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City of Redwood City <br />Notes to the Basic Financial Statements <br />For the fiscal year ended June 30, 2016 <br />NOTE 2 - CASH AND INVESTMENTS (CONTINUED) <br />6.1.D. - Page 75 <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 City <br />must adjust the carrying value of its investments to reflect their fair value at each fiscal year-end, and it <br />must include the effects of these adjustments in income for that fiscal year. Changes in value at the fiscal <br />year ended June 30, 2016 from the fiscal year ended June 30, 2015 amounted to an unrealized gain of <br />$366,784. <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 by <br />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 $13,580,937 in cash and investments as of June 30, 2016 held by <br />trustees or fiscal agents. The City had $8,114,449 in restricted cash and investments held by the City. This <br />restricted cash is pledged for the payment or security of certain bonds, certificates of participation, and <br />lease obligations. The California government code provides that these monies, in the absence of specific <br />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 trustees <br />or fiscal agents may make. In some situations, these investments differ from those permitted by the City <br />investment policy. Included in these investments at June 30, 2016 is a guaranteed investment contract <br />with a maturity date in fiscal year 2035 authorized in the bond indenture and by City Council prior to <br />purchase. <br />D. External Investment Pools <br />The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California <br />Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City <br />reports its investment in LAIF at the fair value amount provided by LAIF. The balance available for <br />withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized <br />cost basis. Included in LAIF's investment portfolio are collateralized mortgage obligation, mortgage- <br />backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities <br />issued by federal agencies, government-sponsored enterprises, supranational obligations, and <br />corporations. <br />G;E3 <br />