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Marion misses windfall by not investing reserves

Staff writer

In the past 14 years, the City of Marion has lost out on hundreds of thousands of dollars that could have reduced taxes or paid for additional civic improvements.

Twenty-five years ago, Marion had an aggressive policy of keeping the bulk of its cash reserves in accounts that bore interest at all three Marion banks.

Since 2010, however, the city has kept its cash almost exclusively in no-interest checking accounts in a single bank.

A Record analysis of documents on file with the state indicates the city lost out on at least $350,000 in interest — the equivalent of more than 29 mills in property taxes — during that period.

In 1999, the city’s cash reserves of $2,090,019 were invested in $1,431,278 in certificates of deposit — half at Central National, one-quarter each at Marion National and Tampa State — and an additional $670,839 in interest-bearing savings accounts at those banks — two-thirds of that at Marion National.

Only a quarter of the city’s cash was kept in no-interest accounts — $529,602 in two checking accounts at Central National.

Today, the city has no CDs and no savings accounts. It instead keeps nearly all its $2,475,790 in reserves in a single checking account at Central National.

Marion’s use of interest-bearing accounts like those used by the City of Hillsboro and Marion County declined throughout the 2000s as Marion shifted from having a city commission, with an elected commissioner in charge of finance, to a council and a succession of city managers, starting with David Mayfield, inexperienced in overall city administration.

By 2008, the city had only $1,101,661 in cash — all in only one bank. By 2010, none was in savings instruments.

Since that time, a succession of three outside accounting firms have warned the city of the danger of keeping virtually all its money in a single financial institution.

Under state law, banks are required to provide evidence of backing securities registered in their name and the municipality’s for any amount a municipality may have on deposit in excess of the $250,000 FDIC insurance limit.

Those securities do not pay the city anything, however.

Under law, cities may invest in local banks, an investment pool, or U.S. Treasury notes.

If the city had kept $1 million of its idle cash in Treasury notes, even overnight notes that guarantee immediate liquidity, it would have earned $347,954.27 in interest for 2010 to 2023, based on year-end rates on Treasury notes.

This potential was suggested in an editorial in last week’s Record and in a comment made independently at last week’s city council meeting by Vice Mayor Ruth Herbel, who had not yet read the Record’s article.

In response, City Administrator Brogan Jones reacted almost incredulously, saying the council should have brought up the matter if it wanted money put in interest-bearing accounts.

In fact, the council did — long ago — by including in Chapter I, Article 6 of City Code: “The city clerk shall periodically report to the governing body as to the amount of money available for investment and the period of time such amounts will be available for investment, and shall submit such recommendations as deemed necessary for the efficient and safe management of city finances.”

The article goes on to say that “the investment program shall … aggressively manage and invest all public moneys to maximize net earnings, consistent with the public responsibility to secure maximum, safe investment return possible from moneys assigned to its stewardship, to relieve demands on the property tax and to otherwise reduce the cost of public services.”

Under law, the city typically is required to deal first with banks that have branches within the city limits and with U.S. government securities. If those rates don’t match or exceed a rate offered by a state-sponsored municipal investment pool, the city may invest there instead.

That pool currently is offering 5.33% on deposits for periods as short as one day.

Each month, Marion carries a cash balance of more than $2 million. If Marion invested only $1 million of that — less than half its cash reserve, not even approaching the three-quarters it used to invest — it would generate enough money to shave 4.48 mills off its current property tax rate.

Marion actually increased its tax rate this year by 2.48 mills — plus 6.43 mills attributable to increased tax appraisals.

Last modified Jan. 4, 2024

 

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