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Council looks to invest: City looks to make long-term capital on $3 million investment

WOODBURY — The city of Woodbury is looking at trying its hand in the market.

During Wednesday's City Council workshop meeting, Woodbury Finance Director Tim Johnson proposed investing $3 million from the city's $175 million portfolio into the stock market in hopes of a long-term gain.

"The idea is to enter the stock market and achieve a much higher rate of return than you would on bonds in the long run," Johnson said. "These funds are intended to be long-term. They would represent our long-term holdings and capital project funds. Think of the investments beyond the 15-year horizon of bonds."

The city will invest with the Minnesota State Board of Investment, which created a fund that adheres to the state statute and is a passive investment with the S&P 500. Johnson said the city already uses the S&P 500 for firefighter pensions.

"I don't think we've thought of any alternatives besides the State Board of Investment," Johnson said. "Frankly, they're the lowest cost. They're much more competitive than the retail options that are available to us."

In order to invest, cities must have a population of at least 100,000 or have a AAA credit rating.

While there's risk of losing the investment if the market takes a hit, Johnson said $3 million makes up under 2 percent of the city's portfolio.

Johnson asked for the proposal to be put on the April 4 agenda, which would allow time for preparing paperwork for the state board. The $3 million could be invested in the last two weeks of April, Johnson said.

"Of the group I frequent with, most cities are looking at this," Johnson said. "They're being cautious. It's being looked at by 75 percent of AAA cities."