04-28-2014 Council Minutes - Laserfiche WebLink

Home Browse Search

MINUTES OF THE ORONO CITY COUNCIL MEETING Monday, April 28, 2014 7:00 o’clock p.m. _____________________________________________________________________________________ Page 10 of 13 13. INVESTMENT POLICY, RESOLUTION NO. 6399 Olson stated the investment committee consisting of himself; the City Administrator, Tom Olson and Charlie Kelley met earlier this year and had a nice discussion regarding the overall finances of the City. The committee discussed the City’s investment policy and did have some recommendations for changes. One of the first questions asked by Charlie Kelley was regarding the City’s primary goal they wanted to achieve with the investment policy and whether it was for preservation of principal. Olson stated preservation is the primary goal and that the City typically does not take a lot of risks since they do not want to face the loss of principal. Olson stated Kelley also specifically mentioned the need for the City to keep some cash on hand in the event of a tornado or other catastrophic event until state funding became available. Olson stated the committee did have some recommendations they agreed on. Under the reporting section, it was suggested that the wording “annualized rate of return” be removed. This suggestion was made because the annualized rate of return refers to very specific calculation and that the City may run afoul of some federal regulations if something is called an annualized rate of return and the calculation is incorrect. It was determined that it would be better to simply list the amount of interest received rather than provide the annualized rate of return. Olson noted under the instruments section, a suggestion was made to remove the ability to invest in the general obligation of the Minnesota Housing Finance Agency. This has been removed in the proposed investment policy and wording has been added to limit the City’s ability to invest in general obligations of the State of Minnesota that provide for essential services rather than any items that are categorized as moral obligations. Olson noted as it relates to the maturities and diversification section, the committee felt that the maximum allowed for a specific maturity should be reduced to 5 percent rather than 35 percent. This would limit the maximum investment in any one security to $750,000. The City currently has two investments of $1 million. These investments will be held until maturity to avoid a loss of principal if they were sold early. Olson stated currently the CD market has provided the highest rates of return with the least amount of risk and the City has approximately 50 percent of its investments in CDs. Olson noted the City can receive between three to five percent on a CD with only one percent on a government bond. Olson noted another suggestion by the committee was to determine if the First National Bank of the Lakes should meet stricter requirements. Olson noted the bank is currently exempted from the minimum capital and net worth requirements that other banks are required to meet. Olson indicated Staff is working with the City’s auditors to determine that. Olson stated in addition to the changes to the investment policy, the committee discussed some additional issues related to the City’s finances. One issue that was discussed involved insurance coverage for investment issues. The City currently has theft coverage up to $250,000 per incident but there is no coverage for market losses. Also suggested was that the City performs criminal background and credit checks every five years for key employees with access to City funds. This suggestion has not been incorporated into the Investment Policy, if the Council is interested in exploring that; it could be incorporated into the City Personnel Policy.