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City of Redwood City
<br />Notes to the Basic Financial Statements (Continued)
<br />For the Year Ended June 30, 2025
<br />
<br />
<br />79
<br />Note 2 – Cash and Investments (Continued)
<br />
<br />C. Fair Value Measurement (Continued)
<br />
<br />Debt and equity securities classified in Level 2 are valued using the following approaches:
<br />
<br />• U.S. Treasuries, Federal Agency Obligations, and Municipal Bonds: quoted prices for identical securities
<br />in markets that are not active;
<br />• Medium term notes, Negotiable CD’s, and Supranational: quoted prices for similar securities in active
<br />markets; and
<br />• Asset-backed securities: recent appraisals of the asset value.
<br />
<br />D. Risk Disclosure
<br />
<br />Disclosures Relating to Interest Rate Risk
<br />
<br />Interest rate risk is the risk that changes in market interest rate will adversely affect the fair value of an investment.
<br />Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market
<br />interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination
<br />of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the
<br />portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and
<br />liquidity needed for operations.
<br />
<br />Information about the sensitivity of the fair values of the City’s investments (including investments held by bond
<br />trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the
<br />City’s investments by maturity. For purposes of the schedule shown on the next page, any callable securities are
<br />assumed to be held to maturity.
<br />
<br />Investment Type Fair Value 1 year or less 1-2 years 2-3 years 3-4 years 4 years or more
<br />Investments:
<br />Corporate Notes 58,597,467$ 557,487$ 13,109,651$ 8,679,774$ 15,590,448$ 20,660,107$
<br />Certificate of deposit - Negotiable 2,027,792 - 2,027,792 - - -
<br />Municipal Bonds 1,180,000 1,180,000 - - - -
<br />Asset-backed Securities 26,032,145 - - 6,202,771 9,947,562 9,881,812
<br />Federal Home Loan Mortgage Corporation 55,100,652 - 6,490,425 6,531,303 27,713,561 14,365,363
<br />Federal National Mortgage Association 1,981,954 - - - 1,981,954 -
<br />US Treasury Notes 138,736,733 27,517,926 19,985,462 40,155,699 18,579,791 32,497,855
<br />Investments Held in Section 115 Trust 31,580,588 31,580,588 - - - -
<br />Money Market Funds - Held by City 151,039 151,039 - - - -
<br />Money Market Funds - Held by Trustee 13,748,771 13,748,771 - - - -
<br />Local Area Investment Funds (LAIF) 113,957,642 113,957,642 - - - -
<br />San Mateo County Pool 55,915,458 55,915,458 - - - -
<br />Total investments 499,010,241$ 244,608,911$ 41,613,330$ 61,569,547$ 73,813,316$ 77,405,137$
<br />Maturities (in years)
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<br />Disclosures Relating to Credit Risk
<br />
<br />Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the
<br />investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.
<br />However, some issuers do not seek a credit rating. For instance, the California Local Agency Investment Fund
<br />(LAIF) has not sought or received a credit rating. In these cases, the purchaser is solely responsible for performing
<br />their own due diligence before purchasing an investment or participating in an external investment pool. Certificates
<br />of deposit of $250,000 or less are fully insured by the Federal Deposit Insurance Corporation (FDIC), and therefore,
<br />do not seek a credit rating.
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