br /> for each pool is in the $100,000 to $150,000 range).
<br /> By type of investment: $200,000 in Western Bank non-interest bearing checking account, •
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