13.2 SR 07-15-2024The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community
engagement that encourages and inspires prosperity
Request for Action
To
City Council
Item Number
13.2
Meeting Date
July 15, 2024
Prepared By
Lori Stich, Finance Manager
Item Description
Investment Report - 2nd Quarter 2024
Reviewed by
Lori Stich
Joe Stremcha
Cal Portner
Tina Allard
Action Requested
Information only.
Background/Discussion
Introduction
The purpose of this report is to update the City Council on the status of the various investments the city
maintains as of June 30, 2024.
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 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 on 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.
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Cities generally use a short-horizon benchmark such as the two-year Treasury Bill or some similar measure.
As of 6/30/24, the two-year T-bill was at 4.71%, up from 4.59% on 3/28/24. Our current portfolio yield is
roughly 5.04%.
Our primary reserve account is our 4M Fund, which is a money market account where many cities pool their
funds. It currently yields 5.234% with daily withdrawal privileges. The city must maintain a strong and
diversified portfolio, prioritizing safety, liquidity, and flexibility in this market environment.
Financial Impact
N/A
Mission/Policy/Goal
Grow responsibly and be good stewards for every dollar to develop a sustainable and prosperous community
Attachments
1. 06-2024 Investment summary
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RX XX694 • City of Elk River • Business Service AccountPrepared forCity of Elk RiverRisk profile:ConservativeReturn Objective:Current IncomeBond Summaryas of June 30, 2024Bond SummaryBond Overview48,873,000Total quantityTotal market value$45,133,154.45Total accrued interest$281,694.59Total market value plus accrued interest$45,414,849.03Total estimated annual bond interest$1,347,801.21Average yield to maturityAverage coupon2.88%5.04%2.99%5.04%Average current yieldAverage yield to worstAverage modified duration3.27Average effective maturity4.01Investment Type AllocationTaxable ($)Investment typeTotal ($)Tax-exempt /deferred ($)% ofbondport.Asset/Mortgage11,229,731.120.0011,229,731.1224.73Certificates of deposit4,145,650.390.004,145,650.399.13Municipals29,539,452.520.0029,539,452.5265.04U.S. federal agencies500,015.000.00500,015.001.10Total$45,414,849.03$0.00$45,414,849.03100%Credit Quality of Bond Holdings128.76Aaa/AAA/AAAA3,993,619.126256.15Aa/AA/AAB25,509,617.2410.57A/A/AC260,305.9710.60Baa/BBB/BBBD271,032.9000.00Non-investment gradeE0.00189.12Certificate of depositF4,145,650.391324.81Not ratedG11,234,623.42Total100%$45,414,849.03107Effective credit rating% ofport.Value on06/30/2024 ($)IssuesBond Maturity ScheduleEffective maturity schedule2024202520262027202820292030203120322033203420352035 +Other0.02.55.07.54.3%13.0%12.6%8.6%16.1%15.2%16.6%9.7%3.4%0.0%0.0%0.0%0.0%0.0%Cash, mutual funds and some preferred securities are not included.$ MillionsIncludes all fixed income securities in the selected portfolio. Average yields and durations exclude Structured Product, Pass-Through, Perpetual Preferred, and Foreign securities.Accrued interest, if any, has been included in the total market value.Report created on: July 01, 2024Page 3of 33Page 389 of 389