(A) Authorization. Pursuant to Minnesota Statutes and this section, the city is authorized to invest any funds not presently needed for its obligations. In accordance the city may invest its idle funds in certain specified obligations and it may make interest-bearing deposits of such funds in state or national banks and savings and loan associations.
(B) Permissible investments.
(1) Permissible investments and interest-bearing deposits are set forth in this section.
(a) Direct U.S. government obligations:
1. Treasury bills;
2. Certificates of indebtedness;
3. Treasury notes;
4. Treasury bonds;
(b) Federal agency issues (not directly guaranteed by U.S. government):
1. Federal home loan banks;
2. Federal national mortgage association;
3. Federal land banks;
4. Federal intermediate credit banks;
5. Banks for cooperatives;
(c) Shares in mutual funds investing exclusively in U.S. government and agency issues;
(d) Obligations of the state or municipalities;
(e) Banker’s acceptances of United States banks eligible for purchase by the Federal Reserve System;
(f) Highest quality commercial paper issued by United States corporations or their Canadian subsidiaries when the paper matures in 270 days or less;
(g) Interest-bearing deposits.
(2) Time deposits shall be withdrawable and certificates of deposit and investments shall mature and bear interest payable at times and in amounts which, in the judgment of the city, will provide cash at the times and in the amounts required for the purposes of paying the city obligations. There is one exception, however: the city may authorize the purchase of longer term investments subject to an agreement to repurchase such investments at times and prices sufficient to yield the amounts estimated to be so required. Repurchase agreement may be made with a bank qualified as a depository or with any national bank or state bank in the United States which is a member of the Federal Reserve System and whose combined capital and surplus equals or exceeds $10,000,000 or with a reporting dealer to the Federal Reserve Bank of New York. The city is also authorized to enter into a reverse repurchase agreement with any institution with which it is authorized to make a repurchase agreement. A reverse repurchase agreement obligates the city to repurchase at a fixed future date and price a security sold by it to a financial institution.
(3) Any investments may be sold by the City Council at any time, but if the investment is made from a debt service fund or another fund dedicated to a particular purpose, the money received from the sale must remain a part of the fund until used for the purpose for which the fund was created.
(C) Criteria for making wise investments. The following shall be the criteria used in making investments for the city with no exceptions.
(1) Safety. Includes the federal insurance available up to the specified maximum with excess bank deposits to be protected by the furnishing of the required collateral (110% of the excess deposit). In no case will home mortgages be permitted as collateral even though allowed in law. Direct obligations of the United States (Treasury certificates, notes, bonds, and bills) are guaranteed by the United States. Safety of governmental agency issues must be weighed in terms of experience, types of loans which agencies make, and what organizations Congress and the states permit to invest in agency issues.
(2) Spacing of maturities. This principle must be stated, “When the money is needed, it must be available.” In short, the interest to be earned, the length of the investment and the estimated cash flow needs shall be weighed so as to obtain the maximum investment return with the funds available as required.
(3) Liquidity. A proper investment must be sufficiently liquid so that the city is able to obtain cash if an emergency arises.
(4) Yield. The investment or deposit providing maximum earnings shall be made since the object of investing idle funds is to put the taxpayer’s money to a use that will yield the greatest return consistent with safety and the city’s later need for money.
(D) Cash flow analysis.
(1) Making the cash forecast. A cash forecast is the city’s tool for determining expected expenditures and revenues over a projected period of time which may be a fiscal calendar year or several fiscal calendar years.
(2) Determining the amount to be kept in the checking account. This is the amount required to cover any obligations of the city that may be outstanding plus any money that may be expended based on the cash flow projections between investments periods and in relation to the city determined fiscal periods plus any banking or financial institution service charges that may be incurred for the maintenance of the city’s accounts.
(3) Accountability. Investments should be shown at cost, adjusted for any premium or discount. An accounting schedule of investments for each year will show for each investment the date purchased and sold, the price paid with reference to 100 as par, the total cost to the city, the amount realized on the sale, with premium, if any, and the interest received by the city.
(E) Investment depository/investment officer designations.
(1) Investment depository designation. The City Council at the annual meeting will designate the official depository(ies) as prescribed in accordance with Minnesota law and may add or delete depositories from time to time as required for the proper conduct of city business with these actions being officially recorded.
(2) Investment officer designation. By City Charter and this section, the City Treasurer is designated as the primary investment officer. In the absence of the City Treasurer (absence being defined as he or she is unavailable) the following alternatives are designated to act as the investment officer:
(a) The City Clerk;
(b) Mayor; or
(c) The Deputy City Clerk-Treasurer
(F) Penalty. Violations of the provisions of this section shall fall under Minnesota state law in accordance with the magnitude of the violation.
(Ord. 307, passed 3-11-2002)