Sean C. Morgan
The Sweet Home City Council last week approved new financial policies that will give the city more options for investing its funding reserves.
Right now, the city holds its tax revenues until needed in the state-operated Local Government Investment Pool and in money market funds through Umpqua Bank.
“Several members of the council felt that the interest rate offered was too low, and the city was missing out on potential revenues by having the city’s reserves held in the pool,” said Finance Director Pat Gray during the council’s regular meeting on Nov. 13.
“In 2016, we were asked to research investment policies, trying to come up with a better way to earn more interest with our money. Currently, our pool money is at 1.45 percent, which is pretty good compared to our money market, which is .5 percent at the bank.”
After meeting with a financial adviser from Umpqua Bank several times, the city updated its financial policies to allow investments outside of the LGIP in September 2016.
In August, the city contracted with Government Portfolio Advisors to develop an investment policy that could be presented to the Oregon Short Term Fund Board for state approval at its Jan. 11 meeting. Upon approval, it would allow the city additional investment options.
The city last updated its financial policies in 2008, Gray said. “Our Admin and Finance Committee was concerned about keeping our money secure in 2008. We didn’t want to be investing it when things were falling and the market was imploding.
“At the time, in our financial policies, they had us put in there that the investments would be always held at the (LGIP), that we wouldn’t be investing outside. If we do anything it would be consistent with ORS (Oregon Revised Statute) limitations. When we started looking in 2016 at going outside the pool, we had to develop an investment policy.”
The city currently has about $9 million in reserves, Gray said. Those funds are matched by allocations in the city budget, including expenses and cash to be reserved for use in the future.
Cash reserves were at about $600,000 when Gray went to work for the city in 1991, she said. They’ve been as high as $15 million. Since 1991, the reserves have never been less than $600,000. Previous to her arrival in Sweet Home, the city had to borrow money from a bank to meet expenses.
The city anticipates $90,000 in interest this budget year, Gray said. Last year it received about $87,000. In 2006, the city received $58,000 in interest.
Gray said she has been talking with the Umpqua financial adviser about investing some $5 million of the total available funds.
“Historically, what do you think a safe number is to put aside?” asked Councilor Dave Trask.
Gray suggested “about $5 million.”
“You need to stair-step it. We talked about that at the Admin and Finance Committee. You don’t put it all out there at once.”
The city may not want to invest at all, she said. “I keep everything I can in the pool. You’re getting your biggest bang for your buck. I pull out very little and put it over in the money market at Umpqua Bank.”
Referring to Gray’s planned departure next year, Councilor Lisa Gourley said: “We’re looking at getting a new finance director, and we know your past practice and integrity and how much you have invested in the city. We don’t know the future of somebody we haven’t hired yet.”
“They might make you tons of money,” Gray said, if “they’re not so conservative.”
She told the council also that she tends to be conservative with the city’s money.
The city doesn’t have to invest, Gray said. It’ll take a couple of years to go through the process. By then “the bubble might break.”
“You never know what the market’s going to do,” she added.
Mayor Greg Mahler said, “Last year, the adviser that came out then, he kind of was concerned that we weren’t really going to gain a whole lot.”
The representative of Government Portfolio Advisors said the same thing, Gray said.
“So you can make your investment policy, and like she said, ‘have it on the back burner.’ You don’t have to invest. You don’t have to do a lot of these things, but it’s on the back burner should something come up, and she comes forward and says, ‘Hey, here’s a good deal.’ Or the people at the pool invest wrong, and your rates go down.”
Noting how long this process has taken so far, “if we needed this ‘strike while it’s hot,’ we wouldn’t have time,” Gray said, so it’s worth having a policy in place when an opportunity arises, even if it isn’t a good time now.
“Your fund balances match, mirror what you have in the bank,” she said. “You don’t have money to invest that’s over and above. You’re not making tons of money on something. You don’t have property tax money coming in just lying around because we’re waiting to pay the bills when it comes in, in November.
“Something might come up. You might want to have something on the back burner. You might get a finance person that likes investing more than I do.”
“I’m all for making the money if we can, but I’m very sensitive to losing a lot of money in the market,” Trask said.
The council voted 7-0 to approve the new investment policy.
Present at the meeting were Mayor Greg Mahler, Bob Briana, Susan Coleman, Diane Gerson, James Goble, Lisa Gourley and Dave Trask.