Lake Forest Park reports bond laddering and liquid reserves; about half of cash invested in government agency bonds

Budget Director Vaughn presented the committee with the city’s investment report, dated Aug. 31, 2025, describing a laddered purchase strategy of government agency bonds and a liquid reserve maintained in the Local Government Investment Pool (LGIP) and a bank reserve account.

Vaughn said roughly 46 percent of the city’s cash is invested in government agency bonds, near the policy target of 50 percent. “About over half of the city's cash funds are in what we define as a liquid investment, so we can pivot very quickly with those funds,” Vaughn said, explaining the city also keeps a laddered set of $1 million blocks that mature every six months.

The report showed coupon (yield) rates vary by tranche and that one $1 million block recently matured and was reinvested with a coupon around 3.5 percent toward a 2030 maturity. Vaughn noted that liquid vehicles such as the LGIP and the bank reserve account currently yield above 4 percent but that those rates may decline with Federal Reserve policy changes. A committee member asked whether any of the agency bonds are callable; Vaughn answered no.

Vaughn framed the approach as prioritizing (1) safety, (2) liquidity, and (3) yield, which he said provides predictable, budgetable interest income the city can count on for multiple fiscal years. He and members discussed the sensitivity of yields to Fed actions and the tradeoffs between longer-term locked‑in yields and short‑term liquid rates.

There was no formal committee action; councilmembers thanked staff for the conservative investment approach and asked staff to continue reporting yields and reinvestment timing in future quarterly reports.

Ending: The committee moved on to the capital improvement plan update after the investment discussion.