RES 2024-40 Approving an Investment Policy
INVESTMENT POLICY
ADOPTED: June 10, 2024
1. POLICY
It is the policy of the City of Otsego to invest public monies which may become available for a period
before such monies are required to be expended. It is prudent that such monies are invested to
maximize the resources available for the City. It is the intent of the City to:
1. Invest these public monies in a responsible and secure manner in conformance with Minnesota Statute
§118A to provide protection of investment principal.
2. Acquire a reasonable rate of return given market conditions and alternate uses of funds.
3. Provide sufficient liquidity to meet daily cash flow requirements.
4. Conform to all State statutes and City policies or directives.
This investment policy applies to all assets of the City that are accounted for in the City’s Annual
Comprehensive Financial Report. The City will work with the depository banks and brokers approved
annually by the City Council.
Investments shall be made with judgment and care under circumstances, then prevailing, that persons
of prudence, discretion, and intelligence exercise in the management of their own affairs, not for
speculation, but for investment considering the probable safety of their capital as well as the income to
be generated from the investment. The standard of prudence to be used by the designated investment
officer shall be the prudent person standard as defined in Minnesota Statutes §356A.04 Subdivision 2
and shall be in the context of managing an overall investment portfolio. The designated investment
officer acting in accordance with written procedures and policies and exercising due diligence shall be
relieved of personal responsibility for an individual security’s credit risk or market prices changes
provided deviations from expectations are reported in a timely fashion and appropriate action is taken
to control adverse developments.
2. OBJECTIVES
Any investment of the City is limited to those that are permitted by Minnesota Statutes. The objective
of any City investment shall be prioritized as follows:
1. Safety
2. Liquidity
3. Maintaining the Public Trust
4. Investment Return
Safety is the first investment objective. Investment options shall be considered in a manner that seeks
to ensure the preservation of the principal amount in the overall investment portfolio. To obtain this
objective, diversification is to be considered in the type of investment, maturity, and the investment
institution where the investment is located. For checking accounts and savings accounts collateral may
be required. Such collateral requirements will be monitored monthly. Certificates of deposit will not be
purchased beyond the limitations on insurance of said Certificates.
Liquidity is the second investment objective to be considered. The investment portfolio must remain
sufficiently liquid to enable the City to meet its cash flow requirements as may be reasonably
anticipated. Liquidity in the face of changing market conditions will also be a consideration in
determining the term of any investment purchased. Criteria will be established and periodically
reviewed to determine the proportions of the portfolio invested at less than one year, one to three
years and three to five years. The maximum maturity authorized for investment is five years from the
date of purchase unless otherwise authorized by the City Council. The City’s liquidity will be reviewed
monthly and may be considered part of any reporting to Administration or the City Council.
Maintaining the Public Trust is the third of the investment objectives. All employees that are part of the
investment process shall act responsibly as custodians of the public trust. Employees of the City shall
avoid transactions that may impair the public’s confidence in the City’s ability to govern effectively.
The Return on Investment is the fourth investment objective. The investment portfolio should be
designed with the objective of attaining a market rate of return through the budgetary and economic
cycles considering the constraints of risk and cash flow characteristic on the investment portfolio.
The City’s investment policies and practices will conform to Minnesota Statutes §118A. Management of
the City’s investment activity is delegated to the Finance Director. No person will engage in an
investment transaction on behalf of the City except as provided under the terms of this policy and the
procedures established to maintain this program.
Employees and any other City officials involved in the investment process shall refrain from personal
business activity that could conflict with the City’s investment program or could reasonably expect the
public to question or doubt the ability to make impartial, objective investment decisions. Any such
conflict or potential conflict must be declared to the City Administrator as soon as such conflict or
potential conflict is known. The City Council will annually approve the financial institutions or
broker/dealers authorized to provide investment services. All brokers/dealers providing investment
services shall have a Broker Certification form properly completed annually and on file with the City.
The Council will also adopt, on an annual basis, a Corporate Form of Resolution declaring that the City
Administrator and Finance Director are authorized to transact business on behalf of the City of Otsego.
Investments authorized and permitted by this policy are as follows:
United States Securities including governmental bonds, notes, bills, mortgages, and other
securities which are direct obligations or are guaranteed or insured issues of the United States,
its agencies, its instrumentalities, or organizations created by an act of Congress.
Minnesota Joint Powers Investment Trust agreements or contracts for shares of a Minnesota
joint powers investment trust whose investments are restricted to securities authorized for
investment by the City and shares of an investment company registered under the Federal
Securities Act of 1940, whose shares are registered under the Federal Securities Act of 1933, as
long as the investment company receives the highest credit rating and is rated in one of the two
highest risk categories by at least one nationally recognized statistical rating organization and is
invested in financial instruments with a final maturity of no longer than 13 months (e.g. the
Minnesota Municipal Money Market (4M) Fund).
State and local government obligations including any security that is a general obligation of any
state or local government with taxing powers rated “A” or is a revenue obligation of any state or
local government which is rated “AA” or better by a national bond rating service.
Commercial paper issued by a United States Corporation or their Canadian subsidiary that are
rated in the highest quality category by at least two nationally recognized rating agencies and
matures in 270 days or less.
Time deposits fully insured by the Federal Deposit Insurance Corporation or the National Credit
Union Administration.
Investment transactions are to be documented by the City’s finance department. Investment
confirmations are received from banks and/or brokers for each transaction. The finance department
maintains all investment transactions on a monthly summary of cash and investments. Quarterly
reports on the composition of the investment portfolio will be provided to the City Council by the
second Friday of the month following the end of the quarter.
3. INVESTMENT PROCEDURES
City funds not required for cash flow purposes will be invested at the direction of the Finance
Director in instruments that meet the criteria set forth by the City’s investment policy, including
the types of instruments, maturity dates, insurance, and collateral requirements of the portfolio.
Investment securities may be purchased through the services of a bank, dealer or broker who has
a current Broker Certification Form on file with the City.
The safekeeping agent will provide monthly statements to the City of those instruments held by
the safekeeping agent on behalf of the City, their purchase and maturity dates, interest rate, face
value, and fair market value as of the end of the statement period.
All investment securities owned by the City shall be held by a single safekeeping agent in the
name of the City. The qualified safekeeping agents for use by the City are outlined by Minnesota
Statute §118A.06.
On a quarterly basis, the Finance Director will provide to the City Administrator and the City
Council an Investment Report, including but not limited to a detailed listing of all investment
instruments and securities in the City’s portfolio with both book value and fair market value as of
the end of the reporting period.
4. POLICY HISTORY
This is the current and most recent version of the Investment Policy. Previously:
Adopted: February 14, 2005
Revised: November 24, 2014
Revised: December 14, 2015
Revised: June 10, 2024