13.2 SR 04-21-2025The Elk River Vision
A welcoming community with revolutionary and spirited resourcefulness, exceptional service, and community
engagement that encourages and inspires prosperity
[ITEM_HEAD]
Request for Action
To
City Council
Item Number
13.2
Meeting Date
April 21, 2025
Prepared By
Lori Stich, Finance Manager
Item Description
Investment Report - 1st quarter
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 city's financial investments as of
March 31, 2025.
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 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 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 more than FDIC insurance amounts).
The city intends to hold investments until maturity, which means we will get the rate of return at which we
invest our funds. The finance staff ensures the city is sufficiently liquid by continually updating our forecast on
the anticipated cash flow needs over the next five-year period. 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 3/31/25, the two-year T-bill was at 3.89%, down from 4.25% on 1/2/25. Our current portfolio yield is
roughly 4.39%.
Our primary reserve account is our 4M Fund, which is a money market account where many cities pool their
funds. It currently yields 4.289% with daily withdrawal privileges. It is important that the city maintains a
strong diversified portfolio, prioritizing safety, liquidity, and flexibility in this market environment.
Financial Impact
N/A
Mission/Policy/Goal
Responsible for every dollar - good stewards
Attachments
1. 03-2025 Investment summary
Page 196 of 197
RX XX694 • City of Elk River • Business Service AccountPrepared forCity of Elk RiverRisk profile:ConservativeReturn Objective:Current IncomeBond Summaryas of March 31, 2025Bond SummaryBond Overview50,403,000Total quantityTotal market value$47,995,050.57Total accrued interest$249,520.96Total market value plus accrued interest$48,244,571.53Total estimated annual bond interest$1,525,355.52Average yield to maturityAverage coupon3.14%4.39%3.18%4.39%Average current yieldAverage yield to worstAverage modified duration2.87Average effective maturity3.90Investment Type AllocationTaxable ($)Investment typeTotal ($)Tax-exempt /deferred ($)% ofbondport.Asset/Mortgage17,306,212.430.0017,306,212.4335.87Certificates of deposit3,470,923.590.003,470,923.597.19Municipals26,964,105.510.0026,964,105.5155.89U.S. federal agencies503,330.000.00503,330.001.04Total$48,244,571.53$0.00$48,244,571.53100%Credit Quality of Bond Holdings108.04Aaa/AAA/AAAA3,880,926.375247.67Aa/AA/AAB23,020,628.3121.14A/A/AC550,946.3300.00Baa/BBB/BBBD0.0000.00Non-investment gradeE0.00157.19Certificate of depositF3,470,923.592335.95Not ratedG17,321,146.93Total100%$48,244,571.53102Effective credit rating% ofport.Value on03/31/2025 ($)IssuesBond Maturity ScheduleEffective maturity schedule2025202620272028202920302031203220332034203520362036 +Other0.02.55.07.510.011.8%10.1%7.8%15.4%15.7%16.8%12.2%7.0%2.7%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: April 01, 2025Page 3of 33Page 197 of 197