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CCP 03-16-1998
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CCP 03-16-1998
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<br /> Memorandum, Interest Rate on Unpaid Assessment Balances . <br /> Page Two <br /> March 12, 1998 <br /> Relationship to City's Investment Policy <br /> The City's Investment Policy allows a maximum investment instrument duration of five (5) <br /> years. Therefore, tying an assessment rate interest factor to Investment Portfolio performance is <br /> not appropriate. <br /> Current Investment Return for 10 Year Treasuries <br /> As of the end of February, ten year constant Treasury maturities were yielding approximately <br /> 5.65% (Source: Federal Reserve Statistical Release). <br /> Another comparative benchmark is the Development Agreement between the City of Arden Hills <br /> Economic Development Authority (EDA) and Developer Welsh Companies LLC, which calls for <br /> repayment to the PIR Fund for soil correction expenditures at a ten (10) year 6.5% rate. <br /> Recommendation <br /> Although future interest rate projections are by definition risky, it appears that the interest rate <br /> environment has been drifting down for the past several years and that the interest rate factor for <br /> assessment purposes should reflect this fact and not be held at a constant eight percent (8%). <br /> Specifically, I recommend that the assessment rate factor to be considered at the March 30, 1998 . <br /> Assessment Hearing be the Federal Reserve ten year constant maturity for the week ended Mareh <br /> 25, 1998, plus one percent (1.0%) with an upper cap at eight percent (8%) and a lower cap at six <br /> percent (6%). <br /> . <br />
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