City Council

1 AGENDA CITY COUNCIL WORKSHOP July 20, 2026 at 6:00 PM Forest Lake City Center Forest Lake, Minnesota City of Forest Lake - Link to Meeting Livestream 1. Call to Order 2. Roll Call 3. Pledge of Allegiance 4. Open Forum - Citizen Petitions, Requests and Concerns The Open Forum is available for residents to express personal opinions for any item of business. Please limit your comments to three (3) minutes. 5. 2027 Budget Discussion: a. Investment Portfolio Presentation b. Fund 101 c. Budget Survey Questions 6. Adjourn A quorum of the City Council is possible at all Board and Commission Meetings  2 STAFF REPORT MEETING DATE: July 20, 2026 TO: Mayor Blake Roberts and City Council Members STAFF ORIGINATOR: Elle Reichert, Finance Director AGENDA ITEM: PTMA Financial Solutions – Investment Portfolio Review ______________________________________________________________________________ INTRODUCTION: Representatives from PTMA Financial Solutions, the City's investment advisor, will be present to provide the City Council with an overview of the City's investment portfolio and current investment strategy. ANALYSIS: Please note that the investment balances presented include more than the City's General Fund balance. The portfolio consists of funds from various sources, including dedicated funds, capital funds, enterprise funds, debt proceeds, reserves, and other restricted and unrestricted City resources. ATTACHMENTS: - Investment Policy  3 CITY OF FOREST LAKE INVESTMENT POLICY Revised January 9th, 2023 Purpose The purpose of this policy is to establish specific guidelines the City of Forest Lake will use in the investment of City funds, including:  Investment objectives,  Investment reporting practices,  Designation of appropriate investment instruments,  Criteria for selection of banks and dealers,  Requirements regarding maturities and diversification,  Principles of risk, prudence and ethics,  Responsibilities for the investment function,  Internal controls related to investments. Policy It will be the responsibility of the Finance Director and/or City Administrator 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. Scope The Finance Director and/or City Administrator are 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 Project Funds, Enterprise Funds and Agency Funds. Unless specified by the City Council, investments of the City’s monies will be pooled and invested, with the resultant investment income accruing to the benefited fund. Prudence The standard of prudence to be used by investment officials shall be the “prudent investor,” and shall be applied in the context of managing the overall portfolio. Investment officers acting in accordance with this policy, and with Minnesota Statutes §427.01, et. seq. and Minnesota Statutes §118A.01, et. seq., 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. The Finance Director is expected to display prudence in the selection of securities, as a way to minimize default risk. No individual transaction shall be undertaken which jeopardizes the total capital position of the overall portfolio. -1-  4 Objectives There are five 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 shall be defined as the risk of loss due to failure of the security issuer or backer. Interest rate risk shall be defined as the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. 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. It shall be the policy of the City to emphasize liquidity over yield to meet disbursement requirements. 3. Diversification To diversify the investment portfolios by individual financial institution, government agency, or by corporation in the case of commercial paper to reduce the exposure to risk or loss. Investment maturity dates should vary in order to ensure that the City will have money available when needed. 4. Yield The investment portfolio of the City of Forest Lake 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 prudent investment principles. Securities shall generally be held until maturity with the following exceptions: • A security with declining credit may be sold early to minimize loss of principal. • A security swap would improve quality, yield, target duration in the portfolio. • Liquidity needs of the portfolio require that the security be sold. 5. Responsibility To maintain public confidence in the City of Forest Lake, all participants in the investment process shall seek to act responsibly and avoid any transaction that might impair the credibility of the City. Subject to requirements of the above objectives, it is the policy of the City of Forest Lake to offer financial institutions and companies within the City of Forest Lake the opportunity to bid on investments; however, the City of Forest Lake will seek the best investment yields. -2-  5 Delegation of Authority Management responsibility for the investment program is hereby delegated from the City Council to the Finance Director and/or City Administrator, 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 Finance Director and/or City Administrator shall be responsible for all transactions undertaken and shall establish a system of internal controls designed to prevent losses from fraud, employee error, unanticipated changes in financial markets and imprudent actions by employees and officers of the City. Conflict of Interest Any City official (elected or appointed) involved in the investment process shall refrain from personal business activity that could conflict, or give the appearance of a conflict, with proper execution of the investment program or which could impair his/her ability to make impartial investment decisions. Authorized Financial Institute and Dealer In accordance with Minnesota Statutes §118.02, the responsibility for conducting investment transactions resides with the City Council of the City of Forest Lake. Also, the Council shall be responsible for designating the depositories of the funds. Depositories shall be selected through a banking services procurement process, which shall include a comprehensive review of credit characteristics and financial history by the Finance Director or reliance on selection criteria by an independent third party. In selecting depositories, the creditworthiness of the institutions under consideration shall be examined. The City Council shall designate depositories after a recommendation from staff. Only approved security broker/dealers selected by creditworthiness shall be utilized (minimum capital requirement $10,000,000 and at least five years of operation.) These may include “primary” dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15c3-1 (uniform net capital rule.) All financial institutions and broker/dealers must supply the following as appropriate:  audited financial statements;  proof of Financial Industry Regulatory Authority (FINRA) certification,  proof of state registration;  completed broker/dealer questionnaire for firms who are not major regional or national firms;  certification of having read the City’s investment policy. Broker Representations Municipalities must obtain from their brokers certain representations regarding future investments. The City of Forest Lake will provide each broker with information regarding the municipality’s investment restrictions. Before engaging in investment transactions -3-  6 with the City of Forest Lake the supervising officer at the securities broker/dealer shall submit a certification stating that the officer has reviewed the investment policies and objectives, as well as applicable state laws, 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 Forest Lake. All financial institutions shall agree to undertake reasonable efforts to preclude imprudent transactions involving the city’s funds. Authorized and Suitable Investments MN Statutes, §118A.04, lists all permissible investments for municipalities. This list establishes the maximum investment risk permitted for a Minnesota municipality. Even though MN Statutes §118A.04 provides for more instruments to be used for investing purposes, the following is a listing of investments the City will be authorized to invest in: 1. Government Securities Direct obligations of the federal government or its agencies, with the principal fully guaranteed by the U.S. Government or its agencies. 2. Certificate of Deposit A negotiable or nonnegotiable instrument issued by commercial banks and insured up to $250,000, or the amount set, by the Federal Deposit Insurance Corporation (FDIC). 3. Repurchase Agreement An investment that consists of two 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. Prime Commercial Paper An investment used by corporations to finance receivables. A short-term (matures in 270 days or less) unsecured promissory note is issued for a maturity specified by the purchaser. Corporations market their paper through dealers who in turn market the paper to investors. The City will only purchase commercial paper issued by U.S corporations or their Canadian subsidiaries that has been rated highest quality (A1, P1 and F1) by two of three rating agencies. 5. State or Local Government Securities No further restrictions beyond Minnesota Statutes §118A.04. 6. Statewide Investment Pools Statewide investment pools that invest in authorized instruments according to Minnesota Statutes §118A.04, such as the Minnesota Municipal Money Market (4M) Fund. -4-  7 7. Money Market Mutual Funds Money market mutual funds that invest in authorized instruments according to Minnesota Statutes §118A.04. Interest-bearing deposits in authorized depositories must be fully insured or collateralized. Collateralization The City funds must be deposited in financial institutions that provide at least $250,000 in government insurance protection. At no time will deposits in any one institution exceed the insured amount unless such excesses are protected by pledged securities. Pledged securities, computed at market value, will be limited to the following: 1. United States Treasury bills, notes or bonds that mature within five years; 2. Issues of United States government agencies guaranteed by the United States government; 3. General obligation securities of any state or local government with taxing powers which is rated “A” or better, or revenue obligation securities of any state or local government with taxing powers which is rated is rated AA or better, provided no single issue exceeds $300,000 with maturities not exceeding five years; 4. Irrevocable standby letters of credit issued by Federal Home Loan Banks accompanied by written evidence that the bank’s public debt is rated AA or better; 5. Time deposits that are fully insured by any federal agency. In order to anticipate market changes and provide a level of security for all funds, the collateralization level will be 110 percent (110%) of the market value of principal and accrued interest. Collateral shall be deposited in the name of the City of Forest Lake, subject to release by the City’s Finance Director. All certificates of deposit and repurchase agreements purchased by the City shall be held in third-party safekeeping by an institution designated as primary agent. The primary agent shall issue a safekeeping receipt to the City listing the specific instrument rate maturity and other pertinent information. All deposits will be insured or collateralized in accordance with Minnesota Statutes Chapter 118. No other collateral except as designated above will be authorized for use as collateral for City funds. Safekeeping and Custody When investments purchased by the City are held in safekeeping by a broker/dealer, they must provide asset protection of $500,000 through the Securities Investor Protection Corporation (SIPC) and at least another $2,000,000 supplemental insurance protection. Diversification It is the policy of the City to diversify its investment portfolios to eliminate the risk of loss resulting from the over concentration of assets in a specific maturity, a specific issuer, or a specific class of maturities. -5-  8 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. Liquidity is necessary to pay for recurring operations. Maturities should not be extended beyond the dates necessary to meet these projected liquidity needs and should be staggered in such a way that avoids over concentration in a specific maturity sector. Extended maturities may be utilized to take advantage of higher yields. The portfolio will reflect diversity by class of maturity and issuer. The following limits are imposed for investments of a specific class: 1. Commercial Paper At any one time, no more than 20% of the total portfolio shall consist of commercial paper investments. Maximum holdings for any one issuer of commercial paper will be 5% of the total portfolio. 2. Certificates of Deposit At any one time, no more than 90% of the total portfolio shall consist of certificates of deposit. Maximum holdings for any one issuer of a certificate of deposit will be $250,000, or the amount insured by the Federal Deposit Insurance Corporation (FDIC), unless collateral is provided in accordance with this policy and Minnesota Statute Chapter 118. Maximum holdings for any one issuer of collateralized certificates of deposit will be 5% of the total portfolio. 3. Government Securities There is no limitation as the percentage of the total portfolio that shall be invested in the obligations of the federal government or its agencies. 4. Repurchase Agreements At any one time, no more than 5% of the total portfolio shall be invested in repurchase agreements. 5. State or Local Government Securities At any one time, no more than 30% of the total portfolio shall be invested in State or local government securities. Maximum holdings for any one issuer of state or local government securities will be 10% of the total portfolio. 6. Money Market Funds Unless funds are needed for liquidity purposes, no more than 25% of the total portfolio shall be invested in authorized money market mutual funds. Due to fluctuations in the aggregate surplus funds balance, maximum percentages for a particular issuer or investment type may be exceeded at a point in time subsequent to the purchase of a particular issuer or investment type. Securities need not be liquidated to realign the portfolio; however, consideration should be -6-  9 given to this matter when future purchases are made to ensure that appropriate diversification is maintained. Investment Reporting The Finance Director shall prepare an investment report at least quarterly, including a management summary that provides a clear picture of the status of the current investment portfolio and transactions made over the last quarter. The investment reporting function shall include requirements for budgetary reporting, interim reporting, internal reporting, and annual reporting. 1. Budgetary Reporting As part of the annual budget, interest income shall be estimated for all funds based on a formal cash flow forecast. This forecast shall take into account the historical pattern of inflows and outflows of general fund cash, the adopted fiscal policies and any other pertinent factors affecting cash flow. The budget document shall explicitly state the assumptions of the cash flow forecast, the assumed interest rate on short-term investment and the interest estimated for any long-term investments. 2. Interim Reporting The investment portfolios for the City funds shall be provided to the Council with the periodic budget versus actual reports that they receive monthly. These reports shall be sequenced by maturity and shall state the type of investment, annualized rate of return based on the daily interest amount. The Finance Director shall summarize any changes in investment strategy or anticipated variances from the investment income budgeted as part of monthly reporting process. 3. Internal Reporting Finance Department procedures shall ensure that investment portfolios are maintained on the City computer system on a daily basis and available to management or the City Council at any time. Management shall be provided investment portfolios monthly together with their budget versus actual reports. 4. Annual Reporting Within 90 days of the City’s fiscal year end, the Finance Director shall prepare a written comprehensive fiscal report on the investment program and investment activity. This report shall include: a. A summary of the investment activity and rate of return for the fiscal year then ended; b. A discussion of how the year’s investment activity compares to the stated objectives and the budgeted amount; -7-  10 c. A detailed comparison of total rate of return with other benchmarks. Benchmarks for comparison may include: the Minnesota Municipal Money Market fund; other state investment pools that have similar investment restrictions; treasury bill rates that are indicative of a strictly passive investment strategy; performance indexes, as set forth in the Government Finance Officers’ monthly publication of the Public Investor (e.g. the 10 bill index); or any other index that may be deemed appropriate; d. A discussion of the outlook for interest rates and the economic trend for the upcoming year, investment strategies to be implemented and budgetary expectations for investment income. Investment Committee The City Council may appoint an investment committee to serve at its pleasure. The mission of the committee shall be to monitor the City’s investment portfolio and make recommendations to the Finance Director and/or City Administrator regarding the same. The committee shall consist of five members defined as follows: the City Finance Director, the City Administrator, two City Council members, and one member of the community who has a background in public finance and no financial connection with the City. The Finance Director shall serve as the facilitator of the committee. The committee shall meet as often as it sees fit, but no less than once per year and no more than once per quarter. 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. Additional Policies Interest earnings will be credited to the source of the invested monies at the end of each month based on the average cash balances during that quarter. Market value adjustments will be credited to the source of the invested monies annually based on the average cash balances during that year. -8-  11 STAFF REPORT MEETING DATE: July 20, 2026 TO: Mayor Blake Roberts and City Council Members STAFF ORIGINATOR: Elle Reichert, Finance Director AGENDA ITEM: 2027 General Fund (Fund 101) Budget Overview ______________________________________________________________________________ INTRODUCTION: The City meets every year to review the preliminary budget. Information presented tonight will focus on the funds that have a dedicated tax levy. Included in the packet are the 2027 preliminary budgets for all City funds, except utility funds, which will be presented to the City Council in August. The preliminary tax levy is required to be sent to the County by September 30, 2026. The total tax levy amount submitted cannot be increased, it can only be decreased. Additionally, the City will be posting an online budget survey for public feedback later this month. The proposed questionnaire is attached for Council’s review/feedback. ANALYSIS: The proposed 2027 General Fund budget includes: • Total Estimated Revenue: $15,919,590 • Total Requested Appropriations: $16,170,318 • Planned Use of Fund Balance: $250,728 The proposed budget is balanced through the planned use of existing General Fund reserves. If approved as presented, the General Fund balance is projected to decrease from approximately $7.94 million at the beginning of 2027 to approximately $7.69 million at year-end. This planned use of fund balance allows the City to address operational priorities while maintaining reserves within established financial policy guidelines. Revenue Summary General Fund revenue continues to be primarily supported by property taxes and other general governmental revenues.  12 Approximately 84.5% of total General Fund revenue is generated through general taxes and unallocated revenues, while the remaining 15.5% is generated directly by City departments through permits, licenses, fees, grants, and charges for services. The proposed 2027 certified property tax levy is $19.66 million, representing an overall levy increase of 10.55% over the prior year. Approximately 69.4% of the levy supports General Fund operations, with the remaining levy allocated toward debt service and other dedicated capital funds. Expenditure Summary Public safety continues to represent the City's largest operational investment. The Police Department accounts for approximately 41% of total General Fund appropriations, followed by Fire, Streets, Finance, Park Maintenance, and Community Development. The requested budget also reflects inflationary impacts, contractual obligations, technology investments, and operational adjustments necessary to maintain current service levels across all City departments. Staffing Requests The proposed budget includes several staffing additions and organizational adjustments intended to address continued community growth, operational demands, and succession planning. Requested positions include: • Patrol Officer • Police Staff Promotion • Parks Superintendent • Building Inspector I • Planner Collectively, these staffing requests represent an estimated 3.4% impact on the proposed levy. Several positions also offset existing contractual or professional service expenditures, reducing the net financial impact to the General Fund. Budget Development Process The proposed budget has been developed through a collaborative review process with department directors and incorporates current operational needs, historical expenditure trends, anticipated revenues, and Council priorities discussed throughout the annual "Where Your Tax Dollars Go" budget workshop series.  13 As budget discussions continue through the remainder of the budget calendar, staff will refine revenue estimates, evaluate expenditure requests, and incorporate Council feedback prior to adoption of the final budget and Truth in Taxation hearing. Fund Balance Process As the draft General Fund budget stands today, the projected fund balance is 46%. Based on previous Council discussions and feedback, this is an area that could be evaluated if the Council wishes to reduce the proposed levy. At this time, the draft budget does not include the use of fund balance to balance the budget. Staff developed the initial budget assumptions based on the City's adopted 10-Year Financial Management Plan, while also keeping prior Council direction and discussions regarding long-term financial sustainability in mind. It is important to note that this is very early in the budget development process. The draft budget is intended to serve as the starting point for discussion. Staff will continue refining the budget as additional information becomes available, and changes, reductions, and Council priorities will be discussed and incorporated throughout the upcoming budget meetings and workshops before a final budget is presented for adoption. Should the Council wish to further reduce the proposed levy, adjusting the targeted fund balance would be one potential option for consideration. RECOMMENDATION: Staff recommends that the City Council review the proposed General Fund budget, provide feedback regarding priorities and budget assumptions, and continue the budget development process in preparation for approval of the preliminary levy and final 2027 budget later this year.  14 STAFF REPORT MEETING DATE: July 20, 2026 TO: Mayor Blake Roberts and City Council Members STAFF ORIGINATOR: Elle Reichert, Finance Director AGENDA ITEM: 2027 Budget Survey – Proposed Questions ______________________________________________________________________________ INTRODUCTION: As part of the 2027 budget development process, staff is seeking feedback from the City Council regarding a proposed community budget survey. The survey is intended to gather resident input on City services, spending priorities, long-term investments, and overall budget direction. Community feedback can provide valuable insight as the Council considers budget priorities and policy decisions throughout the budget process. Attached are the proposed survey questions for Council review. The questions are designed to be brief while collecting meaningful information on resident priorities and preferences. Last year, the City received 105 survey responses. Staff believes continuing the survey process provides another opportunity for residents to participate in the annual budget process and share their perspectives on City services and future investments. ANALYSIS: Staff is requesting feedback from the City Council on the proposed survey questions, including whether there are additional topics or revisions the Council would like to see before the survey is finalized. Following Council direction, staff will make any requested revisions and prepare the survey for public distribution. Proposed survey questions are provided on the following page:  15 1. With respect to inflation and increasing or decreasing property taxes for 2027, what statement do you most agree with: a) Decrease property taxes and reduce service levels b) Increase property taxes and enhance service levels c) Maintain with inflationary increase d) Unsure Please explain your selection 2. What is your top priority for how the City should invest its resources? a) Public safety (police, fire, emergency response) b) Roads and sidewalks c) Parks, recreation, and community spaces d) Economic development and job support e) Other (please specify): _________ Please explain your selection 3. Are there any priorities that you would like to see City Council address in future year budgets that are not currently being addressed? Please explain below. 4. Is there anything else you would like to share concerning the 2027 budget? 5. If the City must make difficult budget decisions, which approach would you prefer? a) Reduce services to minimize tax increases b) Maintain current services with moderate tax increases c) Increase services even if taxes increase d) No opinion 6. How important is it for the City to maintain strong financial reserves for emergencies? a) Extremely Important b) Very Important c) Somewhat Important d) Not Important e) Unsure 7. How important is investing in a new Public Works facility? a) Extremely Important b) Very Important c) Somewhat Important d) Not Important e) Unsure  16 RECOMMENDATION: Staff is seeking Council feedback on the following: • Are there any changes or additions the Council would like to make to the proposed survey questions? • Does the Council support distributing the 2027 Budget Survey to the public following any requested revisions? No formal action is required. Staff is requesting direction from the Council to finalize and distribute the survey.