Union County received record investment income in 2023, earning more than twice what it earned in the same timeframe the year prior.
For the first investment advisory committee update for 2024 Wednesday, Treasurer Andrew Smarra told the commissioners that the county earned $4.5 million in total interest last year.
He said regardless of what is going on in the rest of the country, Union County and central Ohio are in a good place.
“For the year (2023), we generated a little more than $4.5 million in total interest income,” he said. “$4.5 million is more than this county has ever generated in interest in its history.”
He said that comes partly from higher interest rates and partly from the county having more money than in the past.
That total number grew by $3 million last year compared to $1.2 million in 2022. The county ended last year with a fourth quarter investment income alone of $1.1 million compared to only $611,000 in the fourth quarter of 2022.
Smarra said the county’s strategy looking forward is to expand its portfolio and focus on certificates of deposit (CDs), or accounts that collect interest, as well as corporate bonds while continuing to retain sufficient liquidity, or cash, for things like “anticipated outlays and investment opportunities.”
“It was a good year to be on the liquidity side,” he said. “We came into the year highly liquid, in other words, we had cash sitting in the bank.”
According to the treasurer’s report, the total investments and deposits on hand include $27.6 million in cash, $1.2 million in CDs with various banks, $38.6 million in agency issues, $21 million in corporate bonds, $24.1 million in commercial paper and $1.1 million in other areas.
“I still want to take advantage of the opportunities commercial paper offers, but I also want to start moving into things that are going to provide us a little bit longer period of time,” Smarra said. “Right now, we’re under a year duration. On average, if you put everything together, we had less than a year in terms of everything maturing. That’s not where we want to be in either a stable- or a declining-rate environment.”
He said, at least for the time being, a stable environment is where the country appears to be going.
Given the country’s expanding GDP (gross domestic product) and strong labor numbers, Smarra said the Federal Reserve is unlikely to decrease interest rates in the first and second quarter of this year though given the presidential election in November, the third and fourth quarters remain uncertain, he said.
Commissioner Dave Burke said he appreciates what Smarra does with the investment portfolio as it keeps the county strong in the event of recession or other events.
“If there was a recession, that excess capacity would get used up pretty quickly because our expenses don’t change. But revenue could change,” he said. “My concern is, I just want to make sure that we have the capacity if something happens. Recessions generally start fairly quickly and they’re very slow to recover because people just don’t go back out to the store and pick up where they left off.”
He said in the event something like that happening, the county would deal with those financial issues for years.
“I just want to make sure that we can deliver the services like law enforcement, roads, bridges and everything else we do,” Burke said. “These things can change on a dime and it looks like you’re living large and then six months from now we’re like, ‘what happened to my income?’”
Smarra said the county should be in good shape even in that situation because its assets are 100% sellable.
“(In a) recessionary period, the Fed would be slashing rates and that unrealized loss would turn into an unrealized gain because interest rates are falling and we have higher yields than the market would provide,” he said. “We can liquidate our assets and then with the falling rate environment, we would actually make money on it.”
Smarra said he tries to keep a close eye on the national economic situation but given the growth and development interest in the central Ohio region, Union County is in a very positive position.
“That is good for our finances because that’s going to translate into more along the lines of sales tax revenue and that’s increased sales or purchased volumes here in Union County,” he said. “Even if no appreciation ever happened, we’re going to see a continued increase in our revenue from a property tax standpoint, but I think, long-term, we want to see sales tax growth because that is indicative of a healthy economy because people are out there buying big ticket items.”