042808 CC WS AgP
CITY OF SHOREWOOD
CITY COUNCIL WORK SESSION
MONDAY, APRIL 28, 2008
5755 COUNTRY CLUB ROAD
COUNCIL CHAMBERS
6:00 P.M.
AGENDA
1. CONVENE CITY COUNCIL WORK SESSION
A. Roll Call
Mayor Lizee _
Woodruff
Turgeon _
Bailey _
Wellens
B. Review Agenda
2. ADMINISTRATOR'S PERFORMANCE REVIEW FORMS (Att. Acting Administrator's
memorandum)
3. DISCUSSION REGARDING USE OF LIQUOR FUNDS (Att. - Finance Director's
memorandum and attachments)
4. DISCUSSION OF INVESTMENT POLICY (Att. - Finance Director's memorandum and
attachments)
5. DISCUSSION REGARDING FIBER OPTIC SERVICES (Att. - Acting Administrator's
memorandum)
6. OTHER
7. ADJOURN
CITY OF
SHOREWOOD
5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927 · {952} 474-3236
FAX (952) 474-0128. www.ci.shorewood.mn.us . cityhall@ci.shorewood.mn.us
MEMORANDUM
TO:
Mayor and City Council
Larry Brown, Acting City Administrator r
Apri125, 2008
FROM:
DATE:
RE:
Administrator Performance Review Forms
The City Council has expressed the desire to review and discuss the forms utilized for the City
Administrator's review process. Attachment 1 to this memorandum is the current forms utilized.
Attachment 2 to this memorandum is the job description for the position.
In addition, staffhas also obtained evaluation forms form Springsted and Associates, other
municipalities, and the International City/County Management Association (lCMA) for the City
Council's reference.
Staff awaits direction from the City Council as to any modification to the process the Council would
like to see in the forms or process.
#-~
,.
f: . PRINTED ON RECYCLED PAPER
.."
City of Shorewood
Evaluation of City Administrator
Explanations and Directions
-------------------------------------------------------------------------------------
Evaluation as Team Buildina
If evaluation is to be, in the truest sense, a means of team building, certain conditions must prevail.
The two processes must be compatible and interrelated in the following ways:
1. Evaluation is basically a means, not an end in itself.
2. The trust level between the evaluatee and evalua.tors must be high.
3. The roles each are to fulfill must be clearly indicated and accepted.
4. Responsibilities are matched with pre-determined standards of performance.
Definition of Roles
1. City Council
A. Conduct annual assessments of performance of the City Administrator.
B. Respect the prerogatives of the City Administrator insofar as operation management
function of the organization is concerned and the policy function of the Council.
C. Make assessments in general terms but also by using specific examples in instances
where specific improvements are needed or when explicit commendations are due.
2. City Administrator
A. Accepts the prospects of annual evaluation.
B. Understands the scope and thrust of the evaluations.
C. Expects the evaluations to adhere to the established procedures for evaluating the
performance of the City Administrator.
D. Agrees to make the effort to implement results of the evaluation.
Pre-determined Performance Standards
A performance standard is defined as a condition that will exist when a responsibility or function is
successfully performed. It is essential that a performance standard be established, at the outset, for
each of the eight major areas of responsibility of the City Administrator. This is necessary in order to
use the rating scale effectively.
Maior Areas of Responsibilitv
It should be reiterated that in determining the appropriate level of expectations, actual performance
must be measured in relation to the indicated standard of performance. Eight major areas of
responsibility serve as the basis upon which assessments are to be made. Descriptors are provided
under each to clarify the meaning and content of the area. However, the evaluation is made of the
major area.
Explanation and Directions (continued)
Ratina Svmbols
Rating symbols are used to make the assessments; and these symbols fall into three main categories:
E = Exceeds Expectations (performance has been above reasonable expectations)
M = Meets Expectations (performance has attained a level of reasonable expectations)
I = Improvement Needed (performance is inconsistent and requires improvement)
B = Below Expectations (performance has been below reasonable expectations)
As indicated earlier, without more precise definition of the term "expectations", it is possible that
ambiguity will result in the use of the term. In order to help avoid this possibility, the concept of
performance standards is used.
It will be noted that in connection with each major area, a performance standard is stated, including the
conditions that have to be met in order to decide the extent to which "expectations" have been met.
I. ORGANIZATIONAL MANAGEMENT
ResDonsibilitv
. Plans and organizes the work that goes into providing services established by past and current
decisions of the Council.
. Plans and organizes work that carries out policies adopted by the council and developed by
staff.
. Plans and organizes responses to public requests and complaints or areas of concern brought
to the attention of staff by Council and staff.
. Evaluation, recommendation and implementation of new technology.
. Selecting, leading, directing and developing staff members.
. Performance evaluations are developed and performed for staff on an annual basis.
Performance Standard
Organizational Management will be considered effective when a majority of the conditions have been
successfully fulfilled.
. Well qualified, promising persons are recruited and employed.
. Employees are appropriately placed contributing to a high retention rate.
. Supervisory techniques motivate high performance.
. Citizen complaints are effectively resolved.
. The organization is aware of new trends in tools and technology and they are implemented
where appropriate.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
II. FISCAL/BUSINESS MANAGEMENT
Responsibilitv
. Plans and organizes the preparation of an annual budget with documentation, etc. that conforms to
guidelines adopted by the Council.
. Plans, organizes and administers the adopted budget with approved revenues and expenditures.
. Plans, organizes and supervised the most economic utilization of staff, materials, and equipment.
. Plans and organizes a system or reports for Council that provide the most up-to-date data available
concerning expenditures and revenue.
. Plans and organizes maintenance of city-owned facilities, building and equipment.
Performance Standard
Fiscal/business Management will be considered effective when a majority of the conditions have been
successfully fulfilled.
. Budget preparation and management are thorough and effective.
. Cost-effective measures are persistently pursued.
. Financial reporting is timely and readily understandable.
. Physical assets management is efficient.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
III. PROGRAM DEVELOPMENT AND FOLLOW-THROUGH
Responsibilitv
. Plans and organizes on-going programs and services to city government.
. Plans and organizes work involved in researching program suggestions by Council and staff and the
reporting of the results of analysis.
. Maintains knowledge of current and innovative trends in the area of services being provided by local
governments, and incorporates that knowledge in program suggestions and research.
. Plans and organizes work assigned by the Council so that it is completed with dispatch and
efficiency.
. Plans, organizes and supervises implementation of programs adopted or approved by the Council.
Performance Standard
Program planning techniques and procedures will be considered effective when a majority of the
conditions have been successfully fulfilled.
. Ongoing programs and services are fully responsive to the City's needs.
. Monitoring procedures are in place and functioning well.
. Measurable outcomes (to the extent possible) are used to determine success in program planning.
. The City Administrator can be depended upon to follow through.
. Makes most effective use of available staff talent.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
IV. RELATIONSHIP WITH MAYOR AND CITY COUNCIL
Responsibilitv
. Maintains effective communication, both verbal and written, with Council.
. Maintains availability to Council, either personally or through designated subordinates.
. Establishes and maintains a system of reports for Council on current plans and activities of the staff.
. Plans and organizes materials for presentations to the Council, either verbally or written, in the most
concise, consistent, clear and comprehensive manner possible.
Performance Standard
Relations with the Mayor and Council will be considered effective when a majority of the conditions
have been successfully fulfilled.
. Materials, reports, presentations and recommendations are clearly and convincingly made.
. Communications are made in a timely, forthright, and open manner.
. Responses to requests are made promptly and completely.
. Recommendations appear to be thoroughly researched.
. Adequate information is provided to Council to make decisions.
. A system is in place and utilized to report to Council current plans, activities, and events of the City.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
v. LONG RANGE PLANNING
Responsibilitv
. Maintains a knowledge of new technologies, systems, methods, etc. in relation to City services.
. Keeps Council advised of new and pending legislation and developments in the area of public
policy.
. Plans and organizes a process of program planning in anticipation of future needs and problems.
. Establishes and maintains an awareness of developments occurring within other cities or other
jurisdictions that may have an impact on City activities.
. Plans, organizes and maintains a process of assisting the Council in establishing community goals.
including a process for monitoring and reporting on the City's progress toward achieving those
goals.
Performance Standard
Long range strategic planning will be considered effective when a majority of the conditions have been
successfully fulfilled.
. A well-constructed long-range (strategic) plan, adopted by the Council, is currently in operation.
. Annual operational plans are carried out by staff members.
. An on-going monitoring process is in operation to attain quality assurance in program and project
implementation.
. Program evaluation and personnel evaluation are interrelated with the long range strategic planning
process.
. Legislative knowledge is current and complete.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
VI. RELATIONSHIP WITH PUBLIC/PUBLIC RELATIONS
Responsibilitv
. Plans, organizes and maintains training of employees who have primary responsibility for contact
with the public, either by phone or in person.
. Ensures that an attitude and feeling of helpfulness, courtesy, and sensitivity to public perception
exists in employees coming in contact with the public.
. Establishes and maintains an image of the City to the community that represents service, vitality and
professionalism.
. Establishes and maintains a liaison with private non-governmental agencies, organizations and
groups involved in areas of concern that relate to services or activities of the City.
Performance Standard
Communication services will be considered effective when a majority of the conditions have been
successfully fulfilled.
. Contacts with the media are timely and credible.
. Publications are varied and consistently well received by the citizens.
. Feedback from the public and the community leadership is positive.
. City has good image with comparable organizations.
. Ability to solicit and use feedback from the public.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
VII. INTERGOVERNMENTAL RELATIONS
Responsibilitv
. Maintains awareness of developments and plans in other jurisdictions that may relate to or affect
City governments.
. Establishes and maintains a liaison with other governmental jurisdictions and associations in those
areas of service that improve or enhance the City's programs.
. Maintains communications with governmental jurisdictions and associations with which the City is
involved or has interaction.
Performance Standard
Intergovernmental relations will be considered effective when a majority of the conditions have been
successfully fulfilled.
. Sufficient activity with municipal and professional organizations.
. Regarded as highly competent by municipal officials.
. Provides examples of good ideas from other jurisdictions.
. Positive relationship with surrounding cities.
. Good cooperation with County and State agencies.
. Improved mutual understanding and relationship with the State Legislature.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
VIII. PROFESSIONAL/PERSONAL DEVELOPMENT
Responsibilitv
. Maintains awareness and value of broadening professional and personal development.
. Demonstrates imaginative leadership initiatives.
· Ability to build cohesiveness in staff.
. Decisiveness in leadership performance.
. Effectiveness in verbal communications.
Performance Standard
Professional and personal competencies will be considered effective when a majority of the conditions
have been successfully fulfilled.
. Management techniques show evidences of innovation, imagination, and decisiveness.
. Techniques are incorporated that promote cooperation and information sharing between departments
and staff as a whole.
. Continuous professional personal growth is demonstrated.
Rating (circle one)
E
M
I
B
Comments: (Observations of Evaluators)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the City Administrator: (Responses to any of the evaluations, comments,
suggestions, and/or commendations)
CITY OF SHOREWOOD
POSITION:
City Administrator
Department:
Reports to:
Supervises:
Administration
City Council
All employees of the City
OBJECTIVE AND SCOPE
Responsible for planning, organizing, directing and coordinating the daily operations of all City
departments and functions including administration, finance, planning, engineering, public
works/utilities, parks, and City facilities. Provides information and support to the City Council
and advisory commissions and serves as Executive Director of the Economic Development
Authority.
ESSENTIAL FUNCTIONS OF THE POSITION
A. Plans and directs the general administration of City services
1. Plans, organizes and directs City affairs to ensure a coordinated and efficient
effort to meet the goals and objectives established by the City Council and various
Boards and Commissions.
2. Monitors operations to ensure compliance with applicable laws, regulations, rules,
policies and ordinances.
3. Plans, develops and implements administrative policies, rules, regulations, and
procedures.
4. Implements, interprets and applies City Council actions, directives and policies.
5. Ensures that public services are efficiently provided and that all complaints are
effectively handled.
6. Directs communication activities to keep the public informed of City plans and
operations.
B. Provides effective support to the City Council
7. Establishes goals, programs and objectives and prepares reports to the City
Council.
7. Attends and participates in all City Council meetings, and meetings of other City groups
as appropriate.
ATTACHMENT 2
JOB DESCRIPTION
Adopted by the Shorewood City Council on
City Administrator
Page 2
C. Keeps abreast of developments in municipal operations
9. Represents the City in local, regional, and state meetings, and in community
group functions as delegated by the Council.
10. Cooperate with other governmental units and municipalities on matters of mutual
interest.
11. Plans, directs and coordinates the administration of the Economic Development
Authority.
12. Serves as City's representative and liaison to public safety organizations and
operating committees including Excelsior Fire District, South Lake Minnetonka
Police Department and Mound Fire Department.
D. Oversees implementation of financial and fiscal planning in the City
13. Prepares operations and capital budgets, including recommendations for tax levies
and utility rates and submits to City Council for consideration.
14. Oversees all fund management and investment activities.
15. Works with Finance Director to ensure effective accounting practices to properly
control financial assets and provide accurate information for financial planning.
16. Monitors the management of the Liquor Stores and the Liquor Store funds, and
makes reports to the Liquor Commission in regard to business activities.
E. Plans, develops and directs personnel programs, policies and procedures
17. Administers the Personnel Policy, Position Classification and Compensation Plan.
18. Recommends employee benefits and personnel policy programs and coordinates
all phases of personnel administration including direct control over the
maintenance of personnel files.
19. Negotiates and implements City Contracts including labor contracts and contracts
for services.
20. Represents management in negotiating collective bargaining agreements.
F. Supervise City Clerk Functions
21. Supervises City Clerk functions including record keeping, minutes, legal notices,
agendas, and meeting packet preparation. Supervises the administration of
elections, including training, hiring judges, organizing polling sites, and
maintenance of files,.
City Administrator
Page 3
22. Coordinates preparation of agendas and supporting data for all Council meetings.
23. Develops, drafts and oversees the preparation of ordinances, resolutions and
policies for City Council consideration and implementation.
G. Performs other duties as apparent or assigned.
SUPERVISORY RESPONSIBILITIES
Responsible for the overall direction, coordination, and evaluation of the City.
Carries out supervisory responsibilities in accordance with City policies and applicable laws.
Responsibilities include recruiting; interviewing; training; planning, assigning, and directing
work; evaluating performance; rewarding and disciplining; suspending; transferring; promoting;
demoting; adjusting grievances; addressing complaints and resolving problems of employees.
Responsibilities also include the ability to effectively recommend hiring and discharging
employees.
QUALIFICATION REQUIREMENTS
To perform this job successfully, an individual must be able to perform each essential duty
satisfactorily. The requirements listed below are representative of the knowledge, skill, and/or
ability required. Reasonable accommodations may be made to enable individuals with
disabilities to perform the essential functions.
EDUCATION and/or EXPERIENCE
Bachelor's degree (B.A.) in Public or Business Administration or related field; four years
experience working with local government; or equivalent combination of education and
experience. A Master's degree in Public Administration (M.P.A) or related field is preferred.
LANGUAGE SKILLS
Ability to read, analyze, and interpret documents, procedure manuals, plans and specifications,
contracts, codes, statutes, ordinances and resolutions, technical journals, financial reports and
legal documents. Ability to prepare contracts, ordinances, resolutions, policies, reports and
correspondence. Ability to communicate effectively both orally and in writing with elected and
appointed officials, staff, other public officials, volunteer departments, and the general public.
Ability to respond effectively to the most sensitive inquiries or complaints. Skill in negotiating
various types of contracts.
MATHEMATICAL SKILLS
Ability to make arithmetic computations using whole numbers, fractions and decimals. Ability
to compute rates, ratios and percentages. Ability to read and interpret financial data including
City Administrator
Page 4
budgets, tax information and development finance analyses. Knowledge of budgeting, budget
controls, accounting and government finance.
CERTIFICATES, LICENSES AND REGISTRATIONS
Valid Minnesota Driver's License
OTHER KNOWLEDGE, SKILLS AND ABILITIES
· General knowledge of computer operations and ability to use computer programs
including MS Word and Excel.
. Skilled in communication, facilitation, conflict management and mediation.
. Ability to establish effective working relationships With elected officials, staff, residents
and other public officials.
· Knowledge of organizational management principles and the skill and ability to apply to
public sector organizations.
· Knowledge of the laws, rules and regulations applicable to City government.
. Skill in supervising employees and consultants.
PHYSICAL DEMANDS
The physical demands described here are representative of those that must be met by an
employee to successfully perform the essential functions of this job. Reasonable
accommodations may be made to enable individuals with disabilities to perform the essential
functions.
While performing the duties of this job, the employee is regularly required to sit and talk and
hear. The employee is frequently required to use hands to finger, handle or feel objects, tools, or
controls. The employee is occasionally required to stand; walk; and reach with hands and arms;
and stoop, kneel, or crouch.
The employee must regularly lift and/or move up to 10 pounds and occasionally lift and/or move
up to 25 pounds. Specific vision abilities required by this job include close vision, and the
ability to adjust focus.
WORK ENVIRONMENT
The work environment characteristics described here are representative of those an employee
encounters while performing the essential functions of this job. Reasonable accommodations
may be made to enable individuals with disabilities to perform the essential functions.
The noise level in the work environment is usually moderate.
II'
VILLAGE OF ROSELLE
MEMORANDUM
.To:
Board of Trustees, Viiiage Clerk Linda McDermott
From:
Mayor Gayle A. Smolinski
pate:
Re:
April 4, ~005
,
Village Administrator Evaluation (February 2004 - February 2005)
Attached please find the Village Administrator Evaluation Form and a report from her about
goals and accomplishments. Please complete this evaluation form and return it to me no
later than Monday morning, April 11,2005. Mark it Personal and Confidential.
The evaluation is on a point system. If you feel you do not have enough knowledge
regarding .Robin's performance in a particular area, please mark "no response". Although
you may have insufficient information in Some areas, it would be helpful if you would give
any written comments.
Please keep in mind that goals and objectives are set at one point in time. I've attached
Robin's memo regarding goals status. Please refer to it Issues throughout the year may
impact completion. For example, fire personnel changes were dealt with quickly,
effectively and without undue embarrassment or negative publicity. The department ran
seamlessly despite two major personnel changes. And, John Nevenhoven, the Assistant
to the Administrator/Network Administrator, left in July 2004.
VILLAGE ADMINISTRATOR EVALUATION FORM
INSTRUCTIONS
The Village Administrator is graded 1 ~5, with the following scale:
1 = Poor
2 = Fair
3 = Good
4 = Very Good
5 = Excellent
It is understood that some individuals may not be in a position to evaluate each area.
Scored responses should only be given when you are knowledgeable in the specific
evaluation area. All other matters should be marked with an "NR" (No Response).
I will compile the comments, review the ratings and develop an evaluation.
VILLAGE OF ROSEllE
VilLAGE ADMINISTRATOR EVALUA liON FORM
1. PERSONNEL MANAGEMENT
A. Does the Village Administrator properly supervise the management team?
5
4
3
2
1
NR
B. Is a standard of respect maintained for the staff's abilities and is staff initiative
encouraged?
5
4
3
2
1
NR
c. Has the Village Administrator recruited professional. qualified personnel for the
Village?
5
4
3
2
1
NR
D. Does the Village Administrator appear to interact well with staff?
5
4
'3
2
1
NR
,E. Does she bring out the best qualities and performance in personnel?
5
4
3
2
1
NR
F. Are employment related lawsuits minimal or non-existent?
5
4
3
2
1
NR
Comments:
2. LEADERSHIP
A. Does the Village Administrator set a positive example in leading Village staff?
5
4
3
2
1
NR
B. Is she a problem soiver - someone who works on a problem or issue and can find
alternative ways to successfully resolve it?
5
4
3
2
1
NR
C. Does the Village Administrator suggest new iqeas?
$
4
3
2
1
NR
D. Is she responsive to new ideas?
5
4
3
2
1
NR
E. Does the Village Administrator stay informed about municipal issues. new
technologies and public issues?
5
4
3
2
1
N~
Comments:
3. EXECUTION OF POUCY
A. Does the Village Administrator have a full understanding of Village services,
programs and policies?
5
4
3
2
1
NR
B. boes she cause policy to be correctly executed?
5
4
3
2
1
NR
C. Does the Village Administrator's attitude reflect a commitment to Village policies?
.5
4
3
2
1
NR
Comments:
4. PROGRAM PERFORMANCE
B.
How well are the Village's services provided?
543 2
Are services provided fairly and equitably?
543 2
C. Are Village services provided in an efficient manner?
1
NR
A.
1
NR
5
Comments:
4
3
2
1
NR
5. SAFETY
A Does the Village Administrator encourage and enforce safety requirements?
5 4 3 2 1 NR
. B. . Does the Village Administrator provide safety training to Village employees?
5 4 3 2 1 NR
C. Does the Village Administrator promote and conform to risk management principles
and activities?
..
5
4
3
2
1
NR
Comments:
6. BUDGET
A. Is the budget proposed by the Village Administrator realistic?
5
4
3
2
1
NR
B. Is the budget prepared in a professional and understandable manner?
5
4.
3
2
1
NR
C. Does the Village Administrator administer the budget so that the Village annually
operates within its financial ability?
5
4
3
2
1
NR
Comments:
7. REPORTING
A. Are the Village Administrator's reports readable?
5
4
3
2
1
NR
B. Are.they comprehensive and understandable?
5
4
3
2
1
NR
C. Does the Village Administrator provide timely information?
5
4
3
2
1
NR
Comments:
8. BOARD RELA TlONS
A. Is the Village Administrator helpful to'elected and appointed officials?
5
4
3
2
1
NR
B. [s the Village Administrator receptive to constructive criticism and advice?
5
4
3
2
1
NR
C. Do Board members receive prompt responses?
5
,4
3
2
1
NR
D. Is the Village Administrator candid and forthright and exhibit behavior appropriate to
a situation?
5
4
3
2
1
NR
Comments:
9. AGENDA
NR
NR
NR
D. Are materials prepared and distributed to facilitate effective decision making?
5
4
3
2
1
NR
Comments:
10. INTERGOVERNMENTAL RELA TlONS
A. Does the Village Administrator support regional cooperation between governments?
5
4
3
2
1
NR
B. Is t,e Village Administrator active with regional councils - DuPage Mayors and
Managers Conference and Northwest Municipal Confe.rence?
5
4
3
2
1
NR
Comments:
11. PUBUC RELATIONS
A . Do others regard the Village Administrator as a person of high integrity, ability and
commitment to the Village?
5
4
3
2
1
NR
B. Is the Village Administrator active in the Chamber of COmmerce?
5
4
3
2
1
NR
C. Does the Village Administrator maintain good relations with media representatives?
5
4
3
2
1
NR
D. Does the Village Administrator maintain good relations with Citizens?
5
4
3
2
1
NR
E.. Does the Village Administrator promote Village. programs, services and
accomplishments?
5
4
3
2
1
NR
Comments:
12. COMPLETION OF PRIOR PERFORMANCE GOALS
Considering the resources available and other circumstances, how well did she implement
the following goals? (See attached)
A. Annual report
5 4 3 2 1 NR
B. Purchasing training (supervisory team)
5 4 3 2 1 NR
C. Ethics training (all employees)
5 4 3 2 1 NR
D. Budget development and presentation
5 4 3 2 1 NR
E. Cable cons?rtium leadership
5 4 3 2 1 NR
F. Renewal of cpntract with Roselle Fire Protection District
5 4 3 2 1 NR
G. police buildingaddition/re,novation
5 4 3 2 1 NR
H. Provide additional financial information to the Village Board (forecast. trends)
5 4 3 2 1 NR
I. Greater visibility in departments by Village Administrator
5 4 3 2 1 NR
J. Address issues with management team
5 4 3 2 1 NR
K Improve management review timelines
5 4 3 2 1 NR
Comments:
~
13. NEW PERFORMANCE GOALS
Please list any personal performance goals that you would recommend the Mayor ahd the
Village Administrator consider establishing for the upcoming year (Feb~ 2005 - Feb. 2006).
14. OTHER WEAKNESSES
Please,list any other areas not explained above in which you believe the Village
Administrator needs improvement.
15. OTHER STRENGTHS
Please list any other strengths of the Village Administrator not explained above that you
would like to highlight. .
Please attach extra pages for any additional comments.
Thank you for taking the time to complete this evaluation.
Signature of E"valuator
SUPERVISOR
PERFORMANCE REVIEW FORM
CITY OF TYLER
Employee Name
Date of Review
Supervisor
ACCOMPLISHMENTS~ List three things you accomplished or felt were successes this past year.
1.
2.
3.
GROWTH AREAS: List three things you felt did not work out so well this past year.
1.
2.
3.
ANNUAL GOALS: List the goals established at the employee's last performance evaluation and rate the
accomplishment ofthose goals. If goals were not met, indicate why.
GOALS RESULTS
1.
2.
3.
COMPETENCY COMMENTS
Flexibility
- Willing to try or learn new techniques.
- Gives full consideration to new ideas.
- Able to modify personal preferences to meet the needs or desires
of others.
Initiative
- Anticipates and thoroughly analyzes problems and opportunities.
- Seeks opportunities to undertake new assignments and improve
job performance with minimum supervision or coercion.
- Learns from past problems and takes appropriate action.
Interpersonal Relationships
- Communicates and works cooperatively with coworkers,
supervisors, and outside contacts.
- Treats others with courtesy and respect.
- Responds to direction and/or correction in a professional and
respectful manner.
Relationship with the Public
- Responds to residents in a respectful, helpful, and empathetic
manner.
- Acts in a way that preserves and enhances the City's reputation.
- Anticipates the resident's needs and takes necessary steps to meet
those needs.
- Provides the resident with alternative resources when unable to
provide the service.
Skill Development
- Understands concepts, procedures, and tasks relevant to the
position.
- Maintains and demonstrates the knowledge, skills, and abilities to
perform job.
Supervision and Development of Employees
- Frequently assesses employee's performance and communicates
problem areas.
- Compliments and encourages quality work.
- Handles employee issues in a prompt and efficient manner.
- Effectively delegates tasks and follows up with employee's
progress.
- Enforces City policies and procedures.
Budget Preparation and Monitoring
- Prepares and effectively administers sound departmental budgets.
Communication with the City Council and City Administrator
- Effectively prepares and presents reports.
- Informs the City Council and City Administrator of pertinent
information in a timely manner.
- Demonstrates respect.
GOALS AND GROWTH AREAS FOR NEXT YEAR: Together, the employee and supervisor establish
and list goals for next year.
1.
2.
3.
SIGNATURES
o I am in agreement with this performance review
o I am in disagreement with this review of my performance- please see comments below.
COMMENTS:
Employee's Signature:
Date:
Supervisor's Signature:
Date:
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Page 1 of3
Other Performance Appraisal Materials
Basic Search
Advanced Search
Pearland, TX City Manager Evaluation
Checklist
~"'*.j """'~:"'~"', '"' ~.
for emptoY~$ ~~ l\i
This from may be used by each member of the city council to evaluate the city
manager's performance in fulfilling each of the roles which he/she plays In the city's
government. The city manager is graded 1-4, with the following scale: lis poor; 2
is fair; 3 is good; 4 is excellent. Each member of the council should sign the form
and forward it to the mayor who will be responsible for compiling the comments.
The forms and accompanying summary should then be eresented to the city
manager for his/her permanent file.
New Account Registration
Employers' Login
~~~ ~~ ~~~i ~~
RC&nUf'WS ;;~:~~w?~
What Is the Local Government
Management Profession?
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Model Employment Agreement
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Preparing the Next Generation
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pe~ol11l~~~:~ppr~i~~I.~~cka~e ...
Recruitment GUidelines Handbook
First-TIme Administrator's
Handbook
Internship Toolkit
1. Personal
_ Invests sufficient efforts toward being diligent and through in the
discharge of duties.
_ Composure, appearance, and attitude fitting for an individual in his/her
executive position.
2. Professional Skills and Status
_ Knowledgeable of current developments affecting the management
field.
_ Respected in management profession.
_ Has a capacity for innovation.
_ Anticipates problems and develops effective approaches for solving
them.
_ Willing to try new ideas proposed by council members or staff.
3. Relations with Council
_ Carries out directives of the council as a whole rather than those of any
one council member.
_ Assists the council in resolving problems at the administrative level to
avoid unnecessary council action.
_ Assists the council in establishing policy while acknowledging the
ultimate authority of the council.
_ Responds to requests for information or assistance by the council.
_ Informs the council of administrative developments.
_ Receptive to constructive criticism and advice.
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Page 2 on
4. Policy Execution
_ Implements council action in accordance with the Intent of the counicil.
_ Supports the actions of the city council after a decision has been
reached.
_ Enforces city polices.
_ Understands city's laws and ordinances.
_ Reviews enforcement procedures periodically to improve effectiveness.
. _ Offers workable alternatives to the council for changes in the law when
an ordinance or policy proves impractical in actual administration.
5. Reporting
_ Provides the council with reports concerning matters of importance to
the city.
_ Reports are accurate and comprehensive.
_ Reports are generally produced through own initiative rather than when
requested by the council.
_ Prepares a sound agenda which prevents trivial, administrative matters
from being reviewed by the council.
6. Citizen Relations
_ Accommodates complaints from citizens.
_ Dedicated to the community and to Its citizens.
_ Skillful with the news media--avoiding political positions and
partisanship.
_ Has the capacity to listen to others and to recognize their interest --
work well with others.
_ Willlng to meet with members of the community and discuss their real
concerns.
_ Cooperates with neighboring communities.
_ Cooperates with the county, state and federal governments.
_ Cooperates with the governmental units within the city such as the park
board or school board.
7. Staffing
_ Recruits and retains competent personnel for city positions.
_ Aware of weak or inefficient administrative personnel and works to
Improve their performance.
_ Committed to the council's affirmative action policy.
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Page 3 of3
_ Accurately informed and concerned about employee insurance, fringe
benefits, promotions, and pensions.
_ Impartially administers the merit system.
8. Supervision
_ Encourages department heads to make decisions within their own
jurisdictions without city-manager approval, yet maintains general control of
administrative operations.
_ Instills confidence and initiative in subordinates and emphasizes support
rather than restrictive controls for their programs.
_ Has developed a friendly and informal relationsh'ip with the work force
as a whole, yet maintains the prestige and dignity of the manager office.
_ Evaluates personnel periodically and points out staff weaknesses and
strengths.
9. Fiscal Management
_ Prepares a balanced budget to provide services at a level intended by
the council.
_ Makes the best possible use of available funds, conscious of the need to
operate the city efficiently and effectively.
_ Prepared budget is in an intelligible format.
10. What have been the finest accomplishments of the city manager this past
year?
11. What areas need the most improvement? Why? What constructive, positive
ideas can you offer the city manager to improve these areas?
Signature
Date
~tQQ
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Page 1 of9
other Performance Appraisal Materials
Basic Search
Advanced Search
City Of New Brighton, Minnesota
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for EmptolflM'li ,,_
'!P"
Evaluation of Chief Executive Officer
New Account Registration
.~.rnploy~r~'..Lo9i.n
Performance Evaluation as Team
Building
Explanations and Directions
What Is the Local Government
Management Profession?
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rv1??~I~rnlJl.?Yrn~~~A9r~~ment
Preparing the Next Generation
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. ~erl'?rrn~~c,e~ppraisaIPac~a~e, .
Recruitment Guidelines Handbook
First-Time Administrator's
Handbook
HI~te~~~hip .!()?I~i.t .
Evaluation as Team Building
If an evaluation is to be, in the truest sense, a means of team building, certain
conditions must prevail. The two processes must be compatible and interrelated in
the following ways:
1. Evaluation is basically a means, not an end in itself.
2. The trust level between the evaluatee and evaluators must be high.
3. The roles each are to fulflil must be clearly indicated and accepted.
4. Responsibilities are matched with pre-determined standards of performance
Definition of Roles
A. City Council
1. Conduct annual assessments of performance of the Chief Executive Officer
(CEO).
2. Respect the prerogatives of the CEO insofar as operation management
function of the organization is concern and the policy function of the Council.
3. Make assessments In general terms except In instances where specific
improvements are needed or when explicit commendations are due.
B. Chief Executive Officer
1. Accepts the prospects of annual evaluation.
2. Understands the scope and thrust of the evaluations.
3. Expects the evaluations to adhere to the established procedures for
evaluating the performance of the CEO.
Pre-determined Performance Standards
A performance standard Is defined as a condition that will exist when a
responsibility or function is successfully performed. It is essential that a
performance standard be established, at the outset, for each of the eight major
areas of responsibility of the CEO. This is necessary in order to use the rating scale
effectively.
Major Areas of Responsibility
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Page 2 of9
It should be reiterated that in determining the appropriate level of expectations,
actual performance must be measured in relation to the Indicated standard of
performance. Eight major areas of responsibility as the basis upon which
assessment are to be made. Descriptors as provided under each to clarify the
meaning and content of the area. However, the evaluation is made of the major
area.
Rating Symbols
Rating symbols are used to make assessments; and these symbols fall into three
main categories:
E = Exceeds Expectations (performance has been above reasonable expectations)
M = Meets Expectations (performance has attained a level of reasonable
expectations)
B = Below Expectations (performance has been below reasonable expectations)
To allow for further refinement of these assessments, each of the three categories
can be indicated with a (+) or (-) symbol. This allows for a continuum of nine rating
categories from B- which Indicates the lowest rating to E+ which indicates truly
exemplary performance.
As Indicated earlier, without more precise definition of the term "expectations", it is
possible that ambiguity will result in the use of the term. In order to help avoid this
possibility, the concept of performance standards is used.
It will be noted that in connection with each area, a performance standard is stated,
including the condition that have to be met In order to decide the extent to which
the "expectations" have been met.
~J.QQ
EIGHT MAJOR AREAS OF RESPONSIBILITY
I. Organizational Management
II. Fiscal/Business Management
III. Program Development and Follow-Through
IV. Relationship with the Mayor/Council
V. Long Range Planning
VI. Relationship with Public/Public Relations
VII. Intergovernmental Relations
VIII. Professional/Personal Development
_E+
I. Organizational Management
PERFORMANCE STANDARD
Organizational Management will
be considered effective when a
majorltyof the conditions have
been successfully fulfilled.
RATING RESPONSIBILITY
_E
E- Plans and organizes the work that
_M+ goes Into providing services
established by past and current
a. Weil qualified, promising
persons are recruited and
employed.
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Page 3 of9
_B-
decisions of the Council.
Plans and organizes work that carries
out pollees adopted by the Council
and developed by Staff.
Plans and organizes responses to
public requests and complaints or
areas of concern brought to the
attention of the Staff by Counciland
Staff.
Evaluation and keeping up with
current technology.
Selectingf leading, directing, and
developing staff members.
b. Employees are appropriat~ly
placed contributing to a high'
retention rate. '
_M
_M-
_B+
c. Supervisory techniques
motivate high performance.
_B
d. Complaints to Council are not
common.
e. The organization is aware of
new trends In technology.
,Comments: Observations of Evaluators: (use this space also to indicate the impact
upon the teamwork factor)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the CEO: (Responses to any of the
eva lu ati ons/ co m ments/sug gestl ons/ com mend atio n s)
II. Fiscal! Business Management
PERFORMANCE STANDARD
Fiscal/Business
Management will be
considered effective when
a majority of the conditions
have been successfully
fulfilled
RATING RESPONSIBILITY
_E+
_E
_E- Plans and organizes the preparation of an
annual budget with documentation etc.
M+ that conforms to guidelines adopted by the
Council.
_M Plansf organizesf and administers the
adopted budget with approved revenues
_M- and expenditures.
a. Budget preparation and
management are thorough
and effective.
b. Cost-effective measures
are persistently pursued.
_B+ Plansf organizes and supervises most
c. Financial reporting is
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economic utilization of
man power/materia Is/ ma ch i n ery.
_6
_6-
Plans and organizes a system of reports for
Council that. prOVide most up-to-date data
available concerning expenditures and
revenue.
Plans and organizes maintenance City-
owned facilities, buildings and/or
equipment.
Page 4 of9
timely and readily
understandable.
d. Physical facilities
management is efficient.
Comments: Observations of Evaluators: (use this space also to indicate the impact
upon the teamwork factor)
suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the CEO: (Responses to any of the
eva I u ations/ co m ments/ sugg estions/ com mend ations)
RATING RESPONSIBILITY
_E+ III. Program Development and Follow
_E Through.
E- Plans and organizes on-going
M+ programs and services to City
- government.
_M Plans and organizes work involved by
_M- Council and Staff and the reporting of
the results of analysis.
Maintains knowledge of current and
Innovative trends In the area of
_6+ services being provided by local
government, and incorporates that
_B knowledge in program suggestions and
research.
Plans and organizes work assigned by
PERFORMANCE STANDARD
Program planning techniques
and procedures will be
considered effective when a
majority of the conditions have
been successfully fulfilled.
a. Ongoing programs and
services are fully responsive to
the City's needs.
b. Monitoring procedures are in
place and functioning well.
c. Measurable outcomes(to the
extent possible) are used to
determine success in programs
planning.
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_B-
the Council so that it is completed with
dispatch and efficiency.
Pians, organizes and supervises
implementation of programs adopted
or approved, by the Council.
Page5of9
d. The CEO can be depended
upon to follow through.
e. Makes most effective use of
available Staff talent.
Comments: Observations of Evaluators: (use this space also to indicate the impact
upon the teamwork fador)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the CEO: (Responses to any of the
eva I u ati ons/ co mments/ su g gesti 0 ns/ co m me n d atio ns)
RATING RESPONSIBILITY
_E+ IV. Relationship with Mayor and
Council.
_E
E- Maintains effective communication
- M+ both verbal and written, with
- Council.
_M
_M-
Maintains availability to Council,
either personally or through
designated subordinates.
Establishes and maintains a system
of reporting to Council current plans
and activities of the Staff.
_B+
_B
Plans and organize materials for
presentations to the Council, either
_B- verbally or written, In the most
concise, clear, and comprehensive
manner possible.
PERFORMANCE STANDARD
Relations with the Mayor/Council
will be considered effective when
a majority of the conditions have
been successfully fulfilled.
a. Materials, reports,
presentations and
recommendations are clearly and
convincingly made.
b. Communications are made in a
timely, forthright, and open
manner.
c. Responses to requests are
made promptly and completely.
d. Recommendations appear to
be thoroughly researched.
e. Adequate information is
provided to Council to make
decisions.
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Page 6 of9
f. A system is in place to report to
Council current plans, activities,
events of the City.
Comments: Observations of Evaluators: (use this space also to indicate the i.!np'act
upon the teamwork factor) !
Suggestions for Improvements: (Specific area(s) that need strengthening) .
Commendations: (Area(s) of performance calling for praise/commendation) ,
Comments of the CEO: (Responses to any of the
eva I u a tions/ com ments/sugg estio ns/ co mme nda tio ns)
RATING
RESPONSIBILITY
_E+
V. Long Range Planning
_E
_E-
_M+
Maintains a knowledge of new
technologies, systems, methods, etc.
in relation to City services.
Keeps Council advised of new and
impending legislation and
developments in the area of public
policy.
_M
_M-
_B+ Plans and organizes a process of
program planning in anticipation of
_6 future needs and problems.
Establishes and maintains an
awareness of developments occurring
_6- within other cities or other
jurisdictions that may have other
jurisdictions that may have.
Plans, organizes and maintains a
process for establishing community
goals to be approved or adopted by
Council and monitoring and status
reporting.
PERFORMANCE STANDA~D
Strategic planning will be
considered effective when a
majority of the conditions have
been successfully fulfilled.
a. A well-constructed long-
range (strategic) plan is
currently in operation.
b. Annual operational plans are
carried out by Staff members.
c. An on-going monitoring
process is in operation to attain
quality assurance in program
and project implementation.
d. Program evaluation and
personnel evaluation are
interrelated with the strategic
planning process.
e. Legislative knowledge is
current and complete.
Comments: Observations of Evaluators: (use this space also to indicate the impact
upon the teamwork factor)
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Page 7 of9
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the CEO: (Responses to any of the
evaluations/com ments/suggestions/ commendations)
RATING RESPONSIBILITY PERFORMANCE STANDARD
Communication services will
E+ VI. Relationship with Public/Public be considered effective when
- a majority of the conditions
_E Relations. have been successfully
fulfilled.
_E- Plans, organizes and maintains training a. Contacts with the media
_M+ of employees in contact with the public, are timely and credible.
either by phone or in person.
Ensures that an attitude and feeling of b. Publications are varied and
- M helpfulness, courtesy, and sensitivity to consistently well-received by
M- public perception exists In employees the citizens.
coming in contact with the public.
B+ Establishes and maintains an image of c. Feedback from the public
- the City to the community that
represents service, vitality and and the community leadership
- B professionalism. is positive.
Establishes and maintains a liaison with
private non-governmental agencies, d. City has good image with
- B organizations and groups involved in comparable organizations.
areas of concern that relate to services
or activities of the City.
Comments: Observations of Evaluators: (use this space also to indicate the impact
upon the teamwork factor)
Suggestions for Improvements: (SpeCific area(s) that need strengthening)
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Commendations: (Area(s) of performance calling for praise/commendation)
Comments: Observations of Evaluators: (use this space also to Indicate the impact
upon the teamwork factor)
Suggestions for Improvements: (Specific area(s) that need strengthening)
Commendations: (Area(s) of performance calling for praise/commendation)
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Comments of the CEO: (Responses to any of the
eva I u ati ons/ com ments/ sugg esti ons/ com menda tio ns)
RATING
RESPONSIBILITY
_E+
_E
VII. Intergovernmental Relations
Maintains awareness of
E- developments and plans in other
_M+ jurisdictions that may relate to or
affect City government.
Establishes and maintains a liaison
_M with other governmental jurisdictions
M- in those areas of service that
improve or enhance the the City's
programs,
Maintains communications with
_B+
governmental jurisdictions with
_B which the City is involved or
interfaces.
_B-
Comments of the CEO: (Responses to any of the
eva I u ations/ com ments/ su ggestio ns/ co m me nda ti 0 ns)
Page 8 of9
PERFORMANCE STANDARD
Intergovernmental relations will
be considered effective when a
majority of the conditions have
been successfully fulfilled.
a. Sufficient activity with
muniCipal and professional
organizations.
b.Regarded as leader by
municipal officials.
c. Provides examples of good
ideas from other jurisdictions.
d. Positive relationship with
surrounding cities.
e. Good cooperation with County
and State agencies.
Lobs.icma.org
RATING
_E+
_E
_E-
_M+
_M
_M-
RESPONSIBIlITY
VIII. Professional/Personal
Development.
Maintains awareness and value
of broadening professional and
personal development.
Demonstrates imaginative
leadership initiatives.
_B+ Ability to build cohesiveness in
_B Staff.
Comments: Observations of Evaluators: (use this space also to indicate the impact
upon the teamwork factor)
Suggestions for Improvements: (Specific area(s) that need strengthening}
Commendations: (Area(s) of performance calling for praise/commendation)
Comments of the CEO: (Responses to any of the
eva lu atlons/ com ments/ sugg estio ns/ co m mend atio n s)
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_B-
^ top
Decisiveness In leadership
performance.
Effectiveness in the verbal
Communications
Page 9 of9
PERFORMANCE STANDARD
Professional and personal
competencies will be considered
effective when a majority of the
conditions have been successfully
fulfilled.
a. Management techniques show
evidences of innovation, imagination,
and decisiveness.
b. Synergetic techniques are
fostered. .
c. Verbal communication is
commendable.
City Manager
Evaluation Form
.. "... ..," . ":.:.:.:-::.':
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A Does the City Manager maintain effective and open lines
of communication with the Council as a body and with
individual members?
B. Is the Council kept apprised of all ongoing and current
situations involving City business?
C. Does the City Manager exercise sound judgement when
advising Council?
A. Does the City Manager anticipate needs and recognize
potential problems?
B. Does the City Manager propose effective solutions and
provid,e alternatives to identified problems?
C. In making decisions, does the City Manager obtain the
facts and consider the long-term implications?
D. Does the City Manager provide Council with all informa-
tion necessary to make decisions?
E. Are the goals of the Council incorporated into plans for
implementation?
A. Does the City Manager exhibit the ability to arrange work
and efficiently apply resources?
B. Does the City Manager make decisions when sufficient
information is available, and implement action when
conditions are ripe for success?
C. Does the City Manager exhibit the ability to reach for
effective and, when necessary, creative solutions?
D. Does the City Manager obtain the best possible end
result for the money spent?
E.
Do the departments run smoothly, and is there adequate
internal communication among staff, and between staff
and the City Manager?
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City Manager
Evaluation Form
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A.
Does the City Manager adequately and accurately report
and project the financial condition of the City in a timely
manner?
B.
Are management practices and policies -designed to
maintain a sound long-range financial position?
C.
Are plans for the long-term replacement and mainte-
nance of equipment updated regularly?
D. Does the City Manager implement effective programs to
limit liability and loss? .
E. Are there short- and long-term goals for asset manage-
ment?
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Does the City Manager suggest and pursue creative
solutions to financial issues?
A.
Does the City Manager have a customer service orienta-
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public?
B.
Does the City Manager communicate openly, clearly and
honestly with the public, recognizing their right and need
to be wen informed?
C. Do each of the Departments reflect a "customer first"
attitude?
A. Does the City Manager build and motivate a team?
B. Does the City Manager eam the cooperation and
respect of subordinates?
C.
Does the City Manager encourage employees to update
their skills and training?
D.
Does the City Manager promote teamwork andcoopera-
tion among the Department Heads?
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City Manager
Evaluation Form
E. Does the City Manager recognize the value of excel-.
lence in employees, and use all reasonable efforts to
ensure that the best available individuals are recruited,
.hired and continue to work for the City?
F.
Does the City Manager maintain adequate job descrip-
tions for employees?
G.
Does the City Manager ensure annual evaluations for all
employees?
H.
How do you rate the City Manager's overall manage-
ment style in dealing with employees?
A Does the City Manager have the.ability to resolve
conflicts 'inherent in a public agency?
B. Is the City MClnager a good negotiator?
C.
Does the City Manager listen to and understand the
positions and circumstances of others, and communi-
cate that understanding?
D.
Does the City Manager handle stress well?
E,
Does the City Manager exhibit resilience; Le., maintains
motivation and energy in spite of constant demands?
F.
Does the City Manager follow through in a timely man-
ner on commitments and requests?
G. Is the City Manager proactive in recognizing issues and
initiating action?
H. Does the City Manager handle people well in difficult
situations? '
I. Does the City Manager clearly communicate expecta-
tions to contract organizations/personnel to implement
City goals and policies?
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A Does lhe City Manager inspire a shared vision and
enlist staff and Council support?
B. Does the City Manager seek and pursue opportunities to.
improve the organization?
C. Does the City Manager enable others to. act by creating
an atmosphere of trust and collaboration? '
D.
Does the City Manager create standards af excellence
and model behavior?
E.
Daes the City Manager canform to the high ethical
standards of the profession?
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Page 4 of4
CITY OF
SHOREWOOD
5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927. (952) 474-3236
FAX (952) 474-0128. www.cLshorewood.mn.us. cityhall@cLshorewood.mn.us
MEMORANDUM
Date:
April 21, 2008
From:
Honorable Mayor and City Council Members
Lawrence A. Brown, Acting City Administrator
. ,fA. }L/
Bonnie Burton, Finance Director/Treasurer /:Jflv,iJJ- 1
To:
Re:
Discussion on Use of Liquor Fund Cash Balance
Backgroulld
The Shorewood Municipal Liquor Operation was discontinued in December 2007 and the business (both
store locations) sold at that time. Financial information is attached that shows the results of the year's
operations and subsequent sale of same. In brief, both stores showed operating losses for 2007. The
council was aware of this downward trend earlier in the year and that was a factor behind the decision to
sell the stores. The operating loss was offset by a gain on sale of asset, resulting in combined net income
before transfers of $305,000.
The cash proceeds in the Liquor Fund at year end are about $932,000. After all known obligations have
been satisfied, including potential future unemployment claims estimated at about $16,000, the City
Council will have slightly more than $900,000 available in the Liquor Fund for their consideration.
Options
The Council is now requested to consider how they wish to use the proceeds and whether they prefer to
spend the principal balance; or perhaps create a "Shorewood Community Fund" and use the interest
income for various projects; or take no action at this time.
Some possibilities (for work-session discussion purposes) might include:
1. Use all or part of the proceeds to directly fund a specific one-time project such as renovation of
the City offices; or a major environmental or park project; or another project that would benefit
the City.
2. Use all or part of the proceeds to pay the debt service requirements for a project that could be
financed by issuing bonds. For example, ifbonds were issued to renovate the City offices, the
remaining liquor fund balance and/or any interest income it might generate, might be used to
meet the annual principal and interest payment on the bonds. (Please see attached memo from the
City's bond consultant discussing debt financing options for the renovation of the City offices.)
4Ttr
~ . PRINTED ON RECYCLED PAPER
'II'"
4/=.3
Liquor Proceeds Discussion
Page 2
3. Invest the principal balance and use only the interest income for desirable programs on an annual
basis. (The City currently receives 4% - 5% on its investments therefore annual interest income
on $900,000 could be $36,000 - $45,000 per year. The General Fund has been a beneficiary of
annual transfers from the Liquor fund of $40,000 - $50,000 per year, and the Council may decide
to continue this custom, as it has the effect of reducing the tax levy for general operations.)
4. . Use the fund to finance internal loans to other City funds, i.e., allow other funds in need of
financing to 'borrow' internally from the Liquor fund with repayment programmed at a market
rate over a 3-5 year period. (For example, there may be a Stormwater project with some cash
flow needs in 2008. The loan would then be repaid to the Liquor fund from Stormwater rate
revenue over a designated time at a designated interest rate.)
5. Council may choose to take no action at this time and allow the available cash balance to
increase pending future projects and/or emergencies.
The above are suggestions to intended to encourage discussion and the City Council is requested to
consider any and all options at their work-session. Please contact me if you have questions or would like
more information prior to the meeting.
NORTHLAND. SECURITIES
'April 1, 2008
Ms. Bonnie Burton, Finance Director
City of Shore'Yood, Minnesota
Via EMAIL
Re: Debt Financing Options for City Hall Improvements
Dear Bonnie -
As you know there are now three debt financing options available to City's for the acquisition,
construction, equipping or improving City Halls:
. General Obligation (Referendum) Bonds - the City has the authority to issue General
Obligation Bonds backed by the full faith and credit of the City. It would be
necessary for the City to hold a special election on this question. If the election
question passes, the City has the ability to issue General Obligation Bonds. The
bonds would be subject to the statutory debt limit. The City's current statutory debt
limit margin is approximately $16.0M.
. Lease Purchase Revenue Bonds - the City has the authority pursuant to Minnesota
Statutes, Section 465.71 to acquire such a facility pursuant to a lease with option to
purchase agreement. The City must have the right to terminate the lease purchase
agreement at the end of any fiscal year during its term. Unless terminated at the end
of any fiscal year the lease is payable from any revenues available to the City. Under
current law, if the City wants the ability to levy taxes outside of levy limits to make
the lease payments, the bonds must be issued by the Economic Development
Authority. The Economic Development Authority has the authority to issue revenue
bonds payable solely from lease payments to be made by the City pursuant to the
lease purchase agreement entered into between the Port ~uthority and the City.
Under current law, a financing of this type does not require a referendum. In
addition, because the project cost will exceed $1.0 million, the entire lease purchase
bond-finan.cing amount counts against the City's statutory debt limit.
. General Obligation Capital Improvement Plan Bonds - The 2003 Minnesota
Legislature enacted into law a program that allows home rule and statutory cities to
establish a capital improvement program and issue bonds for certain capital
improvements - including public lands, buildings or other improvements for the
purpose of a City Hall, public safety facility and public works facility without an
Northland Securities, Inc. 45 South 7iJ-o Street, Suite 2500, Minneapolis, MN 55402 Toll Free 800-851-2920 Main 612-851-5992
Member FINRA and SIPe
City of Shorewood, Minnesota
City Hall Financing Memo
Page 2
election. These bonds would be subject to the City's debt limit. In addition, there
are other limitations and procedural requirements involved:
o Under current law, the maximum principal and interest on the bonds may
not exceed 0.16% of the taxable market value in the City. The actual pay 2007
market value of the City was $1,481,421,600. This provision will allow for a
bond issue of approximately $35.5M based upon an issue maturing over 20
years at 4.25%.
o A capital improvement plan must be developed and approved by the City
after a public hearing. The capital improvement plan must cover various
cost, needs and revenue considerations as outlined in MSA 410.326
subdivision 3.
o The bonds would only be subject to a referendum if the City received a
petition calling for a vote on the issuance of the bonds. The petition must be
signed by voters equal to 5% of the votes cast in the City's last general
election within 30 days after the public hearing.
Based on my understanding of the City's project description, the amount of a bond financing
would not be an issue as it relates to any statutory requirements.
Preliminary Cost Comparison - A lease revenue bond for city hall improvements will currently
yield approximately .20% - .25% higher interest rates than a general obligation bond for the
same project because of the increased risk due to possible non - appropriation and a lower
credit rating. The spread would be greater for an asset that is less essential. In addition, a lease
revenue bond will carry higher costs of issuance / closing costs. Below is an estimated cost
comparison for a 15 year issue and a 20 year issue.
Average
Rate
Net Debt
Service
Average
Annual
Payment
20 Year Project Financing
City Hall Improvements
(1.0M + financing costs)
General Lease Difference
Obli~ation Revenue
3.89% 4.14% 0.25%
15 Year Project Financing
City Hall Improvements
(1.0M + financinfl costs)
General Lease Difference
Obli~ation Revenue
3.63% 3.83% 0.20%
$1,542,863
$1,583,580
$40,717
$1,388,357
$1,411,747
$23,390
$77,143
(20 payments)
$83,708
(19 payments)
$6,565
$92,577
(15 payments)
$101,604
(14 payments)
$9,027
Northland Securities, Inc. 45 South 7"' Street, Suite 2500, Minneapolis, MN 55402 Toll Free 800-851-2920 Main 612-851-5992
Member FINRA and SIPC
City of Shorewood, Milmesota
City Hall Financing Memo
Page 3
The Municipal Bond Market - Currently, municipal interest rates are artificially high relative
to treasury rates (a typical barometer) in part because of a huge supply of municipal bonds in
the market and a "flight" to high quality investments like treasury bonds. The increased supply
is partially due to institutional portfolios being liquidated because of credit rating downgrades
and the need to stabilize balance sheets due to the sub-prime mortgage market. All else being
equal, we would expect to see municipal bond rates trend lower over the coming months as the
financial markets stabilize and municipal bond supply reverts to traditional levels. From a
historical perspective however, the current bank qualified rates are only .25% - .30% higher than
the lowest rates we have seen in 30 years.
I hope this information is helpful. If you have any questions, please do not hesitate to contact
me.
Sincerely,
NORTHLAND SECURmES INC.
~ dt/lV'-A
Paul Donna
Senior Vice President
Northland Securities, 1nc 45 South 7th Street, Suite 2500, Minneapolis, MN 55402 Toll Free 800-851-2920 Main 612-851-5992
Member FlNRA and SlPC
City of Shorewood, Minnesota I
$1.0M City Hall Improvements (General Obligation Bonds) i
I
Annual Property Tax Impact Summary Estimates ~ __ ~_ _~ ~~___ _J
Term:
Estimated Annal Debt Service:
Pay 2007 TNTC:
Est. Net Rate Increase:
Assumptions
15
$92,577
$16,319,066
0.57%
20
$77,143
$16,319,066
0.47%
Market Value
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
Residential Homestead
15 Year
Annual Impact
$17
$23
$28
$35
$43
$50
$57
$64
20 Year
Annual Impact
$14
$19
$24
$30
$35
$41
$47
$53
Commercial/Industrial
Market Value
$500,000
$750,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$4,000,000
$5,000,000
Northland Securities
Public Finance
15 Year
Annual Impact
$28
$46
$64
$99
$135
$170
$206
$277
$347
20 Year
Annual Impact
$24
$38
$53
$83
$112
$142
$171
$230
$290
Page 1
Prepared 4/7/2008
City of Shorewood, Minnesota
I
$1.0M City Hall Improvements (Lease Revenue Bonds) , '
Annual Property Tax Impact SummCLrY Estimates ' " I
Assumptions
Term:
Estimated Annal Debt Service:
Pay 2007 Taxable Net Tax Capacity:
Est. Net Rate Increase:
15
$101,604
$16,319,066
0.62%
20
$83,708
$16,319,066
0.51%
Residential Homestead
15 Year 20 Year
Market Value Annual Impact Annual Impact
$300,000 $19 $15
$400,000 $25 $21
$500,000 $31 $26
$600,000 $39 $32
$700,000 $47 $38
$800,000 $54 $45
$900,000 $62 $51
$1,000,000 $70 $58
Commercial I Industrial
15 Year 20 Year
Market Value Annual Impact Annual Impact
$500,000 $31 $26
$750,000 $51 $42
$1,000,000 $70 $58
$1,500,000 $109 $90
$2,000,000 $148 $122
$2,500,000 $187 $154
$3,000,000 $226 $186
$4,000,000 $304 $250
$5,000,000 $381 $314
Northland Securities
Public Finance
Page 2
Prepared 4nt2008
CITY OF SHOREWOOD, MINNESOTA Exhibit D-l
LIQUOR FUNDS
SCHEDULES OF ASSETS, LIABILITIES AND NET ASSETS
December 31, 2007 AND 2006
DRAfT
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Shorewood Plaza Totals
2007 .2007 2006 2007 2006
ASSETS
CURRENT ASSETS
Cash and temporary investments $ 263,756 $ 3,401 $ 668,526 $ 359,286 $ 932,282 $ 362,687
Receivables
Accrued interest 23 283 2,726 2,687 2,749 2,970
Accounts 1,021 1,021 2,042
Inventories, at cost 98,041 142,308 240,349
Prepaid items 1,952 1,953 3,905
TOTAL CURRENT ASSETS 264,800 103,677 672,273 506,234 937,073 609,911
NONCURRENT ASSETS
Capital assets
Equipment and furnishings 68,199 247,983 316,182 .
Less accumulated depreciation (59,796) (126,089) (185,885)
TOTAL CAPITAL ASSETS
(net of accumulated depreciation) 8,403 121,894 130,297
TOTAL ASSETS 264,800 112,080 672,273 628,128 937,073 740,208
LIABILITIES
CURRENT LIABILITIES
Accounts and contracts payable 7,131 8,446 7,788 20,491 14,919 28,937
Due to other governments 7,336 10,883 18,219
Salaries and compensated absences payable 14,433 21,638 36,071
TOTAL CURRENT LIABILITIES 7,131 30,215 7,788 53,012 14,919 83,227
NET ASSETS
Invested in capital assets 8,403 121,894 130,297
Umestricted 257,669 73,462 664,485 453,222 922,154 526,684
TOTAL NET ASSETS $ 257,669 $ 81,865 $ 664,485 $ 575,116 $ 922,154 $ 656,981
CITY OF SHOREWOOD, 1vlINNESOTA Exhibit D-2
LIQUOR FUNDS
SCHEDULES OF REVENUES, EXPENSES AND
CHANGES IN FUND NET ASSETS
FOR THE YEARS ENDED December 31,2007 AND 2006 F""RA FT D~RAFT
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Waterford Center Shorewood Plaza Totals
2007 2006 2007 2006 2007 2006
OPERATING REVENUES
Sales $ 792,259 $ 863,424 $ 992,007 $ 1,114,627 $ 1,784,266 $ 1,978,051
Less cost of goods sold (572,169) (632,354) (728,269) (810,448) (1,300,438) (1,442,802)
GROSS PROFIT 220,090 231,070 263,738 304,179 483,828 535,249
OPERA TING EXPENSES
Personal services 112,343 136,553 137,314 143,062 249,657 279,615
Supplies 3,779 4,267 5,303 4,518 9,082 8,785
Depreciation 2,982 3,011 29,138 30,470 32,120 33,481
Professional services 26,490 2,725 27,535 2,725 54,025 5,450
Contracted services 583 596 1,157 1,115 1,740 1,711
Insurance 7,366 6,092 7,366 6,092 14,732 12,184
Utilities 9,024 10,088 12,363 13,001 21,387 23,089
Rent 66,938 67,425 87,724 87,559 154,662 154,984
Advertising 3,840 7,087 3,840 7,197 7,680 14,284
Other 17,724 17,052 22,290 23,780 40,014 40,832
TOTAL OPERATING EXPENSES 251,069 254,896 334,030 319,519 585,099 574,415
OPERATING LOSS (30,979) (23,826) (70,292) (15,340) (101,271) (39,166)
NONOPERATING REVENUES
Interest on investments 419 2,335 18,566 14,608 18,985 16,943
Gain on sale of asset 225,379 157,511 382,890
Other income 985 3,138 3,584 3,155 4,569 6,293
TOTAL NONOPERATING REVENUES 226,783 5,473 179,661 17,763 406,444 23,236
INCOME (LOSS) BEFORE TRANSFERS 195,804 (18,353) 109,369 2,423 305,173 (15,930)
TRANSFERS
Transfers out (20,000) (25,000) (20,000) (25,000) (40,000) (50,000)
CHANGE IN NET ASSETS 175,804 (43,353) 89,369 (22,577) 265,173 (65,930)
NET ASSETS, JANUARY 1 81,865 125,218 575,116 597,693 656,981 722,911
NET ASSETS, DECElv1BER 31 $ 257,669 $ 81,865 $ 664,485 $ 575,116 $ 922,154 $ 656,981
CITY OF SHOREWOOD, MINNESOTA Exhibit D-3
LIQUOR FUNDS
SCHEDULES OF CASH FLOWS
FOR THE YEARS ENDED December 31, 2007 AND 2006 D'RJAFT
ijR ~~ FT " ,'I I'~ '!'~f:
,,,..\..,..~ "i Shorewood Plaza Totals
atertOrd - rer
200'7 20(J~ 2007 2006 2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users $ 791,238 $ 870,173 $ 990,986 $ 1,114,627 $ 1,782,224 $ 1,985,400
Other receipts and payments, net 985 3,138 3,584 3,155 4,569 6,293
Payments to suppliers, contractors and other goverrunents (616,571) (757,133) (775,172) (963,164) (1,391,743) (1,720,297)
Payments to employees (126,176) (127,457) (158,952) (137,118) (285,728) (264,575)
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 48,876 (10,679) 60,446 17,500 109,322 6,821
CASH FLOWS FROM NONCAPITAL
FINANCING ACTNITIES
Transfers out (20,000) (25,000) (20,000) (25,000) (40,000) (50,000)
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTNITIES
Proceeds from sale of capital assets 230,800 250,267 481,067
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received on investments 679 2,218 18,527 14,340 19,206 16,558
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 260,355 (33,461) 309,240 6,840 569,595 (26,621)
CASH AND CASH EQUIVALENTS, JANUARY 1 3,401 36,862 359,286 352,446 362,687 389,308
CASH AND CASH EQUIVALENTS, DECEMBER 31 $ 263,756 $ 3,401 $ 668,526 $ 359,286 $ 932,282 $ 362,687
RECONCILIATION OF OPERATING LOSS
TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES
Operating loss $ (30,979) $ (23,826) $ (70,292) $ (15,340) (101,271) (39,166)
Adjustments to reconcile operating income (loss)
to net cash provided (used) by operating activities
Other income related to operations 985 3,138 3,584 3,155 4,569 6,293
Depreciation 2,982 3,011 29,138 30,470 32,120 33,481
(Increase) decrease in assets:
Accounts receivable (1,021) 7,349 (1,021) (2,042) 7,349
Due from other funds
Inventories 98,041 (5,228) 142,308 4,634 240,349 (594)
Prepaid items 1,952 (790) 1,953 (728) 3,905 (1,518)
Increase (decrease) in liabilities:
Accounts and contracts payable (1,315) (2,599) (12,703) (10,247) (14,018) (12,846)
Due to other goverrunents (7,336) (830) (10,883) (388) (18,219) (1,218)
Salaries and compensated absences payable (14,433) 9,096 (21,638) 5,944 (36,071 ) 15,040
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ 48,876 $ (10,679) $ 60,446 $ 17,500 $ 109,322 $ 6,821
NONCASH CAPITAL AND RELATED FINANCING ACTIVITIES
Retirement of capital assets $ 5,421 $ $ 92,756 $ $ 98,117 $
CITY OF
SHOREWOOD
5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927. (952) 474-3236
FAX (952) 474-0128. www.cLshorewood.mn.us. cityhall@cLshorewood.mn.us
MEMORANDUM
Date:
Apri123, 2008
Re:
Honorable Mayor and City Council Members
Lawrence A. Brown, Acting City Administrator
Bonnie Burton, Finance Director/Treasurer ~v...,tV
Investment Policy Discussion
To:
From:
Introduction
In conjunction with discussion of disposition of the Liquor Fund cash balances, Counci1member
Woodruff requested a discussion of the City's investment policy. Accordingly, attached for your review
are the following documents:
1. City of Shorewood, MN Investment Policy
2. City of Aitkin, MN Investment Policy
3. League of Minnesota Cities Information Memo: City Deposits and Investments
Background
Shorewood's investment policy is based on Minnesota State statute and was adopted in 1996. It has
formed the basis of the City's investment practices these past years. Councilmember Woodruff and I
received, bye-mail, a copy ofthe Aitkin investment policy, recently adopted by their City Council and
Public Utilities Commission. (The policy was then e-mai1ed to council members last week at Dick's
request.) Aitkin's policy also follows Minnesota State Statute very closely and appears to have been
based on the sample model investment policy outline included in the LMC informational memo. The
Shorewood City Council may also wish to consider an update their investment policy. If so, the League
memo model provides a good basis, especially in the area of defining investment objectives.
Shorewood's Investments
Overview
At year end 2007, the City's cash and investment portfolio was about $25.6 million. Approximately $10
million is designated as EDA bond refunding proceeds and is invested by and with U.S. Bank as trustee,
per the EDA bond covenants. The remaining $15.6 million represents the City's cash and investment
balances across all funds (Council will recall that $2+ million was received at year end for December tax
#'fIr
'o.J PRINTED ON RECYCLED PAPER
Investment Policy Work-session
Page 2
proceeds.) The $15 million is invested with 9-10 different brokers and is invested primarily in United
States securities, including U.S. treasury and government agency notes; Certificates of Deposit (CD's);
Commercial Paper rated A1P1 or better; the League of Minnesota Cities 4-M Fund (a Minnesota joint
powers investment trust). All securities are held in safekeeping at the financial institutions and are
collateralized appropriately as required.
Approximately $4.5 million (29-30% of the portfolio) is kept in liquid accounts such as the 4M Fund and
the City's Treasury Cash Series Sweep Account at Beacon Bank. In 2007, the City received $652,000 in
interest income across all funds.
Delegation of Authority
Shorewood's investment policy places authority and responsibility for conducting investment transactions
with the Finance DirectorlTreasurer, and in their absence, the City Administrator. This is similar to the
League memo, which states "in most cities the treasurer or chief financial officer is usually the person
given this function."
Broker Notifications
The City finance department prepares Broker Notification forms and obtains certifications annually. The
Broker Notification forms are designed to document compliance with the requirement that all investments
are to be made in accordance with Minnesota State Statutes and the City's investment policy.
Investment Objectives
The current Shorewood Investment policy is somewhat vague regarding investment objectives. Staff
believes these objectives could be clarified in an updated policy. In practice, the following investment
objectives are generally observed: 1) Safety of Principal - this is the foremost objective for the City tax
dollars; 2) Liquidity - the portfolio must remain sufficiently liquid to meet all operating costs, especially
given the periodic nature of tax receipts; 3) Diversification - a variety of investments and brokers
minimizes exposure to loss; and, 4) Yield - efforts are made to attain a market-average rate of return.
Conclusion
The City Council is requested to review and discuss the Investment policy at their work-session. Please
contact me if you have questions or would like more information prior to the meeting.
CITY OF SHOREWOOD, MINNESOTA
INVESTMENT POLICY
ADOPTED 9/23/96
SCOPE: This investment policy applies to activities of the City of Shorewood, Minnesota
with regard to investing the financial assets of all funds, including the following:
. General Fund
. Special Revenue Funds
. Debt Service Funds
. Capital Project Funds
· Enterprise Funds
. Internal Service Funds
. Trust and Agency Funds
OBJECTIVES: Investments of the City of Shorewood shall be in accordance with
Minnesota Statutes 475.66 and this policy shall be undertaken in a manner that seeks to
ensure the preservation of capital in the overall portfolio. To attain this objective,
diversification is required in order that losses on individual securities do not exceed the
income within the entire pOltfolio.
The City will seek to place all of its deposits and investments with Minnesota depositories
and/or broker/dealers.
A market average rate of return will be sought throughout budgetary and economic cycles.
The investment strategy will take into account the constraints on risk and cash flow
characteristics of the investment portfolio.
All officials and employees that are pmt of the investment process shall seek to act
responsibly as custodians of the public trust. The investment portfolio shall be designed
and managed with a high degree of professionalism worthy of the public trust. The City,
however, recognizes that in a diversified portfolio, occasional measured losses are
inevitable and must be considered within the context of the overall portfolio's investment
return, provided adequate diversification has been implemented.
POOLING OF INVESTMENTS: For purposes of making the maximum amount of
funds available for investment, cash assets for 'all City funds may be pooled in an
investment account. Interest earnings are allocated mnong the various funds based upon
their monthly cash balance.
DELEGATION OF AUTHORITY: In accordance with Minnesota Statutes 471.56,
the responsibility for conducting investment transactions resides with the Finance
DirectorlTreasurer and, in the absence of the Finance DirectorlTreasurer, the City
Administrator (hereafter called "investment officers"). The investment officers are
authorized to make investments of public funds. No person may engage in an investment
transaction except as provided in this policy.
PRUDENCE: Investments shall be made with judgment and care. The standard of
prudence, as defined by Minnesota Statutes 356A.04, meaning not for speculation and with
consideration of the probable safety of the capital as well as the probable investment return,
derived from assets, will be applied in all investment transactions.
The investment officers, acting in accordance with this written policy and exercising due
diligence, shall not be held personally responsible for a specific security's credit risk or
market price changes, provided that these deviations are reported immediately and that
appropriate action is taken to control adverse developments.
INTERNAL CONTROLS: Internal controls are designed to prevent loss of public
funds due to fraud, error, misrepresentation, unanticipated market changes or imprudent
actions. Before the City of Shorewood invests any surplus funds, an analysis of possible
investments shall be conducted. If a specific maturity date is required, either for cash flow
purposes or for conformance to maturity guidelines, quotations will be requested for
instruments which meet the maturity requirement. If no specific maturity is required, an
analysis of various options will be conducted to determine which maturities would be most
advantageous.
Quotations will be requested from financial institutions for various options with regards to
term and instrument. The City of Shorewood will accept the option which provides the
highest rate of return within the maturity required and within the limits of these policies.
The investment officer shall generate monthly repOlts which will include data on investment
instruments being held by the City.
The investment portfolio shall be reviewed by the City Council on a quarterly basis.
Investment records of the City shall be reviewed by independent auditors as part of the
City's annual audit for compliance with state statutes and this policy.
ETHICS AND CONFLICTS OF INTEREST: Officers and employees involved in
the investment process shall refrain from personal business activity that could conflict with
the investment program, or which could reasonably cause others to question or doubt their
ability to make impartial investment decisions.
PARTICULAR PROVISIONS OR RESTRICTIONS: In selecting depositories,
the credit worthiness of the institution shall be considered and the investment officers shaH
conduct a comprehensive review of prospective depository credit, characteristics, services
available, and financial history. Selection will be in accordance with Minnesota Statutes
118.005 and 118.01
Before engaging in investment transactions with the City of Shorewood, the supervising
officer at the securities broker/dealer shall submit a certification. The document will state
that the officer has reviewed the investment policies and objectives, as well as applicable
state law, and agrees to disclose potential conflicts of interest or risk to public funds that
might arise out of business transactions between the firm and the City of Shorewood. All
fmandal institutions shall agree to undeltake reasonable efforts to preclude imprudent
transactions involving the City of Shorewood' s funds.
INSTRUMENTS: The City of Shorewood will only invest in instruments which are in
accordance with Minnesota Statutes 475.66. Investment is allowable in any mortgage
derivative product which is not "high risk" per Minnesota Statutes 475.66. Documentation
of such compliance with at least the results of three separate independent statutory "impact"
2
tests all of which indicate that the security is not "high risk" is required. Test results will be
kept on file for audit purposes.
At the time of purchase of any mortgage or mortgage related security, the investment officer
will obtain documentation of compliance with this policy.
CUSTODIAL RISK: The investment officer shall structure all investments, deposits,
and repurchase agreements so that the custodial risk is at all times in category # 1 or # 2
under GASB Statement # 3. All investments are placed in safekeeping at financial
institutions.
DIVERSIFICA TION/MA TURITIES: It is the policy of the City of Shorewood to
diversify its investment pOltfolio to eliminate the risk of loss resulting from over-
concentration of assets in a specific maturity, a specific issuer or a specific class of
securities. The maturities selected shall provide for stability of income and reasonable
liquidity.
3
Adopted by the Aitkin City Council: September 17, 2007
Adopted by the Aitkin Public Utilities Commission: August 20, 2007
Effective Date of Policy: January 1, 2008
CITY OF AITKIN
INVESTMENT POLI~CY
This policy covers all monies of the City of Aitkin and includes deposits and investments
of funds deposited in interest bearing accounts.
It is a common occurrence for the City of Aitkin to have cash balances in various fund
accounts, which, although allocated for a specific purpose, are temporarily not needed. It
is the policy of the City that any fund with a cash balance, which will remain unexpended
for a reasonable period oftime, shall be invested in a manner as outlined below.
PURPOSE
The purpose of this policy is to establish specific guidelines the City of Aitkin will use in
the investment of City funds. It will be the responsibility of the City Clerk to invest City
funds in order to attain a market rate of return while preserving and protecting the capital
of the overall portfolio.
It will be the responsibility of the Public Utilities Commission (PUC) Manager to invest
PUC funds in order to attain a market rate of return while preserving and protecting the
capital ofthe overall portfolio.
Investments will be made, based on statutory constraints, in safe, low risk instruments.
SCOPE
The City Clerk is responsible for the investing of all funds in the custody of the City,
including, but not necessarily limited to, the General Fund, Special Revenue Funds, Debt
Service Funds, Capital Proj ect Funds, Enterprise Funds, and Agency Funds.
The PUC Manager is responsible for the investing of all funds in the custody of the PUC.
PRUDENCE
Investment officials, when investing or depositing public funds, shall exercise the care,
skill, prudence and diligence under the circumstances then prevailing that a person acting
in a like capacity and familiar with such matters would use to attain the objectives stated
below. This standard requires that when making investment decisions, the City Clerk or
PUC Manager shall consider the role that the investment or deposit plays within the
portfolio of assets of the City of Aitkin and the investment objectives stated below.
Page 1 of6
Investment officers acting in accordance with this policy and with MN Statute 118A, and
exercising due diligence, shall be relieved of personal responsibility for an individual
security's credit risk or market price changes, provided that reasonable action is taken to
control adverse developments and unexpected deviations are reported in a timely manner.
When investing assets of the City of Aitkin for a period longer than one year, the City
Clerk or PUC Manager shall request competitive investment proposals for comparable
credit and term investments from a minimum oftwo investment providers.
OBJECTIVE
At all times, investments of the City shall be made in accordance with Minnesota Statutes
Chapter 118A and amendments. There are three main objectives of all investment
activities that are prioritized as follows:
(1) Safety. Safety of principal is the foremost objective of the City. Each
investment transaction shall seek to first insure that capital losses are avoided.
The objective will be to mitigate credit risk and interest rate risk.
Credit risk is the risk ofloss due to failure of the security issuer or backer.
Thus, designated depositories shall have insurance through the FDIC (Federal
Deposit Insurance Corporation) or the SIPC (Securities Investor Protection
Corporation). To ensure safety, it is the policy of the City that when
considering an investment, all depositories under consideration be cross-
checked against existing investments to make certain that funds in excess of
insurance limits are not made in the same institutions unless collateralized as
outlined below.
Interest Rate Risk is the risk that the market value of securities in the portfolio
will fall due to changes in general interest rates. To minimize this risk, the
City will structure the investment portfolio so that securities mature to meet
cash requirements for ongoing operations, thereby avoiding the need to sell
securities on the open market, prior to maturity. In addition, operation funds
shall be invested primarily in shorter-term securities, money market funds, or
similar investment pools.
(2) Liquidity. The investment portfolio shall remain sufficiently liquid to meet all
operating requirements that may be reasonably anticipated. This is
accomplished by structuring the portfolio so that securities mature concurrent
with cash needs to meet anticipated demands (static liquidity). Furthermore,
since all possible cash demands cannot be anticipated, the portfolio should
consist largely of securities with active secondary or resale markets (dynamic
liquidity). A portion of the portfolio also may be placed in money market
funds or local government investment pools, which offer same-day liquidity
for short-term funds.
Page 2 of6
(3) Yield. The investment portfolio of the City of Aitkin shall be designed to
attain a market-average rate of return through budgetary and economic cycles,
taking into consideration the City's investment risk constraints, cash flow
characteristics of the portfolio and pmdent investment principles. Return on
investment is of secondary importance compared to the safety and liquidity
objectives described above. The core of investments is limited to relatively
low risk securities, in anticipation of earning a fair return, relative to the risk
being assumed.
Subject to the requirements ofthe above objectives, it is the policy of the City of Aitkin
to offer financial institutions and companies within the City of Aitkin the opportunity to
bid on investments; however, the City of Aitkin will seek the best investment yields.
DELEGATION OF AUTHORITY
Management responsibility for the investment program is hereby delegated from the City
Council to the City Clerk; and from the PUC to the PUC Manager; who shall establish
procedures for the operation of the investment program, consistent with this investment
policy. Such procedures shall include delegation of authority to persons responsible for
investment transactions. The City Clerk and PUC Manager shall be responsible for all
transactions undertaken and shall establish a system of internal controls designed to
prevent losses from fraud and employee error.
CONFLICT OF INTEREST
Any City Official (elected or appointed) involved in the investment process shall refrain
from personal business activity that could conflict with proper execution of the
investment program or which could impair hislher ability to make impartial investment
decisions.
AUTHORIZED FINANCIAL INSTITUTE AND DEALER
In accordance with Minnesota Statute l18A.OOS, the responsibility for conducting
investment transactions resides with the City Council of the City of Aitkin. Also, the
Council shall authorize the City Clerk and the PUC Manager to exercise the powers of
the Council in designating a depository of the Funds. In selecting depositories, the credit
worthiness of the institutions under consideration shall be examined by the City Clerk
and PUC Manager.
Only approved security broker/dealers selected by creditworthiness shall be utilized
(minimum capital requirement of $1 0 million dollars and at least five years of operation).
These may include "primary" dealers or regional dealers that qualify under Securities and
Exchange Commission Rule lSc3-l (uniform net capital mle).
Page30f6
BROKER REPRESENTATIONS
The City of Aitkin must obtain from their brokers certain representations regarding future
investments. Minnesota Statutes, Section 118A, Subdivision 6, requires the City to
provide each broker with information regarding the City's investment restrictions.
Before engaging in investment transactions with the City of Aitkin, the supervising
officer at the securities broker/dealer shall submit a certification annually according to
MN Statutes 118A.05. The document will state that the officer has reviewed the
investment policies and objectives as well as applicable state law, and agrees to disclose
potential conflicts of interest or risk to public funds that might arise out of business
transactions between the firm and the City of Aitkin. All financial institutions shall agree
to undertake reasonable efforts to preclude imprudent transactions involving the City's
nmds.
AUTHORIZED AND SUIT ABLE INVESTMENTS
Minnesota Statutes, Section 118A, Subdivision 3, lists all pennissib1e investments for
municipalities. This list establishes the maximum investment risk permitted for a
Minnesota municipality. Even though MN Statutes 118A provides for more instruments
to be used for investing purposes, the following is a list of investments the City will be
authorized to invest in:
(1) Government Securities. Instruments such as bonds, notes, bills, mortgages
and other securities which are direct obligations of the federal government
or its agencies, with the principal fully guaranteed by the US Government
or its agencies.
(2) Certificate of Deposit. A negotiable or nonnegotiable instrument issued
by commercial banks and insured up to $100,000 by the FDIC.
(3) Repurchase Agreement. An investment which consists oftwo
simultaneous transactions, where an investor purchases securities from a
bank or dealer. At the same time, the selling bank or dealer agrees to
repurchase the securities at the same price plus interest at some agreed-
upon future date. The security purchased is the collateral protecting the
investment.
(4) Anv security which is a general obligation of any state or local
government with taxing powers which is rated "A" or better by a national
bond rating service.
(5) Statewide investment pools, including Minnesota Joint Powers Investment
Trust (4M Fund), which invest in authorized instruments according to MN
Statutes 118A.
Page 4 of6
(6) Money Market Mutual Funds which invest in authorized instruments
according to MN Statutes 118A.
(7) Interest-Bearing Deposits in authorized depositories must be fully insured
or collateralized at a minimum of 110% of face value.
COLLATERALIZATION
Financial Institutions. If City funds are deposited in financial institutions, the financial
institutions must provide $100,000 in governmental insurance protection. At no time will
deposits in anyone institution exceed $100,000 unless such excesses are protected by
pledged securities. In order to anticipate market changes and provide a level of security
for all funds, the collateralization level will be 110% of the market value of principal and
accrued interest. When the pledged collateral consists of notes secured by first
mortgages, the collateral level will be 140% of the market value of the principal and
accrued interest. Collateral shall be deposited in the name of the City of Aitkin, subject
to release by the City Clerk or PUC Manager.
Broker-Dealers. When investments purchased by the City are held in safekeeping by a
broker-dealer, the broker-dealer must provide asset protection of $500,000 through the
SIPC and supplemental insurance protection to cover the full amount of investments over
$500,000.
SAFEKEEPING AND CUSTODY
All invested assets of the City of Aitkin involving the use of a public funds custodial
agreement shall comply with all rules adopted pursuant to Minnesota Statute 118A. All
custodial agreements shall be in writing and shall contain a provision that all custodial
services are provided in accordance with the laws of the State of Minnesota.
DIVERSIFICATION
The City will attempt to diversify its investments according to type and maturity. The
portfolio, as much as possible, will contain both short-term and long-term investments.
The City will attempt to match its investments with anticipated cash flow requirements.
Extended maturities may be utilized to take advantage of higher yields; however, no more
than 30% of the total investments should extend beyond five (5) years and in no
circumstance should any extend beyond ten (10) years without the direct approval of the
City Council. At least 30% of unencumbered funds shall be kept in liquid savings
accounts (such as the 4M Fund).
CERTIFICATE OF AUTHORITY
The Aitkin City Council hereby authorizes the following City staff to sell, assign, and
endorse for transfer, certificates of deposit, certificates representing stocks, bonds, or
Page 5 of6
other securities that are registered in the name of the City of Aitkin: City Clerk, Deputy
Clerk, PUC Manager.
INVESTMENT REPORTING
The City Clerk and the PUC Manager on or before September 1 of each year shall furnish
the City Council of the City of Aitkin a detailed report of all investments held as of June
30 of that year, including the cost, date and place of each investment, the maturity date
and rate of interest earning on each as of that date.
POLICY CONSIDERATIONS
Any investment currently held that does not meet the guidelines of this policy shall be
exempted from them. At maturity or liquidation, such monies shall be reinvested only as
provided in this policy.
This policy shall be reviewed an on annual basis. Any changes must be approved by the
City Council and Public Utilities Commission.
CONCLUSION
The intent of this policy is to ensure the safety of all City funds. The main goal of the
City will be to achieve a market rate of return while maintaining the safety of its
principal.
Page 6 of6
'l~.,..."
.;'~''''''''''''''''7
LMC
a research memo for city officials
~ of l.;.illnwwln Cin'i!G
eml1" prtnnonrrfll1dC/u::ll
215G.l
April 2004
~
o
~
City Deposits
and
Investments
~ 1
League of Minnesota Cities
The League of Minnesota Cities provides this publication as a general
informational memo. It is not intended to provide legal advice and should
not be used as a substitute for competent legal guidance. Readers should
consult with an attorney for advice concerning specific situations.
@ 2004 League of Minnesota Cities Research Foundation.
All rights reserved.
LMC
League 0/ Minnesota Cities
Cia"" promoting """"Dence
League of Minnesota Cities
145 University Avenue West
St. Paul, MN 55103-2044
(651) 281-1200
(800) 925-1122
Fax (651) 281-1299
www.lmnc.org
.
..
8
City Deposits and Investments
Deposits and Investments
Highlights
1. What type of financial institutions can
be named as depositories?
Generally, cities may choose any of the following types of financial
institutions as depositories:
. Savings associations
· Commercial banks
. Trust companies
. Credit unions
. Industrial loan and thrift companies
Cities that have checking accounts through the League's 4M Fund or
similar brokerage firms will need to designate the bank where the
checking account is located as a depository.
2. How much money may a city keep in a,
single account?
Cities may keep as much money as they want in a single account.
But if the amount exceeds $100,000, the amounts beyond $100,000
are not insured by the Federal Deposit Insurance Corporation
(FDIC). Ifa city keeps more than $100,000 in a single account, or in
a combination of accounts that are in the same bank or a branch of
the same bank, it must get a bond or collateral to guarantee the extra
amounts.
3. How much of a deposit is insured by the
FDIC?
The FDIC only covers deposits that are made in FDIC-member
banks. A depositor will have coverage up to $100,000 for one
checking account, and one time and savings deposit. Multiple
accounts are added together for the purpose of determining how
much is insured. Multiple accounts will include accounts that are at
the same bank or at a branch of the same bank. There are further
limits for deposits that are kept in out-of-state banks.
3
4. When is collateral or a bond required on
a deposit?
A financial institution must provide a surety bond or collateral to
protect any city funds that are not covered by the FDIC. The amount
of bond or collateral varies, depending upon the type of city.
5. How much collateral or bond is required
for deposited amounts that are not
covered by the FDIC?
$
The total amount of collateral computed at its market value must be
at least 10 percent more than the amount on deposit plus accrued
interest at the close of the business day. Under certain conditions,
some cities may need to get a corporate surety bond as collateral for
at least double the amount of the deposit.
6. What type of collateral is allowed in lieu
of a bond?
B
The following types of collateral are allowed in lieu of a corporate
surety bond for the protection of uninsured deposits:
. United States government treasury bills, notes, and bonds;
. Issues of U.S. government agencies and instrumentalities;
. General obligation securities of any state or local government
with taxing powers;
. Certain irrevocable standby letters of credit issued by Federal
Home Loan Banks to a municipality; and,
. Time deposits that are fully insured by the FDIC.
This is a general listing. Some of these instruments must meet certain
criteria in order to be used.
The most common types of collateral are U.S. treasury bonds and
issues of government agencies. They are generally more desirable
because they are safe, liquid, and easily traded.
4
League of Minnesota Cities
7. What are common issues regarding
deposits?
? . Ability to desigllate more thall olle depository. A city may put
. all its funds in a single depository or in different depositories.
However, the city should be certain that all amounts will be
covered by a bond or collateral if not covered by federal deposit
insurance.
. Allllual desigllatioll of depositories. Generally the law is not
clear on whether cities are required to designate depositories
every year. However, a city must have a designated depository;
thus some argue it should be done on an annual basis. Others say
the designation would carry through to the following year until
the council changes to another depository by passing a new
resolution. Many cities officially re-designate their depositories
at the start of each new year.
. Depositories that employ a city coullcilmember. A city may
designate a financial institution as a depository if one of its
councilmembers is employed by it or has a financial interest in it.
However, the designation must be approved by unanimous vote
of the council and the interested member must disclose his or her
interest in the official council minutes before the depository is
designated. The interested official should abstain from
discussing and voting on the matter. See League research memo
Official Conflict of Interest (140a.3) for a more complete
discussion.
8. What types of investments can be made
by cities?
'" . United States securities, including United States treasury and
government agency securities
. State and local municipal securities
. Commercial paper
. Time deposits
. Temporary general obligation bonds
. Debt service funds
. Bankers acceptances
. Mutual funds
. Certain kinds of repurchase agreements and reverse repurchase
agreements
City Deposits and Investments 5
· League of Minnesota Cities 4M Fund
This is a general listing. Some of these instruments must meet certain
criteria in order to be used. There are also some additional
investments that can be made by the cities of Minneapolis and St.
Paul and by Hennepin and Ramsey counties.
9. Can a city invest in mutual funds?
Generally, a city may invest in a mutual fund only if the mutual fund
is made up of instruments that would be allowed as a direct city
investment and subject to certain restrictions. There are also ratings
and maturity constraints that must be met.
10. What happens if the city does not
comply with the deposit and investment
laws?
@
A city could lose money ifci depository fails and the city does not
have proper bond coverage or collateral, as required by the deposit
laws. Likewise, not following the proper investment laws could
cause the city to take a financial loss. The city could also be cited by
the state auditor for noncompliance with state requirements.
11. Where can cities get further
information?
~
-
The League of Minnesota Cities has several other publications that
discuss issues relating to deposits and investments. Call the League's
Research and Information Services for further information at (651)
281-1200 or (800) 925-1122.
6
League uf Minnesota Cities
Table of Contents
Deposits and Investments Highlights ..................................... ......................... ........................... .................... ..........3
Part 1. Introduction ............................... ........... ......................................... .................................... ................ .......9
Part II. Deposits........... ................ ................ .................... ........ ........... ............... .............................. ..................... 9
A. General authority for deposits ..................... ................. ..................................... ................................... 9
B. FD I C insured depos its .............. .............. ...................... ...... .................................... ............. ...............12
C. Collateral......................... ........................................................ ..;.......... ..............................................15
Part II I. Investments..................... .......... ............................................................................................................. 18
A. Authority for investlnents ....... ...................................... ............................................................... .......18
B. Broker's notification and certification............................ ..... ................. ...... ................... ..... ..... ........... 19
C. Permitted investments........... ......................................... ......... .......................................... .................. 19
D. Permitted investment contracts and agreements .................. ..................... ................ ..........................21
E. Safekeeping of investments, contracts, and agreements .....................................................................25
F. Additional investment authority for some cities and counties ............................................................25
G. Investment pol icies.................. .................................................... .............. ..... ....................................27
H. Conclusion..........................................................................................................................................30
Part IV. Model resolution designating depository ...............................................................................................31
Part V. Sample broker acknowledgment form .......................................................;c........................................... 33
Part VI. Outline of an investment policy .............................................................................................................35
City Deposits and Investments
7
Part I. Introduction
1"1 IOn. Slat. C11. 118 A.
The purpose of this memo is to give an overview of the deposit and
investment laws as they pertain to cities. However, this memo does not
apply to investments of retirement plans or relief association pension
funds. The scope of permitted investments for these entities is typically
broader than those for cities in general. For further information on
investments of pension funds, contact the League or the state auditor.
The deposit and investment laws were recodified in 1996 and became
effective Jan. 1, 1997. While the 1996 law was designed to apply to all
cities, there are also some older laws with requirements that may need to be
considered. Where the 1996 law is mentioned, it refers to the statutes that
were codified in Minn. Stat. Ch. IISA.
Home rule charter cities may also need to consider the individual
requirements of their charter provisions.
Part II.
Deposits
A. General authority for deposits
Cities, counties, towns, school districts, hospital districts, public
authorities, public corporations, public commissions, special districts, and
other political subdivisions have authority to designate depositories for
their funds.
1. Designating a depository
Minn. Stat. ~ ] 18A.!C.
sllbd. I.
All city councils must designate one or more financial institutions as a
depository of city funds. Typically, this is done on an annual basis.
However, there is no general requirement that would seem to require
annual designation. A city may also change its depository at any time
during the year.
a. Types of depositories
Minn Stat S IISA 01,
sllbd.3.
Cities, counties, towns, school districts, hospital districts, public
authorities, public corporations, public commissions, special districts, and
other political subdivisions (except retirement system fiduciaries) must
designate a depository. These government entities may designate one or
more of any of the following financial institutions as a depository:
. Savings associations
. Commercial banks
. Trust companies
City Deposits and Investments 9
Minn. Slat. ~ 42701.
MinH S1.<i\ ~ J ! SA OS.
;vlinn. Stat. *'+69052.
\r11nn. Slat :* 469.099.
Minn Stat. ~ ! ISAO!,
subd.3.
;\'1 inn. Stat. * 47 J. 88, subd.
2. .
See League research memo
qtlkia/ ConjliCl (~(Il11eresl
(l40a3).
10
. Credit unions
· Industrial loan and thrift companies
NOTE: Cities that have checking accounts through the 4M Fund will need
to designate the bank where the checking account is located as a
depository .
The above general requirements apply to all cities. But there is a possibility
that home rule charter cities with populations below 10,000 and all
statutory cities may be more limited in their choices of a depository. An
older statute suggests that these cities must name one of the following
types of institutions as depositories:
· National banks
. State banks
· Private banks
The requirements of the older statute may need to be considered because
the 1996 law contains language that says it will not supersede any already
existing laws.
However, a more liberal interpretation can also be given, namely that the
1996 law offers supplemental authority for additional depository
selections.
A similar concern regarding interpretation appears to exist for a pOlt
authority or Economic Development Authority (EDA). A narrow
interpretation suggests that these entities would be limited to the following
regarding their depositories:
. They must name a depository every two years;
· It must be a national or state bank;
. The bank must be within the state.
However, the 1996 law might also be given the same liberal reading that
was given above for statutory cities and fourth class home rule charter
cities. Thus, it is at least arguable that the 1996 law gives a port authority
and EDA supplemental authority to select from the other types of financial
institutions listed under the more general rule.
A bank or savings association may be designated as a depository even if
one of the council members has a financial interest in it. However, the
designation must be by unanimous vote of the council and the official must
disclose his or her interest in the official city council minutes before the
depository is designated. The interested member should also abstain from
discussing and voting on the matter.
League of Minnesota Cities
M inl1. Slat * -1270 J.
See Part IV. Model
resolution designating
depository .
Nlinn. Stat. * -+27.01.
rv1inn. Slm. ~ 427.02.
\li.nll Slut * 469.052. subd
I
\11I1n. Stat. ~ 469.099.
slIbd.! .
Milln. SwL * 118A.02.
subJ. j.
Minn. Slat. * -1271)9.
City Deposits and Investments
b. How designated
Although there is no general requirement for all cities, it is suggested that
depositories be designated by council resolution. However, the
designations must be made by a council resolution if it is a statutory city or
fourth class home rule charter city. The resolution must state the tenns and
conditions of deposit and be filed with the city clerk.
In situations where the treasurer has been delegated the responsibility for
designating the depository, it may not be possible to designate the
depository by council resolution. However, it is suggested that the
delegation of this responsibility to the treasurer or financial officer be done
by resolution.
Many cities annually redesignate their depositories at the first council
meeting of the new year. There is no specific requirement that a city
designate its depositories on an annual basis. Although an argument can be
made that an annual designation is required for statutory cities and some
home rule charter cities, it is not specifically required.
Every two years, port authorities and EDAs must name depositories. There
does not appear to be anything that prohibits these entities from
designating new depositories or changing to different depositories at other
times.
Home rule charter cities may have additional requirements in their charters.
c. Delegation
The governing body may authorize the treasurer or chief financial officer
to do the following:
. Designate the .depositories of the funds;
. Make investments of funds under sections 118A.OI-.06 or other.
applicable law; OR,
. Both of the above.
Although not specifically required by statute, it is suggested that such an
authorization of the treasurer or chief financial officer be done by
resolution.
d. Failure to designate
If the council of a statutory city or a fourth class home rule charter city
fails to designate a depository within 30 days after the beginning of the
fiscal year, the treasurer must select a depository. The treasurer may select
up to four depositories. There is no general rule for other public entities
concerning the failure to designate depositories.
11
Iv1 inn. Slat * II SA.02..
slll~d. 2.
Minn. Slat. * 427.03
MinD. Stat *427.10.
Minn. Stat. ~ 42704.
\'Iinll. Stat. * 469052.
subJ. ~
Minn. Stm. ~ 469.099.
subd.3.
12 USC.A * 182! (aill).
!2 CI'R * 330.15(a)(2).
! 2 eFR ~ 330 15(a)(2).
2. Liability for deposits
Neither the city treasurer, chief financial officer, or any other official
responsible for the custody of funds will be personally liable for any loss
sustained from deposits or investments that are made in accordance with
Minn. Stat. 99 118A.04-.06.
There is a similar provision regarding city treasurers of statutory cities or
fourth class home rule charter cities. City treasurers from these cities are
exempt from all liability for the loss of any funds deposited in accordance
with Minn. Stat. 99427.02-.07 if the loss is caused by the failure,
bankruptcy, or any other act of default of the depository. Likewise, the
treasurer is not liable for the loss of money while deposited within the
specified limits occasioned by the closing or insolvency of a designated
depository unless the treasurer is negligent.
However, if a statutory or fourth class home rule charter city council fails
to designate a depository, it does not relieve the treasurer or the sureties of
the treasurer's bond from liability for the deposit.
When a port authority or EDA treasurer deposits the authority's funds in a
bonded depository, the treasurer and the surety on the treasurer's official
bond are exempt from liability for the loss of deposits because of the
failure, bankruptcy, or any other act or default of the depository.
B. FDIC insured deposits
1. Generally
Generally, most deposits are protected up to $100,000 by the Federal
Deposit Insurance Corporation (FDIC). However, there are some
"nonmember" banks that aren't covered by FDIC insurance. Cities should
be certain of whether or not a deposit will be FDIC-insured before making
a deposit. Any amounts that are not covered by the FDIC must be protected
by the financial institution posting a bond or collateral.
Accounts of a political subdivision that are in a FDIC member bank will be
separately insured in the following amounts:
. Up to $100,000 total for all time and savings deposits; AND,
· Up to $100,000 total for all demand deposits.
In addition to these limits, deposits in an insured institution outside of the
state in which the city is located are insured up to $100,000. But this
amount is the total for all out-of-state deposits that are kept at the same
financial institution or a branch of the same institution, whether the
deposits are time and savings deposits or demand deposits.
12
League of Minnesota Cities
12 LISC.A ~
182! (a)( 1)1 B) and Ie).
i'vlinn. Stat ~ J 18AJU.
\11nn. Slm. ~ 4~7.01.
See Part II-C. Collateral.
12U.S.cA~
181!(alil)(B) (C),and (D).
City Deposits and Investments
For example, a city could have a non-interest bearing checking account
with $100,000 in it and a time and savings deposit account with $100,000
in it at the same bank. Both accounts would be'covered by the FDIC if the
bank is located in Minnesota. In addition, the city could put another
$100,000 in a bank that is a branch of the same institution if it is outside of
Minnesota, and this would also be covered by the FDIC. But if the city
chose to reverse the situation and keep both the checking account and the
time and savings account in a bank outside of Minnesota, the two accounts
would not be separately guaranteed.
Generally, the maximum amount of FDIC coverage is $100,000 per
depositor, not per separate account. Cities should also be careful regarding
the aggregate limits as they apply to banks that are part of the same
financial institution. Simply putting money in accounts at separate banks
will not give additional FDIC coverage if the banks are part of the same
financial institution.
Deposited amounts in excess of the $100,000 insurance limits must be
protected by collateral or a corporate surety bond for all cities. Likewise, if
a deposit is made in a nonmember bank (not covered by FDIC insurance), a
city will need to get collateral or a corporate surety bond even if the
deposit is less than $100,000.
2. Common questions
There are several questions that often arise when considering whether a
deposit will be covered by FDIC insurance. Some of the more common
ones are discussed below.
a. Separate department funds
Generally, all statutory city funds will be controlled by the city council.
Different funds would not be eligible for separate FDIC insurance coverage
simply because the funds are kept in separate accounts. Thus, if a city has a
special account for its municipal liquor store, an account for the police
department, and an account for the general fund, these accounts would be .
totaled together if kept at the same financial institution. If the total amount
exceeded $100,000, this excess would not be covered by the FDIC. In
short, putting money in separate accounts is not a way to get around the
aggregated limit.
Likewise, if separate accounts were kept in a different bank that is part of
the same financial institution, these accounts would be combined into a
total amount that would be covered by FDIC insurance only up to
$100,000. In short, the $100,000 limit of FDIC coverage is calculated
based on the amount per depositor at the same financial institution (or a
branch that is owned by them).
13
Minn. StH! ~ 11 ,~:\.03.
Minn. StJl ~ 427.0 I.
12 U.S,C.A. * 1821lni(3).
12 CFR!j 33n.I"L
26 U.S.c..'\. ~ 408(a).
26 USC1\. ~ 457.
26 U.S.Ci\* -+OI(d).
29 U.5.C.'\. ~ 1002(34).
Separate FDIC coverage may be available to a home rule charter city ifit
has a charter provision that gives the control of different funds to different
individuals. However, cities in this type of situation should vel'ify the
amount of FDIC coverage on a deposit before making such a deposit.
Incorrectly assuming a deposit will not be subject to the aggregate limits
just because another city officer is in charge of the deposit could prove
costly if a depository should fail and the FDIC denies the additional
amount of insurance. The state auditor will be checking to see that cities
have gotten the proper bond or collateral protection for their money.
b. Insurance on interest amounts
Generally, the interest earned on a deposit will be included as part of the
FDIC insured amount, as long as the total, combined deposit amounts and
insurance are not more than $100,000. However, ifthe interest causes the
total amount to exceed the $100,000 total limit, any amounts above this
would not be covered. Deposited amounts in excess of the $100,000
insurance limits must be protected by collateral or a corporate surety bond.
To ensure this protection is in place, many $100,000 certificates of deposit
(CDs) can be purchased at a discount so that the insured limit will not be
exceeded.
c. Pension plan funds
Although pension plan deposits and investments are not within the scope of
this memo, there are some exceptions to the FDIC coverage limits that
should be mentioned. Certain types of retirement funds may have FDIC
coverage up to $100,000 for each trustee or beneficiary. This "pass-
through" coverage means employers that offer certain types of retirement
savings plans will be able to have FDIC coverage for a total amount above
the $100,000 limit, as long as the amount for each beneficiary does not
exceed $100,000. The following types of retirement accounts are eligible
for this type of FDIC coverage:
. Qualified individual retirement accounts (IRAs);
. Qualified 457-deferred compensation plans for state and local
governments;
. Qualified trusts fonning part of a pension or profit-sharing plan that
benefits owner-employees;
. Individual accounts or defined contribution pension plans that provide
individual accounts for each participant and for benefits based solely
upon the amounts contributed to the particular account.
14
League of Minnesota Cities
Minn. Slat. * II 8A.03.
subd. L
i\linn. Slat. 'i i i SAlt'.
suhd. 3.
Minn Stat ~ 427.01.
Minn. Stat. * 118AO.J.
slIbd I.
Minn. Stat. * 469.052.
slIbd. 1
Minn. Stat. * .469099.
slIbd. i.
City Deposits and Investments
Some of the above exceptions would appear to have limited application to
Minnesota cities. Although it may be possible to argue that some of them
could apply to a volunteer firefighters' relief association, it is unclear
whether or not a firefighters' relief pension plan would be eligible for this
type of "pass-through" coverage. Depositors of these funds should check
carefully to ensure their plans will be eligible before depositing an amount
in excess of$100,000. However, as a practical matter, most retirement
funds are invested rather than deposited to ensure greater returns for the
beneficiaries.
It should also be mentioned that the state auditor's office sees this kind of
"pass-through" coverage as applying to relief association retirement funds.
C. Collateral
If the deposit amount exceeds the FDIC coverage limit amount, a city must
require the financial institution to furnish one of the following:
. A corporate surety bond executed by a company authorized to do
business in the state; OR
· Collateral security.
The total amount of the collateral computed at its market value must be at
least 10 percent more than the amount on deposit plus accrued interest at
the close of the business day, except that where the collateral is irrevocable
standby letters of credit issued by Federal Home Loan Banks, the amount
of collateral must at least equal the amount on deposit plus accrued interest
at the close of the business day. The financial institution may furnish both
a surety bond and collateral aggregating the required amount.
Under the older statute, there are some special requirements for collateral
for all statutory cities and fourth class home rule charter cities. The
financial institution must provide a bond to these cities in at least double
the amount of the deposit under any of the following conditions:
. If the deposit is not FDIC insured; OR
. If the deposit is not protected by collateral or a corporate surety bond
under Minn. Stat. S I 18A.03.
This type of circumstance may be rare. Although there may be some banks
that are not FDIC member banks, most are covered by FDIC insurance.
Further, deposited amounts in excess of the $100,000 insurance limits must
be protected by collateral or a corporate surety bond.
Note that all funds belonging to a port authority or EDA must be bonded or
collateralized, regardless of whether deposit insurance applies.
15
North Ark. Med. Ctr. v.
Barrell. 962 F.2d 780 (811.
Cir. 1992).
i 2 US.CA .~ : X23\c)( Il.
12 USC/\. * 1823(,')(2).
See Part III for a detailed
description ofthese
instruments.
Minn. Stat. ~ 118A.03.
:;uI.'C1. 2(1).
M.ll1n Stat. ~ , 18/1.03.
subd.2(2).
Although cities have since been given exemptions from some of the
requirements to perfect a security interest in the pledge of collateral, they
may want to take note of a court decision that appears to have prompted
Congress to add these exceptions for public bodies.
A 1992 federal court case found that four steps are required to make a
security interest valid in the pledge of collateral. In this case, a medical
center had made deposits that exceeded what would be covered by the
FDIC. The depository had pledged securities as collateral and the securities
were held at another bank. The depository failed, and the FDIC liquidated
the failed depository's assets. The medical center and the FDIC then went-
to court to determine who had the right to the pledged securities. The court
found in favor of the FDIC since the security interest had not been
perfected. As a result, the FDIC could claim the pledged collateral.
Generally, the following criteria must be met in order to perfect a security
interest in pledged collateral under federal law:
· The assignment must be in writing;
. The assignment must have been executed at the same time the deposit
was received by the depository;
. The assignment must have been approved by the depository's board of
directors or loan committee, and the approval must be reflected in the
minutes of the board or committee;
. The assignment must have been continuously, from the time of its
execution, an official record of the depository.
Since this court decision, Congress has amended federal law to provide an
exemption from some of these requirements for public deposits. As a
result, an agreement to provide for collateralization of a city's deposit will
not be invalid solely because the agreement was not executed at the same
time the collateral was acquired. Nor would the agreement be invalid
because of changes in the collateral made in accordance with such
agreement.
1. Securities that may be pledged as collateral
The following forms of securities collateral are allowed in lieu of a
corporate surety bond:
. United States government treasury bills, treasury notes, and treasury
bonds;
. Issues of U.S. government agencies and instrumentalities as quoted by
a recognized industry quotation service available to the government
entity;
16
League of Minnesota Cities
Mirm. Stat. ~ 118..\.03.
suM 2(3).
Minn Stat ~ 118A03,
slIbd 21-+).
. General obligation securities of any state or local government with
taxing powers which is rated A or better by a national bond rating
service, or revenue securities of any state or local government which is
rated AA or better by a national bond rating service;
. Unrated general obligation securities of a local government with taxing
powers may be pledged as collateral against funds deposited by that
same local government entity;
Minn Stat ~ IIS/U)3,
=,uhd.2()).
. Irrevocable standby letters of credit issued by Federal Home Loan
Banks to a municipality accompanied by written evidence that the
bank's public debt is rated AA or better by Moody's Investor's
Service, Inc., or Standard & Poor's Corporation;
Minn. Siat. * 118.'\.03.
$lIbd.2(6\.
. Time deposits that are fully insured by the FDIC.
NOTE: United States treasuries and government agencies are most
common. These instruments are usually preferred because they are liquid,
safe, and easily traded.
2. Assignment of collateral
IVlmn Stat. * 118.'\fU.
~ubd_ 4.
Any collateral that is pledged must be accompanied by a written
assignment to the city from the financial institution. The assignment must
state that, upon default, the financial institution must release to the city on
demand, free of exchange or any other charges, the pledged collateral.
Interest earned on assigned collateral will be remitted to the financial
institution as long as it is not in default. The city may sell the collateral to
recover the amount due. Any surplus from the collateral must be paid to the
financial institutions, its assigns, or both.
~.llnli. Stat. * 118A.03.
subu. 4.
3. Excess collateral
Minn. Stat. * 118.'\.03.
$ubd.5.
A financial institution may withdraw excess collateral or substitute other
collateral after giving written notice to the governmental entity and
receiving confirmation. The authority to return any delivered and assigned
collateral rests with the government entity.
4. Default of financial institution
Mino StaL ~ 118A.03,
subd. 6.
Default of a financial institution includes, but is not limited to, any of the
following:
. Failure to make interest payments when due;
. Failure to promptly deliver upon demand all money on deposit (less
any early withdrawal penalty that may be required in connection with
the withdrawal of a time deposit);
· Closure of a depository.
City Deposits and Investments 17
See North Ark. Med. Ctr. v.
Ban'ell, 962 F.2d 780 (8th
Cir. 1992), discussed
above.
Minn. Stat ~ 118:\03.
subd.4.
,,:linn. Stat. ~ 1 ! 8.'\.03.
slIbd.7.
Minn. SlaT. ~ 118A.tH.
slIbd.l.
If a financial institution closes, all deposits are immediately due and
payable. However, it is not a default to require prior notice of withdrawal if
such notice is required as a condition of withdrawal by federal law or
regulation.
Interest earned on assigned collateral will be remitted to the financial
institution as long as it is not in default. The city may sell the collateral to
recover the amount due. Any surplus from the collateral must be pai~ to the
financial institutions, its assigns, or both.
5. Safekeeping collateral
All collateral must be placed in safekeeping. The city council must approve
the selection. The council may select from among the following places to
keep the collateral:
. In a restricted account at a Federal Reserve Bank
. In an account at a trust department of a commercial bank or other
financial institution that is not owned or controlled by the financial
institution furnishing the collateral.
Some representatives of financial institutions maintain they do not own or
control other branches of the same institution. However, it should be noted
the state auditor does not agree with this interpretation. Cities should not
assume that placing collateral in a different branch of the same bank would
be appropriate.
Part III.
Investments
Many cities invest idle funds in order to gain the best returns from their
money. Generally, many investments will see higher returns than the
amount of interest normally given on deposits. Although the primary goal
should always be to safeguard the principal, another goal is to see returns
that keep up with inflation and provide a market rate of return. If returns
exceed this, the city can actually make a profit. However, with higher
returns can also come greater risks.
A. Authority for investments
Any public funds may be invested if not needed for other purposes or
restricted for other purposes. Such investments are subject to certain
conditions, depending upon the instrument that is used.
18
League of Minnesota Cities
\1 inn. Siat. * 1181\.04.
subd 9.
See Part V. Sample broker
certification form.
M inl1. Stal. ~ II SA (14
slIbd.9(b).
",..linn. Slat. * 118.'\.04.
slIbd 9\c).
See Part V. Sample broker
certification form.
\'Iinn. Slat. * 118iUJ4.
subd 2.
B. Broker's notification and certification
All government entities must provide a copy of the broker notification and
celtification form to their brokers annually. A "broker" includes anyone
who transfers, purchases, sells, or obtains securities for or on behalf of a
government entity and is one of the following:
. A broker
. A broker-dealer
. An investment advisor
. An agent of a government entity
A city cannot enter into a transaction with a broker until the form has been
completed by the broker and returned to the city. The form is designed to
document compliance with the following requirements:
. The broker must be given a written statement of investment restrictions
and notification that all future investments are to be made in
accordance with Minnesota statutes governing the investments of
public funds. This must be done annually.
. The broker must acknowledge the receipt of the investment
restrictions. This must be done annually.
A current copy of the form is available from the state auditor's office. A
copy is also included with this memo.
c. Permitted investments
Cities are authorized to invest in a number of different types of
investments. These generally include government securities (U.S., state,
and local), some commercial paper, time deposits, certain temporary
general obligation bonds, and some debt service funds. Included under
some of these instruments are U.S. Treasury and government agency
securities, banker's acceptances, money market funds, mutual funds, and
repurchase and reverse repurchase agreements. Please note that many of
these instruments must meet certain criteria. These are discussed in flllther
detail in the following sections.
1. United States government securities
These are direct debt issues of the federal government. Public funds may
be invested in these instruments, which include the following:
· Government bonds;
. Notes;
. Bills;
City Deposits and Investments 19
Minn Slat. ~ 11SA()~,
slIbd.2.
· Mortgages (except for high-risk mortgage-backed securities);
· Other securities that are direct obligations or are guaranteed or insured
issues of the United States, its agencies, its instrumentalities, or
organizations created b~ an act of Congress.
A certificate of deposit secured by a letter of credit from a home loan bank
is not permitted as a direct investment.
2. State and local municipal securities
Minn. 5tHt. ~ 118;\.O~.
suPe!. ""
Funds may be invested in the following types of state and local securities:
· A general obligation of any state or local government with taxing
powers, which is rated A or better by a national bond rating service;
· A revenue obligation of any state or local government with taxing
powers, which is rated AA or better by a national bond rating service;
. A general obligation of the Minnesota Housing Finance Agency, which
is a moral obligation of the state of Minnesota and is rated A or better
by a national bond rating agency.
3. Commercial paper
Minn. Stat. * 1 i 8:\.04.
sllbd.4.
These are short-term unsecured promissory notes that are issued by
corporations. Cities may invest in commercial paper issued by U.S.
corporations or their Canadian subsidiaries. These must be rated in the
highest quality category by at least two nationally recognized rating
agencies and must mature in 270 days or less.
4. Time deposits
Minn, Stat. * 118A04.
subJ.5.
i\'linn Stat. * 118.'\.04,
sllbd 2,
Examples of time deposits include savings accounts or certificates of
deposits that are made for a fixed term, but can be withdrawn early with
notice. Funds may be invested in time deposits that are fully insured by the
FDIC or in bankers acceptances of United States banks.
A certificate of deposit secured by a letter of credit from a home loan bank
is not permitted as a direct investment.
See Part II. Deposits.
5. Temporary general obligation bonds
Minn. Stat. * 118A04.
subd. 7,
These are temporary bonds that are guaranteed by the full faith and credit
of a public entity. Funds may be invested in general obligation temporary
bonds of the same governmental entity that were issued under Minn. Stat.
SS 429.091, subd. 7; 469.178, subd, 5; or 475.61, subd. 6. This would
generally include the following types of bonds:
20
League of Minnesota Cities
Minn. Stat. ~ 429091,
subd. 7.
. General obligation temporary improvement bonds;
,,'linn. Stat. ~ 475.6 L slIbd.
6.
. Temporary bonds issued for tax increment financing economic
development purposes that mature within three years. These bonds
must have been issued in anticipation of the issuance of other types of
bonds. These other types of bonds include general obligation bonds of
a city. Also included are revenue bonds and general obligation bonds
of an EDA, HRA, port authority, and other similar entities;
Temporary obligations issued for any lawful purpose that mature in three
years or less. These bonds must have been issued in anticipation of the
issuance of permanent obligations.
Minn Stat. ~ 469.178.
subd.5.
6. Debt service funds
Minn. Stat ~ J 18i\.()4,
slIhd.8.
Money held in a debt service fund may be used to purchase general or
special obligations of an issue that is payable from the fund. The price may
include a premium. Alternatively, such funds may be used to redeem any
obligation of such issue prior to maturity in accordance with its terms.
However, even though the securities representing this type of investment
may be sold by the city at any time, the money received must remain palt
ofthe fund until used for the purpose for which the fund was created. Any
obligation held in a debt service fund froin which it is payable may be
canceled at any time unless prohibited by a resolution or other instrument
securing obligations payable from the fund.
D. Permitted investment contracts and
agreements
There are also some types of investment contracts and agreements cities
may enter. These include certain types of repurchase agreements, reverse
repurchase agreements, securities lending agreements, Minnesota joint
powers investment trusts, and guaranteed investment contracts. Certain
criteria must be met in order to use these vehicles.
1. Repurchase agreements
Minn. Stat ~ 118A.04.
A repurchase agreement is the sale of a government security by a banker or
dealer who agrees to buy it back later. An investor who buys the security is
paid interest for the time he or she holds the security. The security usually
does not reach its maturity date until after the bank or dealer repurchases
the security.
Repurchase agreements may be entered into if they consist of collateral
that is allowed as a direct city investment. The agreement can only be made
with one of the following entities:
Minn. Stat. * 1181\05,
subd. ~.
. A financial institution qualified as a city depository;
City Deposits and Investments 21
. A financial institution which is a member of the Federal Reserve
System and whose combined capital and surplus is $10,000,000 or
more;
. A primary reporting dealer in United States government securities to
the Federal Reserve Bank of New York; OR,
. A securities broker-dealer licensed pursuant to chapter 80A, or an
affiliate of it, regulated by the Securities and Exchange Commission
(SEe) and maintaining a combined capital and surplus of $40,000,000
or more exclusive of subordinate debt.
2. Reverse repurchase agreements
""linn. Slat. .~ I J.~;\'05..
subd2.
A reverse repurchase agreement is very similar to a repurchase agreement.
But with a reverse repurchase agreement, the city is the one selling the
government security to the bank or dealer and buying it back later. Reverse
repurchase agreements are often used to make cash available without
suffering a penalty for early withdrawal of the investment. Reverse
repurchase agreements may only be made with the entities that are
permitted to make repurchase agreements with cities (see previous section).
A reverse repurchase agreement may only be entered into fora period of
90 days or less and only to meet short-terin cash flow needs. In no case
may the proceeds from a reverse repurchase agreement be used for
investments except for securities lending agreements.
3. Securities lending agreements
MlI1n. Stat. ~ 118A.05,
suhd. 3.
Securities lending agreements are similar to reverse repurchase agreements.
An example seems the best way to illustrate how these agreements work.
Initially, the city's securities are held by a bank and are "loaned" to a third
party. The third party would provide cash or securities to the bank to
collateralize the loan. The city and the bank would split the interest
received on the loan.
Minn. Slat. * II 8A.05,
subds 2. 3.
Securities lending agreements may be entered into with a financial
institution that has its principle executive office in Minnesota and meets
one of the following criteria:
. It must be a financial institution qualified as a "depository" of public
funds of the government entity; OR,
. It must be a member of the Federal Reserve System and have
combined capital and surplus equal to at least $10,000,000.
Securities lending transactions may also be entered into with the same type
of entities that can make repurchase agreements and reverse repurchase
agreements with cities.
Minn. StHt. * IISA.OS.
subJ. 2\ I).
Minn. Slnt * 118A .05,
stlDd.2(2}.
22
League of Minnesota Cities
Minn. Stat. ~ 118A05.
Minn. Stat. * 118/\.04.
Mirlll Stat. ~ 118A.05,
subd. 4.
Contact Pat Harris of
Voyager Asset
Management at (612) 376-
7017 or 1-800-553-2143
for information about the
4M Fund and 4M Plus
Fund.
Minn Slat. :~ 118/\04.
Note that the collateral instruments must meet the same criteria as
collateral as they must meet in order to be a direct city investment. In other
words, the collateral must be an instrument in which the city could directly
invest. The collateral for securities lending agreements are therefore
restricted to the following types of securities:
. Repurchase agreements
. Reverse repurchase agreements
. Other securities lending agreements
. Minnesota joint powers investment trusts
. Guaranteed investment contracts
. U.S. securities
. State and local securities
. Commercial paper
. Time deposits
. Temporary obligation bonds
. Debt service funds
4. Minnesota joint powers investment trusts
Cities may enter into agreements or contracts for shares of a Minnesota
joint powers investment trust, units of a short-term investment fund, and
shares of registered investment companies. These entities must meet certain
criteria.
The League's 4M Fund and 4M Plus Fund are joint powers investment
trusts. The 4M Fund is a short-term investment option designed
specifically for Minnesota municipalities to provide safety, daily liquidity,
and a competitive yield. The 4M Plus Fund is a complementary money
market option designed to provide safety and an enhanced yield when
compared to the traditional 4M Fund. The 4M Plus Fund requires deposits
be maintained for at least 30 days with a 24-hour advance withdrawal
notice.
a. Investment trust shares
Cities can only use this if the joint powers investment trust is restricted to
the following types of investments:
. U.S. securities
. State and local securities
. Commercial paper
City Deposits and Investments 23
. Time deposits
. Temporary obligation bonds
· Debt service funds
Minn. Stat. ~ 11 RA.05,
stiDd. ~.
. Any other security listed under joint powers investment trusts
! 7 CFR ~ 270.2a~7.
b. Money market funds
Cities may invest in shares of an investment company that'is registered
under the Federal Investment Company Act of 1940 and holds itself out as
a money market fund if BOTH of the following conditions are met:
. It is a money market fund meeting the conditions of rule 2a-7 of the
Securities and Exchange Commission (SEC); AND,
Minn. Slat. * 118A.05.
stlbJ.4.
. It is rated in one of the two highest rating categories for money market
funds by at least one nationally recognized statistical rating
organization.
Minn. Slat. ~ 1]81\.05..
subd.4.
c. Investment company shares
Cities may also enter into agreements or contracts for shares of an
investment company that meets BOTH of the following criteria:
. It is registered under the Federal Investment Company Act of 194Q,
AND,
. Its shares are registered under the Federal Securities Act of 1933.
In addition, the investment company's fund must meet ALL ofthe
following criteria:
. The fund receives the highest credit rating;
. The fund is rated in one of the two highest risk categories by at least
one nationally recognized statistical rating organization; AND,
. The fund is invested in financial instruments with a final maturity no
longer than 13 months. (Note that the state auditor's office does not see
this new requirement as mandating the sale of mutual funds that were
lawfully purchased prior to Jan. 1, 1997.)
5. Guaranteed investment contracts
Minn Stat. ~ 118A 05,
stiDd. 5.
Agreements or contracts for guaranteed investment contracts may be
entered 'into if they are issued by or guaranteed by any of the following:
· United States commercial banks
· Domestic branches of foreign banks
24 League of Minnesota Cities
Minn. Slat. ~ IISA.OS,
subd. S.
. United States insurance companies or their Canadian subsidiaries
The credit quality of the issuer's or guarantor's short-term and long-term
unsecured debt must be rated in one of the two highest categories by a
nationally recognized rating agency. Should the issuer's or guarantor's
credit quality be downgraded below A, the government entity must have
withdrawal rights.
E. Safekeeping of investments, contracts,
and agreements
MlIln. Sla! ~ 118A 06.
Investments, contracts, and agreements may be held in safekeeping by any
of the following:
. Any Federal Reserve Bank;
. Any bank authorized under the laws of the United States or any state to
exercise corporate trust powers including, but not limited to, the bank
from which the investment is purchased;
. A primary reporting dealer in United States government securities to
the Federal Reserve Bank of New York;
. A securities broker-dealer having its principal executive office in
Minnesota, licensed under chapter 80A, or an affiliate of it, and
regulated by the Securities and Exchange Commission, provided the
government entity's ownership of all securities is evidenced by written
acknowledgments identifying the securities by the names of the
issuers, maturity dates, interest rates, CUSIP number, or other
distinguishing marks.
F. Additional investment authority for
some cities and cou nties
Minn Slat. .~ IISA.07.
Cities with populations over 200,000 and counties that contain such cities
have some additional investment authority regarding repurchase
agreements, reverse repurchase agreements, and options and futures. This
additional authority is currently available only to the cities of Minneapolis
and St. Paul and to Hennepin County and Ramsey County. Certain criteria
must be met in order to utilize this added authority. The government entity
must have written investment policies and procedures, as well as an
established oversight process.
1. Investment policies and procedures
Minn. Stat. ~ 118A 07.
subd.2.
A city or county that wishes to use the additional authority must first have
a written investment policy and procedures governing the following:
. The use of, or limitation on, mutual bond funds or other securities
authorized or permitted as investments under law;
City Deposits and Investments 25
. Specifications for and limitations on the use of derivatives;
. The final maturity of any individual security;
. The maximum average weighted life of the portfolio;
. The use and limitations on reverse repurchase agreements;
. Credit standards for financial institutions with which the government
entity deals;
Credit standards for investments made by the government entity.
2. Oversight process
Minn. Slilt. ~ I ! 8;\()7.
subd. 3.
The oversight process must provide for review of the city's investment
strategy and the composition of the financial pOltfolio. This process must
include at least one ofthe following:
. Audit reviews;
. Internal or external investment committee reviews;
. Internal management control.
In addition to this process, the council must pass a resolution that
authorizes the treasurer to use the additional investment authority within
their prescribed limits and in conformance with the written limitations,
policies, and procedures of the city.
The treasurer must report annually to the governing body on the findings of
the oversight process. The governing body must adopt a resolution by Dec.
I of each year if it intends to continue to use this additional investment
authority for the following calendar year.
Mmn. Slat. ~ 118!\07,
subd.4.
3. Additional permitted investments
The following investments may be made by the cities of St. Paul and
Minneapolis, and by Hennepin County and Ramsey County, if they have
met the previously discussed criteria:
. Repurchase agreements. In addition to the earlier mentioned types of
repurchase agreements all cities can use, these entities can also use
vehicles with "high-risk mortgage-backed securities" if the margin
requirement is 101 percent or more.
26
League of Minnesota Cities
Minn. Stat ~ 118A.07.
subd.4.
. Options andfutures. A qualifying government can enter into futures
contracts, options and futures contracts, and option agreements to buy
or sell securities authorized under law as legal investments for
counties. But this is only with respect to securities owned by the
government entity, including securities that are the subject of reverse
repurchase agreements under this section that expire at or before the
due date of the option agreement.
Hennepin and Rarnsey counties have additional special authority to enter
into reverse repurchase agreements that are not as restricted as those cities
can use. These reverse repurchase agreements can be for longer periods of
time and can also be used to generate cash for investment purposes.
Minn. Stat. ~ 118A.0i.
subd. 4.
G. Investment policies
See Part VI. Outline of an
investment policy.
Although Minneapolis, St. Paul, Hennepin County, and Ramsey County
are required to have investment policies in order to use some investment
vehicles, all cities should have a written investment policy. Determining
when and how to invest and in what to invest requires more special
knowledge of techniques and market operations than is possible to treat in
detail in a research memo of this type. However, it is possible to outline
some general criteria that are usually considered when making investment
decisions. These principles are usually found in city investment policies.
1. General investment objectives
The following general principles are commonly considered when making
city investments:
. Safety of principal. Protecting the principal amount of the investment
is essential and speculation with the principal is never justified.
Therefore, fully-insured bank and savings deposits are generally the
safest. However, such deposits as an investment often appear less
favorable when one considers the other elements of investing such as
yield and liquidity.
. Liquidity. The city must be able to obtain cash if an emergency arises.
Thus, the investment must be sufficiently liquid so the city can obtain
money if needed. Most investments may be sold to a dealer bank or
securities dealer prior to maturity. When this happens, the city selling
the investment usually will retain the interest for the time held and,
depending upon the market, may gain or lose on the principal by the
sale. Some banks have service charges and securities dealers also
charge commissions for buying and selling securities.
. Diversification of investments. In short, this means a city should not
put all its eggs in one basket. Investing in a variety of investments can
mean that if one investment loses money, the other investments may
not be affected or may make up for the loss.
City Deposits and Investments 27
. Diversification of maturity dates. This concept is similar to the
previous one and can go hand-in-hand with the liquidity objective.
Generally, diversifying the maturity dates of investments will help
ensure the city will have money available when it needs it. Often, long-
term investments will pay a higher rate of interest. However, a high
interest rate is worthless if the funds are not available when needed or
if a loss must be taken in order to sell earlier than expected. If funds
might be needed prior to an issue's maturity, they should be bought
only if the following conditions are met:
. The principal will be protected; AND,
. The sale can be made at the proper time.
. Competitive yield. Once all of the above criteria have been considered,
the city can look at the investment's potential yield. The yield is the
amount that the investment is expected to earn. Generally, long-term
investments have higher yields than short-term investments. Likewise,
riskier investments have the potential for higher yields.
2. Making a cash forecast
Clerks and finance officers can use a cash forecast to determine the
expected receipts and expenditures of their city over a projected period of
time. Effective use of a cash forecast can help a city match investment
materials with cash needs. A cash forecast can be made for a city's fiscal
year or for several fiscal years. This information can utilize the following:
. The city's annual budget;
. Prior years' financial statements;
. Departmental budget requests;
· Engineering and construction timetables;
· Trends and other data.
The time to prepare a cash forecast is the beginning of the projected period
or the beginning of the fiscal year. The actual receipts and disbursements
determined each month should be compared with the projections, and
adjustments should be made as needed.
If a city finds its first projections are missing the target by a wide margin, it
may want to consider investing in instruments that have more liquidity
until it has more experience making an accurate cash forecast. The yield
for these types of investments, however, will be less than it might be with
other investments. The ratio of investments to cash in the bank should
improve with experience.
28
League of Minnesota Cities
See (i,'\SB #31 and ivlirm.
Stat. ~ 6.745,
City Deposits and Investments
3. Accountability
Accountability and an evaluation of the results of an investment program
can be accomplished in various ways. The same care and prudence should
be used in the accountability for investments as would be used for cash or
any other asset of the city.
Investments should be shown at cost, amortized for any premium or
discount. An annual investment report might appropriately show the
following:
. A year-end portfolio indicating the following:
. Purchase and maturity date of each investment
. Type of each investment
· Amortized cost
. Market value of each investment and any unrealized gains or loss
. Yield of each investment and the portfolio as a whole
. A summary of the year's investment results that include the following:
. Interest earned for the year
· Realized gains for the year
. The overall rate of return for the year including unrealized gains or
losses
. Comparison of returns to appropriate benchmarks
NOTE: The Government Accounting Standards Board (GASB) Statement
#31 requires cities to repoti investments at market value in the financial
statements in order to comply with generally accepted accounting
principles. This principle is effective for reporting periods beginning after
June 15, 1997. It means that unrealized gains and losses must be reported
in the financial statements.
The results of any investment program should be easily obtainable from the
city's accounting records once the program is under way. The finance
officer should maintain a schedule of maturities of investments in order to
keep funds properly re-invested when necessary. In addition, he or she
should keep a written record of each purchase and sale of securities in
order to provide the evidence of securities and deposits received.
29
,Model resolution designating
depository
Part IV.
SECTION 1. RESOL VED, That the
(name of institution) is hereby designated as a
depository for the funds of the city of (name of
f.i.Ol.L The city treasurer is authorized to deposit city
funds therein to the amount of (amount) Dollars ($
-).
SECTION 2. RESOL VED ALSO, That
before any deposits are made that exceed the amount
that is guaranteed by the Federal Deposit Insurance
Corporation (FDIC), the depository must supply to
the city a corporate surety bond in the amount of at
least 10 percent more than the amount on deposit
plus accrued interest at the close of the business day.
The bond is subject to the approval of the city
council. The surety bond must be conditioned to
repay the above amount or any part thereof upon
proper demand therefore and to perform such other
duties in connection with the deposit as the council
may require.
Comment: The amount of collateral is
established by Minn. Stat. ~ l18A. 03,
subd. 3. If a statutory city or fourth class
home-rule charter city the following
language can be used if the depository is
not an FDIC member institution:
(Alternate) SECTION 2. RESOL VED
ALSO, That
the depository must provide a bond in at least double
the amount that is authorized to be deposited
under any of the following circumstances:
. If the depository is not an FDIC member; or,
. If the depository does not provide collateral in
accordance with Minn. Stat. S 118A.03.
The bond is subject to the approval ofthe city
council. The surety bond must be conditioned to
City Deposits and Investments
repay the above amount or any part thereof upon
proper demand therefore and to perfonn such other
duties in connection with the deposit as the council
may require. Collateral securities may not be
substituted for the bond.
Comment: The amount and type of
collateral requiredfor FDIC non-member
depositories of statutOlY cities and fourth
class home- rule charter cities is
established by Minn. Stat. ~ 427.01. '
SECTION 3. RESOL VED FURTHER
That, in lieu of the above bond, the depository m~y
furnish collateral in the manner and to the extent
permitted by law. All such collateral must be
approved by the council and accompanied by a
written assignment providing that, upon default, the
financial institution shall releaSe to the city on
demand, free of exchange or any other charges, the
collateral pledged.
Comment: Collateral securities are
permitted in lieu of a bond under Minn.
Stat. ~ lI8A.02, subd. 2. Note that these
may not be allowed if a bond is required
in double the amount of the deposit under
Minn. Stat. ~ 427.01 (see alternate
SECTION 2.)
SECTION 4. RESOLVED FURTHER, All
collateral must be placed in safekeeping in a
restricted account at either a Federal Reserve Bank
or in an account at a trust department of a
commercial bank or other financial institution that is
not owned or controlled by the financial institution
that is furnishing the collateral. The selection must
be approved by the city council.
31
Part V. Sample broker acknowledgment form
NOTIFICATION TO BROKER AND CERTIFICATION BY BROKER
PURSUE NT TO MINN. STAT. ~ 118A.04
INSTRUCTIONS
Beginning January 1, 1997, government entities must annually obtain from their brokers certain representations
regarding future investments. Minn. Stat. ~ 118A.04, subd. 9 requires government entities to provide each broker
with information regarding the government entity's investment restrictions. Prior to conducting any business with
or for the government entity, the broker must acknowledge these investment restrictions, and agree to conduct
investment transactions in accordance with them. The state auditor has promulgated this uniform notification
form to assist government entities in complying with this law.
"Broker" as used in this form is a broker-dealer, broker, or agent of a government entity, who transfers, purchases,
sells, or obtains securities for, or on behalf of, a government entity.
Send this form to each broker with whom you conduct business annually. Follow these steps:
1. Fill in the information requested in Section 1 that is known to you.
2. Fill in Sections II and III (if applicable) and attach copies of your investment policy and any
government board resolutions that restrict your investments.
3. Send the form to your broker with instructions to fill in any blanks, sign and return to you.
4. Keep a copy ofthe completed form in your files.
NOTE: Should you change your investment policy or should your governing body adopt any resolutions affecting
future investments, your broker should be notified of the change. To avoid confusion, your broker should receive
written notification, and copies of such correspondence should be kept onfile with this form.
City Deposits and Investments
33
NOTIFICATION TO BROKER AND CERTIFICATION BY BROKER
PURSUE NT TO MINN. STAT. ~ 118A.04
I. Broker Information
1. Name of firm:
2. Address
local:
national:
3.
Telephone number: ( )
local
( )
national
4. Primary representative/manager/partner in charge:
Name and title
II. Statement of Investment Restrictions:
To (name of broker)
(name of government entity) is only authorized to invest in those
investments complying with the requirements of Minn. Stat. SS 118A.04, 118A.OS, and I 18A.06.
Phone
(signed by official of local government)
( date)
III. Statement of Additional Investment Restrictions: (fill in if applicable)
Further be advised that (name of government entity) restricts its investments as
provided:
[ ] in the attached Investment Policy
[] in the attached resolution(s) of the governing body.
(name of government entity) will provide to broker copies of any changes to the
Additional Investment Restrictions identified herein.
(signed by official of local government)
IV. Certification
We agree to conduct your investment transactions in accordance with the Minn. Stat. SS 118A.04,
118A.OS, 118A.06 and the provisions of any Additional Restrictions set forth in Section III above.
(date)
(signed by authorized representative or broker)
(date)
Effective January 1, 1997, prior to completing an annual transaction with a broker, and annually thereafter, this form must be
completed.
34
League of Minnesota Cities
Part VI.
Outline of an investment policy
Note: This outline is designed to show some of the typical sections that are often found in public investment
policies. See the discussion in Part III F and G of this memo for a more detailed discussion. There are also
special requirements for Minneapolis, St. Paul, Hennepin County, and Ramsey County that are not included in
this outline (see Part III F of this memo). Contact the League for examples of investment policies from other
cities.
Section 1.
Purpose
(Comment: This section lists the general purposes of the investment policy)
The purpose of this policy is to establish the city's investment objectives and establish specific guidelines that the
City of (citv name) will use in the investment of city funds. It will be the responsibility of (treasurer/chief
financial officer) to invest city funds in order to attain a market rate of return while preserving and protecting the
capital of the overall portfolio. Investments will be made, based on statutory constraints, in safe, low risk
instruments.
Section 2.
ScopelFunds
(Comment: This section generally identifies the specific city funds to which the investment policy applies,
such as the generalfund, debt service fund, specialfunds, etc. It may also specify particularfunds that
are excludedft'om the policy, such as pensionfimds.)
Section 3.
Delegation of authority
(Comment: This section identifies the officer who is responsible for the management of the investment
program. In cities, the treasurer or chief financial officer is usually the person given this fimction.)
Section 4.
Investment objectives
(Comment: This section generally identifies in detail the primary objectives of the investment policy and
ranks the objectives in order afimportance. Some examples of common objectives are listed.)
A. Safety of principal. Safety of the principal is the foremost objective ofthe city. Each
investment transaction must seek to first ensure that losses are minimized.
B. Liquidity. The investment portfolio must remain sufficiently liquid to meet all operating costs
that may be reasonably anticipated. The portfolio must be structured so that securities mature
concurrent with cash needs to meet anticipated demands. Cash needs will be determined based
on cash flow forecasts prepared during the budget process.
C. Diversification of instruments. A variety of investment vehicles must be used so as to minimize
the exposure to risk of loss. The investment portfolio must be diversified by individual financial
institution, government agency, or by corporation (in the case of commercial paper) to reduce the
exposure to risk of loss.
D. Diversification of maturity dates. Investment maturity dates should vary in order to ensure that
the city will have money available when it needs it.
E. Yield. The investment portfolio must be maintained so as to attain a market-average rate of
return.
City Deposits and Investments
3S
Section 5.
Oversight
(Comment: This section can specify the internal review and audit practices to ensure that the policy is
being followed.)
Section 6.
Investment instruments
(Comment: This section lists the specific investment vehicles that the city will allow. Many policies may
establish a percentage of funds thatcan be invested in each type of instrument. The city may be more
restrictive than state law regarding the types of investments that it allows. See Part III C for details on
investments that state law allows cities to make.)
Section 7.
Prohibited investments
(Comment: Some policies may contain a provision to identify those investment vehicles that the city does
not want utilized.)
Section 8.
Prudence
(Many policies contain provisions that provide a standard of judgment for the investment official. Most
often, this is referred to as the "prudent person" standard. This standard is usually defined as the type of
judgment that a prudent person would use with his or her own investments in accordance with the
adopted policy.)
Section 9.
Ethics
(Comment: Most policies outline some ethical standards and prohibit conflicts of interest or the
appearance of such conflicts. Some require disclosure of any situations that could relate to the city's
investments.)
Section 10.
Internal controls, audits, external controls
(Comment: This type of provision is generally intended to ensure that the policy is beingfollowed and
that investments are being made properZv and records are being kept. Typically this provision creates a
system of checks and balances. The specifics of such a system can vary from city to city.)
36
League of Minnesota Cities
CITY OF
SHOREWOOD
5755 COUNTRY CLUB ROAD. SHOREWOOD, MINNESOTA 55331-8927. (952) 474-3236
FAX (952) 474-0128. www.cLshorewood.mn.us. cityhall@cLshorewood.mn.us
MEMORANDUM
DATE:
Mayor and City Council
Larly Brown, Acting City Administrator ~
April 25, 2008
TO:
FROM:
RE:
Discussion Regarding Fiber Optic Service
Councilmember Woodruff requested that this item be scheduled for a work session agenda.
Fiber optic cable provides the ability to transmit very large streams of data over a network. The
capabilities of such a network provides the ability to easily transmit the larger data file formats such
as live video streaming, in addition to voice over the internet pipeline ("Voice over IP" or V oIP"),<
or any other internet service.
Councilmember Woodruff has also provided material~ for this item, and has prepared a brief
presentation that he would like to present to the City Council during the work session on Monday
evening.
=#=-s-
#.
'.J PRINTED ON RECYCLED PAPER
Fiber To The Premise (a.k.a, Fiber To The Home, etc.)
Shorewood Council Work Session Discussion 4/28/08
Dick Woodruff
What is it?
-Physically, making fiber optic communications connectivity
available to homes and businesses in Shorewood
-The highest speed (and bandwidth) infrastructure
-Analogous to building a communications superhighway to each user
-Could be a "utility" similar to city water service
- The fiber itself is "future-proof'
Fiber To The Premise (a.k.a, Fiber To The Home, etc.)
Shorewood Council Work Session Discussion 4/28/08
Dick Woodruff
What's the need?
-Existing infrastructure slow, proprietary and limited access
Copper owned by Telco's slow and not upgradeable
Cable owned by cable TV companies also slow and
limited upgradeability (still too slow)
Cable and higher-speed copper (e.g., DSL) unavailable
to areas of the City (providers cite technical or cost issues)
-Nationally, current Telcos and cable companies moving toward
protecting their investment by restricting access and speed (the
"net neutrality" issue)
-Services and technology are moving to IP-based communications
-US, Minnesota and Shorewood woefully behind most developed
nations in access and available bandwidth (a competitive disadvantage)
Fiber To The Premise (a.k.a, Fiber To The Home, etc.)
Shorewood Council Work Session Discussion 4/28/08
Dick Woodruff
The speed landscape?
Real Time video ... (TV's per house, one SD, one HD)
... need 13 Mbps
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Fiber To The Premise (a.k.a, Fiber To The Home, etc.)
Shorewood Council Work Session Discussion 4/28/08
Dick Woodruff
Who's doing it now?
St Paul, Eagan and Lakeville are good local examples
Next steps for Council?
Work session with expert consultant to gather more
detailed information
Continue to express interest to LMCC