[October 18, 2013]Tuesday evening the Lincoln City
Council heard from Deb Zimmerman of Illinois Metropolitan Investment
Fund. Zimmerman shared information on an interest-earning investment
account the city might be interested in using to generate additional
dollars from the recently imposed utility tax.
After Zimmerman spoke, city administrator Sue McLaughlin explained
why she had asked for the presentation.
McLaughlin said the council could expect to see cash revenues
from the utility tax start arriving in November. With the exception
of the amount that is designated to the pension funds, the cash will
not immediately be used for projects.
She said she felt it would be wise for the city to put that money
in an investment fund and let it earn interest while it is not being
used. The fund Zimmerman was promoting would produce a much larger
return than investing in certificates of deposit locally.
During her presentation, Zimmerman went into great detail with
the council regarding her company's "convenience fund." She said the
advantages to the fund were found in the interest earned, which
would be about 30 times more than the city could earn in a bank CD.
She told the council that on a $500,000 balance, the convenience
fund would earn approximately $1,685 annually. Even though the
amount sounds small, she said it was much more than anything they
would earn locally.
She also said she realized that the council and the taxpayers
prefer to see dollars invested locally, but to not take advantage of
the higher returns would be "leaving money on the table."
In addition, she said the program offers a one-day liquidity,
which means that dollars can be drawn out of the fund within a
24-hour period. This is important because the money can remain in
the interest-bearing account right up to the day before it is
needed.
Zimmerman explained that the funds could be monitored via the
Illinois Metropolitan Investment Fund website. She said the account
could be set up with varying levels of security. For example, every
alderman and city official could check the account at will, but
there could also be special authorizations for those who would be
transferring funds in and out.
During discussion the first question came from Chuck Conzo, city
treasurer, regarding a minimum deposit requirement. Zimmerman said
that with the convenience fund, the minimum requirement for opening
an account would be $25,000.
When Mayor Keith Snyder asked if the creation of an account could
be put on the next voting agenda, Bruce Carmitchel said he'd like to
see something that indicates exactly what will be put in the
account. Carmitchel expanded by asking if the deposit would be based
on specific revenues generated or on a specific dollar amount.
McLaughlin said her intention for the fund was that it would hold
the utility tax dollars that are not expended for pensions. She said
she could write a policy for how the convenience fund would be used,
and she agreed that it would be a good idea.
In the end, it was decided that McLaughlin would write such a
policy. The council would review the document and will hold off on
voting to create a convenience fund account until later.
Time for a new general obligation bond
In another money-related matter, Conzo told the council it was
time to start planning for the next general obligation bond.
General obligation bonds have been issued by the city for the
last several years. The bonds are basically a loan using a tax levy
as collateral. The city levies property taxes to pay back the loan
over a three-year period.
The money in the bond can only be expended by the city for
capital improvements and cannot be used for the day-to-day
obligations such as payroll.
Historically the city has done business with First Midstate out
of Bloomington. This year Conzo recommended that the council go
through Bernardi Securities of LaSalle.
He told the aldermen that if the city took out a $500,000 bond,
there would be no change to the current tax levy.
During discussion, Marty Neitzel noted the new firm being
recommended. Conzo said he was recommending Bernardi Securities
because they charge less in fees than Midstate. McLaughlin confirmed
that, saying the savings over the life of the bond would be about
$10,000.
Carmitchel asked if the bond was necessary -- whether the city
always used all the money. He was told that they did. It was noted
that the last large expenditure with general obligation bond funds
had been the new fire truck for the city.
The item will be added to next week's voting agenda.
