Page 73 - Moreno Valley 2025 Annual Financial Report

City of Moreno Valley, California

Notes to Financial Statements
For the Year Ended June 30, 2025

Note 3. Cash and Investments (Continued)

Credit Risk:

The City’s investment policy limits investments in medium term notes (MTN’s) to those rated
in the top category by two of the three largest nationally recognized rating services at the
time of purchase (with split ratings, the lower rating must meet the standard). As of June 30,
2025, the City’s investment in medium term notes consisted of investments with Amazon.
com, Inc., Apple Inc., Berkshire Hathaway Inc., Cisco Systems, Inc., Deere & Company, Duke
Energy Corporation, Guardian Life Global Funding, JPMorgan Chase & Co., Massachusetts
Mutual Life Insurance, Merck & Co., Inc., Met Tower Global Funding, Metropolitan Life Global
Funding I, New York Life Insurance Company, Northwestern Mutual Global Funding, PACCAR
Inc, Prologis, Inc., Public Service Enterprise Group Incorporated, Realty Income Corporation,
Royal Bank of Canada, The Charles Schwab Corporation, The Home Depot, Inc., The Toronto-
Dominion Bank, Toyota Motor Corporation, UnitedHealth Group Incorporated, and Walmart
Inc. As of June 30, 2025, all MTN’s were rated “A” or higher by Moody’s. All securities were
investment grade and legal under State and City law at their time of purchase. US Treasury
securities hold ratings of AA+ by S&P and Fitch, and AAA by Moody’s, making them the “risk-
free” security in the US. Consequently, their credit quality is not disclosed. As of June 30, 2025,
the City’s investments in external investment pools and investment agreements are unrated.

Custodial Credit Risk:

The custodial credit risk for deposits is the risk that, in the event of the failure of a depository
financial institution, a government will not be able to recover deposits or will not be able to
recover collateral securities that are in the possession of an outside party. The carrying amount
of the City’s demand deposits was $2,193,187 at June 30, 2025. The custodial credit risk for
investments is the risk that, in the event of the failure of the counterparty to a transaction, a
government will not be able to recover the value of investment or collateral securities that
are in the possession of an outside party. In accordance with the City’s investment policy, all
investments are held by third-party custodians for safekeeping, with securities in the City’s
name. This is the lowest level of custodial credit risk exposure.

Interest Rate Risk:
The City’s investment policy limits investment maturities as a means of managing its exposure
to fair value losses arising from increasing interest rates. The City’s investment portfolio will
not directly invest in securities maturing in more than five years. The City has elected to use
the segmented time distribution method of disclosure for its interest rate risk.

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