Information #2 Investment Report 04-19-2021Information
City of
Elk '
Pjveoro**�
To: Mayor and City Council
From: Lori Ziemer, Finance Director
Date: April 19, 2021
Subject: Quarterly Investment Report Uanuary —March 2021)
Memorandum
Introduction
The purpose of this report is to update the City Council on the status of the various investments the
city maintains as of March 31, 2021.
Background
The investment policy complies with state statutes and generally follows the Government Finance
Officers Association (GFOA) model.
The investment goals for the City of Elk River are passive in nature due to the allowable
investments permitted under state statutes. The city has four objectives for investing, in order of
importance, they are: 1) safety of principal, 2) liquidity, 3) return on investment, and 4) maintaining
the public trust. This means we are focused on not losing on the original investment, having
sufficient funds on hand to meet ongoing operating cash needs, getting a market rate of return, and
not purchasing speculative investments.
State statutes limit the city's ability to invest in many risky types of investments. The city is generally
limited to federal and state government obligations or agencies backed by them, rated debt of local
governments, short-term highly rated commercial paper, certificates of deposit, and money market
accounts (with collateralization if in excess of FDIC insurance amounts).
The city intends to hold investments until maturity, which means we will get the rate of return for
which we invest our funds. The finance staff makes sure the city is sufficiently liquid by continually
updating our forecast on the anticipated cash flow needs over the next five-year time horizon. We
anticipate two large tax settlements each year along with the regularly -scheduled debt service
payments. We also build in a reserve balance maintained in money market accounts in case of
unexpected expenditures.
Fed officials are optimistic about the overall economy and growth expectations for this year due to
government stimulus along with services opening as vaccinations ramp up. Treasury yields have
increased in the intermediate and long term from two years and beyond and have decreased in the
one -month through one-year terms. Three-month notes are yielding .03%, down from .09% at the
beginning of the year, and the 10-year notes are 1.74%, up from .93%.
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
Treasury Yield Curve
1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
-111121
-3/31/21
Cities generally use a short -horizon benchmark such as the two-year Treasury Bill or some similar
measure, as of the beginning of the year the two-year T-bill was at 0.16%, up from 0.11%. Our
current portfolio yield is roughly 2.26%.
Our primary reserve account is our 4M Fund which is a money market account where many cities
pool their funds. It currently yields 0.02% with daily withdrawal privileges. It is important the city
maintains a strong diversified portfolio prioritizing safety, liquidity, and flexibility in this market
environment.
Attachments
• Investment summary
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