Information #2 04-18-2022Information
City
�
Memorandum
To: MayTor and CityT Council
From: Lori Ziemer, Finance Director
Date: Apri118, 2022
SubjeCt: QuarterlyT Investment Report �anuaryT — March 2022)
Introduction
The purpose of this report is to update the CityT Council on the status of the various investments the
cit�r maintains as of March 31, 2022.
Background
The investment policy complies �uith state statutes and generallyT follo�us the Government Finance
Officers Associarion (GFOA) model.
The investment goals for the Cit�T of Elk River are passive in nature due to the allowable
investments permitted under state statutes. The cityT has four objectives for investing, in order of
importance, they are: 1) safetyT of principal, 2) liquidityT, 3) return on investment, and 4) maintaining
the public trust This means we aYe 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 b�T them, rated debt of local
governments, short-term highlyT rated commercial paper, certificates of deposit, and moneyT market
accounts (with collateYalization if in excess of FDIC insurance amounts).
The cityT intends to hold investments until maturityT, which means we will get the rate of return for
which we invest our funds. The finance staff makes sure the cityr is sufficiently liquid byr continually
updating our forecast on the anticipated cash flo`v needs over the next five-�rear time horizon. We
anticipate two large tax settlements each year along with the regularly-scheduled debt service
pa�rments. We also build in a reserve balance maintained in money market accounts in case of
unexpected expenditures.
As woYkeYs YetuYned to the laboY foYce and the economy YepoYted strong job growth, the
unemployTment rate dropped to 3.6%, near the pre-pandemic rate of 3.5%. Booming employTment
has pushed hourly earnings up 5.6% over the past yTear. TreasuryT yTields have increased across the
board and the dip in the 10-yTear Treasur�T suggests continued inflationar�T pressures and reflect the
expectations of fed funds rate increases.
� Treasury Yi�ld Cur�e
3.00f � -
2 .50 %
2.00 %
1.50 %
1.00 f
0.50 %
0.00 %
1 rr�o 3 rno 5 rno 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr
12�31�21
-� E�.� �-,-,
Cities generallyT use a short-horizon benchmark such as the t�vo-yTear TreasuryT Bill or some similar
measure, as of 3�31�22 the two-year T-bill was at 2.28%, up from .73% at 12�31�21. Our cuYrent
portfolio yTield is roughlyT 2.73%.
Our primaryT reserve account is our 4M Fund which is a moneyT market account �vhere manyT cities
pool their funds. It currently yTields .053% with daily withdrawal privileges. It is important the cityT
maintains a strong diversified portfolio prioritizing safetyT, liquidityT, and fle�bilityT in this market
environment.
Attachments
Investment summary
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