View the entire newsletter for more articles: 2021 – NJAC County Biz – November
by Zach O’Grady, Senior Managing Consultant, PFM Asset Management LLC (“PFMAM”). PFMAM serves as Investment Advisor to NJ/ARM
The events of this past year have placed an extraordinary strain on counties, businesses, and families. To help address these challenges the federal government provided two separate rounds of federal stimulus funding to governments over the last year. Funds for county governments were included in the CARES Act and the American Rescue Plan Act (ARP). These funds are intended to help directly address the impact of COVID-19 on local government budgets.[1]
The ARP Act, which was passed in March 2021, represents one of the most significant investments in public funds in recent history. Over $1.7 billion has been allocated to New Jersey counties.
Currently, county finance officials are juggling supporting the public health response to COVID-19, addressing negative economic impacts, and deciding how to invest in certain infrastructure – all while gathering information for next year’s budget. When making decisions about what will be funded and what its priorities are, great care must be taken as it is of the utmost importance that counties spend these resources wisely and with a view to improving and stabilizing finances in the long-term.
NJ/ARM’s investment advisor, PFMAM, has public finance professionals that have worked extensively with counties and other types of municipal governments throughout the nation, helping them hone their budgeting and financial planning efforts, here are some observations we think decision makers should be aware of as they ponder the use of these funds:
- Understand your pre-pandemic financial picture. What was your county’s long-term financial position before receiving ARP funds? Are there any pre-pandemic trends or issues your county may have been facing that will likely continue to impact your finances once the one-time funds have been spent? Understanding the key factors at play in your budget will aid you in identifying areas where the use of time-limited ARP funds can be spent to have the most impact.
- Leverage ARP funds for impact and sustainability: Given these constraints, counties will likely focus on ideas with the greatest potential return on investment or those that can provide a long-term financial benefit.
- Communicate with stakeholders: As counties make decisions about how to use these resources, those plans should be clearly communicated to all stakeholders, including staff, and the community. Plans should be discussed at regular meetings, and community input should be encouraged, so that all perspectives are acknowledged.
As counties carefully consider how to spend these one-time funds, we believe they will need to balance their long-term goals against what can be reasonably achieved over the next three years, and then base their decisions on the individual financial, operational, and circumstances of their counties. Local leaders will need to invest a great deal of thought and effort into balancing their long-term priorities and clearly communicating how these investments fit into those goals in a way that is transparent and understandable to all stakeholders.
Zach O’Grady is a Senior Managing Consultant at PFMAM working with investors in the New Jersey Asset and Rebate Management (“NJ/ARM”) program. He can be reached at ogradyz@pfmam.com.
This information is for institutional investor use only, not for further distribution to retail investors, and does not represent an offer to sell or a solicitation of an offer to buy or sell units of the NJ/ARM Joint Account, NJ/TERM or any other security. Investors should consider the investment objectives, risks, charges and expenses before investing in the NJ/ARM Joint Account and NJ/TERM. This and other information about the NJ/ARM Joint Account and NJ/TERM are available in the NJ/ARM Information Statement, which contains important information and should be read carefully before investing. A copy of the NJ/ARM Information Statement may be obtained by calling 1-800-535-7829 or is available on the NJ/ARM website at www.njarm.com. While the NJ/ARM Joint Account seeks to maintain a stable net asset value of $1.00 per unit and NJ/TERM investments seek to achieve a net asset value of $1.00 per unit at their stated maturity, it is possible to lose money investing in the NJ/ARM Joint Account and NJ/TERM. An investment in the NJ/ARM Joint Account or NJ/TERM is not guaranteed or insured by the Federal Deposit Insurance Corporation or any other government agency. Units of the NJ/ARM Joint Account and NJ/TERM are distributed by PFM Fund Distributors, Inc., member Financial Industry Regulatory Authority (FINRA) (www.finra.org) and Securities Investor Protection Corporation (SIPC) (www.sipc.org). PFM Fund Distributors, Inc. is a wholly owned subsidiary of PFM Asset Management LLC.
[1] Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (CRRSA Act).