View the entire newsletter for more articles: 2024 – NJAC County Biz – March
by William Cherry, Director of Public Partnerships for three+one
According to their most recent financial statements, New Jersey’s 21 counties currently have a combined total of $3 billion in cash on deposit. The amounts range from a low of $23 million to a high of $347 million, with the overall, average-sized county’s liquidity coming in at about $141 million.
Having been a longtime county treasurer, I know that county finance officers are very conservative and protective when it comes to the funds in their care and custody. Rightfully so, because safety and security of taxpayer dollars must always be our number one priority as public officials. But safety and security measures don’t require leaving all of your cash sitting idly by in what are often lower-interest bank accounts.
Effective cash-management best practices open the door to putting a significant portion of your county’s liquidity to work earning much higher interest in safe investments such as certificates of deposit and U.S. Treasuries, while also maintaining absolute security of your capital. Locking in some cash at today’s high-interest rates (while they last) could equate to millions of dollars in additional interest going into county coffers over the next 12 months.
Let’s take a look at that average New Jersey county with $141 million in cash. Of that amount, probably $110 to $120 million can safely be put to work earning fixed-rate, medium-to-long- term interest revenues; they could be used to pay for much-needed public services or to reduce property taxes.
A portfolio of staggered-maturity, fixed-rate investments earning interest at today’s rates of 5.50% or more could easily generate $6.2 million in revenues for that county in 2024. That’s a lot of spending power, without having to use a single dollar of taxpayer money. Recently, Federal Reserve Chairman Jerome Powell signaled that the Fed was likely to cut rates this year. There is even some possibility that there could be multiple rate cuts which would almost certainly translate into lower revenues for counties.
For every 1% reduction in national interest rates, the average-size New Jersey county would likely see their earnings decrease by $1.1 million dollars! Larger counties could see even more drastic decreases. That’s why now is the perfect time to establish precisely how much liquidity your county has on deposit and to use future cash-flow projections to accurately determine how long those funds will remain on deposit before they will be needed for county expenses.
That combination of data can give your county finance office the critical information it needs to build a strong financial portfolio that includes a solid mix of liquid cash along with longer-term, fixed-rate investments. The results? Maximum earnings/revenues combined with absolute safety of principal.
three+one® is proud to be working with John Donnadio and the team at NJAC to help the state’s counties build solid financial foundations through accurate liquidity data. We have also been endorsed by the National Association of Counties (NACo) and dozens of other municipal advocacy associations because it has been proven that our data helps finance officers make the very best cash-management decisions.
William Cherry served for 24 years as a county treasurer responsible for managing and investing public funds. He now serves as the Director of Public Partnerships for three+one, and can be reached by phone at 585-484-0311, ext. 709 or by email at wec@threeplusone.us