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Department Approval <br />e,4 7"e. /nA <br />qASFAbhE <br />REQUEST FOR COUNCIL ACTION <br />Date: 01/23/2012 <br />Item No.: 12. c <br />City Manager Approval <br />Item Description: Adopt a Resolution Amending the City's Investment Policy <br />1 BACKGROUND <br />2 The City maintains an investment policy to direct the investment of available funds in accordance with the <br />3 City's cash flow needs and Minnesota State Statutes. Generally speaking, the current Investment Policy is <br />4 designed to ensure that the City has funds on hand to pay both short and long -term obligations. As such, <br />5 the City holds monies in short -term vehicles such as a checking account and money market account to pay <br />6 for day -to -day obligations that are fairly regular in nature. <br />7 <br />8 In addition, the City also has non - recurring obligations like debt payments that occur once a year. These <br />9 types of payments are oftentimes very large and require advance planning to ensure monies are available. <br />lo To accommodate these types of obligations, the City invests in longer -term vehicles such as federal <br />11 government securities, or certificates of deposit. <br />12 <br />13 Historically, the City's Investment Policy has placed greater emphasis on security and liquidity and has <br />14 therefore identified investment opportunities that provide investment earnings that carry low -risk. While <br />15 this approach has proven successful, the Policy does have one limitation that creates a missed opportunity <br />16 when it comes to intermediate -term type investments. Intermediate -term investments are ideal for <br />17 managing bond proceeds. <br />18 <br />19 Unlike day -to -day or long -term debt needs, bond proceeds are used to finance a specific project. Typically <br />20 those improvements are made at a consistent pace over a 12 -24 month period. To match those cash flow <br />21 needs, the City needs to have an investment vehicle that can provide relatively good earnings while <br />22 allowing for regular cash withdrawals to make contractor payments. <br />23 <br />24 Two investments in particular; Guaranteed Investment Contracts (GIC's) and Banker's Acceptances, are <br />25 well suited for this purpose and are allowed under State Statute. However, they are not allowed under the <br />26 current Investment Policy. Staff would like the Council to consider adding these to the list of allowable <br />27 investments. Both are described in greater detail below. <br />28 <br />29 <br />Page 1 of 7 <br />