Union County made nearly 10-times the interest by the second quarter of 2023 than it did by the second quarter of 2022.
County Treasurer Andrew Smarra told the commissioners Wednesday that the county’s financial outlook was positive and thanks to the continuous rise in interest rates at the federal level, the county has been able to take advantage of the rates translating to high earnings.
The conversation was partly over of the board’s quarterly investment advisory committee report.
“Through six months, we’ve generated $2 million in interest,” Smarra said. “That’s 10-times what we did last year in the second period.”
He said the increase reflects decisions the county made over the last several years to be “highly set with cash.”
He said the county is sitting on more than $30 million in cash, $14 million in corporate bonds, $42 million in agency bonds and nearly $30 million in commercial paper, an investment Smarra said he favors because shares can be bought at a discount but returns are fixed.
“What’s that done, is since the rates have risen and risen and risen, it’s giving us $100,000 per issue,” he said. “So, if you take a look at that $29.3 million, we’re not out beyond February of next year. That’s $700,000 of interest because you’re buying it at a discount and getting the fixed part. So that’s $30 million of commercial paper that we have on the books, so roughly $700,000 of interest income we can look forward to over the course of this year and the first couple months of next year.”
Smarra noted the total fund interest recorded in the second quarter was $1,169,000, as compared to $150,000 in 2022. That number represents a $1 million increase from 2022. He added the average return on total cash and cash equivalent assets for the quarter was 3.9% as opposed to 0.57% during the same quarter in 2022.
Those rising numbers continue to be the byproduct of the Federal Reserve raising interest rates in an effort to combat inflation.
Smarra said, as long as that’s happening, it will mean high yields for Union County investments, which he said are “positioned well” to benefit from that.
He said interest income has more or less become another county revenue source after property tax revenue and sales tax, which is the highest source.
“We continue to see an expansion in terms of housing and commercial development and that usually is going to lead us into higher sales tax revenues going into the future,” he said, noting that a portion of that commercial development is retail which helps with the sales tax. “That retail comes along and it expanding should bode well for the short-term, intermediate and long-term.”
The county is required to keep $10 million on hand as a base to account for bills. Anything above that number is considered “non-idle,” meaning those funds can be invested.
“So, $10 million is my base in terms of just meeting bills, which obviously with a $30 million general fund budget and other expenditures that are outside it, is more than enough on hand at any given time,” Smarra said. “Really, I’m sitting on about $25 million of excess funds, but I’m currently getting 5.1% on it so I’m not complaining.”
Those excess funds are not general fund operating dollars that can be used; instead, it’s cash that will eventually be used. In some instances, the funds are “spoken-for” but haven’t yet been billed.
Commissioner Dave Burke said, in those cases, those monies can be parked “somewhere to get an little juice out of,” knowing the bill will be coming eventually.
“This isn’t excess capacity, sitting around,” said Commissioner Dave Burke. “They’re future allocations for projects whether it’s roads or bridges…future capital projects.”
Until then, the money is invested and generates money.