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City of Redwood City 7.1.A. - Page 73 <br /> Notes to the Basic Financial Statements <br /> For the year ended June 30, 2014 <br /> NOTE 2 — CASH AND INVESTMENTS (CONTINUED) <br /> The City's investments are rated by the nationally recognized statistical rating organizations as follows: <br /> Moody's S &P Fitch <br /> U.S. Agencies, Securities, and Corporate Notes: <br /> Federal Home Loan Bank Aaa AA+ <br /> Federal National Mortgage Association Aaa AA+ AAA <br /> Federal Home Loan Mortgage Corporation Aaa AA+ AAA <br /> Federal Farm Credit Aaa AA+ AAA <br /> U.S. Treasury Securities Aaa AA+ AAA <br /> External Investment Pools: <br /> San Mateo County Investment Fund Not Rated AAAf /S1 Not Rated <br /> California Local Agency Investment Fund Not Rated Not Rated Not Rated <br /> Custodial Credit Risk. For an investment, custodial credit risk is the risk that, in the event of the failure <br /> of the counter party, the City will not be able to recover the value of its investments or collateral <br /> securities that are in the possession of an outside party. All securities, with the exception of the County <br /> Pool and LAIF, are held by third -party custodians (Union Bank of California Trust Division, U.S. Bank and <br /> Bank of New York). Union Bank, U.S. Bank and Bank of New York are registered members of the Federal <br /> Reserve Bank. The securities held by Union Bank, U.S. Bank and Bank of New York are in street name, <br /> and an account number assigned to the City identifies ownership. None of the City's investments were <br /> subject to custodial credit risk. <br /> In fiscal year 1997 -98, the City adopted Governmental Accounting Standards Board Statement No. 31, <br /> which requires that the City's investments be carried at fair value instead of cost. Under GASB 31, the <br /> City must adjust the carrying value of its investments to reflect their fair value at each fiscal year -end, <br /> and it must include the effects of these adjustments in income for that fiscal year. Changes in value at <br /> the fiscal year ended June 30, 2014 from the fiscal year ended June 30, 2013 amounted to an unrealized <br /> gain of $358,088. <br /> GASB 31 applies to all the City's investments, even if they are held to maturity and redeemed at full face <br /> value. Since the City's policy is to hold all investments to maturity, the fair value adjustments required <br /> by GASB 31 result in accounting gains or losses (called "recognized" gains or losses) which do not reflect <br /> actual sales of the investments (called "realized" gains or losses). Thus, recognized gains or losses on an <br /> investment purchased at par will now reflect changes in its value at each succeeding fiscal year -end, but <br /> these recognized gains or losses will net to zero if the investment is held to maturity. By following the <br /> requirements of GASB 31, the City is reporting the amount of resources which would actually have been <br /> available if it had been required to liquidate all its investments at any fiscal year -end. <br /> C. Restricted Cash <br /> The City's restricted cash consisted of $16,332,219 in cash and investments as of June 30, 2014 held by <br /> trustees or fiscal agents. The City had $6,394,037 in restricted cash and investments held by the City. <br /> This restricted cash is pledged for the payment or security of certain bonds, certificates of participation, <br /> and lease obligations. The California government code provides that these monies, in the absence of <br /> specific statutory provisions governing the issuance of bonds, certificates, or leases, may be invested in <br /> accordance with the ordinance, resolutions, or indentures specifying the types of investments its <br /> trustees or fiscal agents may make. In some situations, these investments differ from those permitted <br /> by the City investment policy. Included in these investments at June 30, 2014 is a guaranteed <br /> 45 <br />