Town Banking & Investments

By Council Member Ellen Andeen

In the summer of 2020, I participated, along with Council Members Moore & Thomasson with CFO Doug Allen in a working committee focused on the review of our Town’s banking & investments.  It was a volunteer commitment requested by the CFO of a few council members. With an MBA, summa cum laude, from the University of Arizona Eller College of Management, a background in accounting & finance and 25 years in the banking and finance industry working for Bank of America and Ally Bank it was time well spent for me on this committee.  I also regularly attend our Office of the Treasurer of the State of Arizona’s monthly Board of Investment meetings and PSPRS (Public Safety Personnel Retirement System) monthly meetings to gather pertinent information useful to the execution of Town resources.  

The committee proposed several suggestions to then CFO, Doug Allen and since then we have been waiting to get this on the agenda to discuss.  In October, after my attendance in the latest round of State Treasurer Board of Investment meetings and a very promising PSPRS meeting, I engaged our new CFO along with Town Manager inquiring as to when we could get the Town’s Banking & Investment discussion scheduled.  This had been postponed because of COVID but also due to the departure of CFO Doug Allen.

To provide some background information, as you know, the Town has no property tax and thus, we rely on diversified revenue streams for funding.  If there were to be an economic event, that is where our healthy reserves would kick in.  During the last audit review, our CPA addressed that we have 800 days of cash on hand (unrestricted) and 1000 days of cash on hand (restricted & unrestricted); current ratio – 13:1. To put in perspective, most local governments have perhaps 2-3 months in reserves.  Our annual expenditures average around $26-$28M so, as you can see, the Town is in a good financial position.  It is also my belief, to limit big government, we should discuss what financial measures or triggers enable us to divest some of these funds and give back to our residents.  As suggested by Council Member Pace in earlier meetings, a reduction or elimination of the fire service fee may be something to consider.

Statements ending fiscal year 2020 show Town total investments increased from $42M to $63M, year over year, with $28M of the monies held in a money market account and, as we know, those yield low returns.  Specifically, our money market account held $11M in 2019 at fiscal YE and in our 2020 fiscal year end statements held, $28M.  Prudent diversified investing of those funds is suggested.  Keep in mind, to stay in compliance with state law, our investment policy & conservative values, any government investment must comply and be invested first, based on safety, then liquidity, then yield.  We currently are invested in US Treasuries & Agencies, Corporate Bonds, Money Markets & the State Treasurer’s Pools.

In addition, I am very excited to announce, from the latest PSPRS meeting, the fiscal YE yield was 27.8% which far exceeds the assumed rate of 7.3%; 3x.   That means, we are much closer to fully funding our Public Safety Personnel Retirement Fund (retirement benefits for our public safety officials) which has been a tremendous financial burden to the Town.  

In summation, the Town has an investment policy that recommends a Town Investment Committee of which, we currently do not have.  The Town investments have been managed by the CFO, well, but given the figures I have discussed today, it would be my suggestion that one exists. Stay tuned to upcoming meetings for these discussions to take place.  As always, I welcome your comments and input.  **Numbers quoted come from the PAFR (Popular Annual Financial Report 2020) pages 14, 22 & 23. The PAFR can be found on the Town’s website at Budgets & Financial Reports | Paradise Valley, AZ – Official Website (paradisevalleyaz.gov)