With the City’s 2015 end of year financial wrap-up underway, I had a chance to see the latest investment earnings report for City cash reserves.
The City has about $20 million in cash at any given time and we try to keep about one-third of those funds fluid enough to be able to call on in case we need it.
There’s really 2 principle drivers in our earnings — interest rates and money management. In the old days when interest rates were relatively high, we really didn’t get too complicated with our investment strategies — we kept our cash in bank accounts and CD’s and collected the interest.
However, as interest rates steadily declined over the last decade that simple banking strategy began to come up short and cost us about $1.2 million in interest earnings (annually) from 2007 to 2013.
2006 = $1,202,764
2007 = $1,436,221
2008 = $1,313,575
2009 = $712,742
2010 = 471,539
2011 = 223,993
2012 = $196,619
2013 = $160,052
Hitting that low point in 2013, the City’s Finance Director thought it was time to turn over our investment portfolio to a professional money management advisor and even though the interest rates have remained exceptionally low, the investment advisor has helped us claw back some of the lost interest earnings by being more diversified and strategic in the timing of our cash investments.
We’re still far from the high times of our investment earnings but we’ve doubled our returns in the last 2 years which we’re happy to see.
2013 = $160,052
2014 = $230,705
2015 = $339,778
I try not to dwell in the past but it’s hard not to think about how much more street paving or sidewalk repairs we could have done in the last 5 years if the State hadn’t cut about $1 million from our Local Government Funding and we hadn’t lost another $1 million in investment earnings at the same time.
That’s a $2 million hit year after year. That’s 5% of our City revenues, gone.
Thankfully using some of our reserve cash as strategic investments in downtown came up big and helped buffer the City from the losses.
As a result of the earnings from the City’s investments in downtown, City Council has still been able to make “extra” investments in streets and sidewalks for 4 years running (extra $250,000 in 2012, $178,500 in 2013, $364,000 in 2014, and $620,000 in 2015) despite the $2 million loss.
Thank you downtown investments.