Kent County government and the county’s local governments earned approximately $1.4 million in interest on the $323 million in cash the county had invested during 2014, according to the annual report from Kent County Treasurer Ken Parrish to the Board of Commissioners in March.
When asked later what that interest rate amounted to, Parrish replied in jest: “What interest rate?”
He said the overall interest rate is about the same as the rate earned by the county on $5.2 million it invested in the Michigan Liquid Asset Fund Plus, a pooled investing organization for Michigan public school districts and local governments. That rate was slightly less than one-half of 1 percent, or more accurately, 0.44 of 1 percent.
Local government funds, under Michigan law, can only be invested in certificates of deposit, money market accounts and government securities. None may be invested in equities.
“Our investments,” Parrish told the board, “are as plain and straightforward as you can get.” Safety is the first consideration, he said, and the investments “hopefully earn a dollar or two.” In discussing the yields, Parrish noted there “isn’t much these days and hasn’t been for several years.”
Local governments have the option to invest their cash with the county cash investments, which has the advantage of scale, but some opt to invest on their own. Of the $323 million total in 2014, $79 million was local government cash and $72.9 million was the county government’s general fund. The rest is made up mainly of various county department cash balances, the largest including $65.8 million in DPW Solid Waste Disposal, $28.9 million from the Gerald R. Ford Airport, $25.8 million in the Delinquent Tax Fund and $16.4 million from the county roads balance.
Parrish noted the airport cash balance was higher than usual because it had just issued bonds for airport improvements.
The largest segment of county cash investments were $239.5 million in CDs and money markets at 20 banks and one credit union. The largest was PNC Bank with $39.4 million, followed by Comerica Bank with $33.3 million. The smallest amount was $179,335 at First Community Bank; the second smallest was $250,000 at Consumers Credit Union.
The interest rates for all are in the same approximate range of 0.4 to 0.5 of 1 percent, according to Parrish.
“Nobody is paying a lot, I’ll tell you that,” he said.
Also listed for each bank were the Bauer Financial Bank Star Ratings, with 10 (including Consumers Credit Union) having the five-star rating, Bauer Financial’s highest. Eight hold a four-star rating. Two have a 3.5-star rating and one has a three-star rating.
Parrish mentioned to the board that Consumers Credit Union has been expanding in Kent County. Commissioner Stan Stek asked why there was just one credit union on the list, and Parrish replied that, like the banks, credit unions “have to come to us” if interested in holding Kent County investments, and only Consumers did.
But Parrish noted the larger credit unions are “becoming more like banks every day.”
Kent County had $67.9 million invested directly in government securities: Fannie Mae, Freddie Mac, Federal Home Loan Bank and Federal Farm Credit Bank. They are held to maturity, usually two to three years.
Kent County also had $10.2 million in cash, all in its single checking account at Huntington Bank.
Parrish said the Treasurer’s office investment strategy is based on three goals, the first being safety. Second is liquidity and third is yield. In Parrish’s 18 years as county treasurer, he said, the county has never lost any principal.
Parrish told the Business Journal money market accounts these days are competitive with CD rates, with the added advantage of not being locked into a specific term to maturity.
He noted that in 2008, the pool of cash invested by Kent County was a little larger at $386 million, compared to $323 million last year. But the interest earned in 2008 was $17.8 million, compared to $1.4 million last year. In 2008, the county general fund cash earned $2.6 million, versus about $262,000 earned last year.
“It’s a big difference,” said Parrish.