The Pine Bluff Depository Board voted Wednesday to place $2.6 million in city reserve funds into a five-year certificate of deposit with Relyance Bank.
The board is made up of Mayor Debe Hollingsworth, City Clerk Loretta Whitfield and Ward 4 Alderman George Stepps and advised by City Treasurer Greg Gustek and Director of Finance Steve Miller.
Hollingsworth made a motion to put the money into a five-year certificate of deposit, which received a second by Stepps and was unanimously approved.
Hollingsworth said that the certificate of deposit is preferable to other investment alternatives because the money will remain in the local economy and the funds will be subjected to less market volatility.
Relyance Bank Senior Vice President Steven Brown said that while there are penalties for early withdrawal of funds prior to their maturity date, the bank can work with the city if funds are needed.
“When it comes to our in-house penalties, a lot of it has to do with the timing and the amount of a withdrawal,” Brown said. “While there is the option of taking out a loan, we can also consider reduced withdrawal penalties instead if that would save the city money.”
The money is part of $5.2 million in municipal reserve funds that Relyance Bank began managing in July after Stephens Inc. ceased its municipal fund management business effective June 30 because of what the company said was a lack of profitability in a low-interest-rate environment.
Gustek said in the May 5 council meeting that a law was passed in 2011 requiring the creation of a depository board but the previous city treasurer did not do so.
The board met July 31 with Relyance Bank Assistant Vice President John Wall and Assistant Vice President for Wealth Management Chris Cummings to formalize an agreement between the bank and the city and to explore investment options for the city funds.
“Right now the city has between $4.9 million and $5.2 million in cash management trusts operated by Stephens Inc.,” Gustek said in May. “But Stephens notified us that they are shutting down the program that was used by municipalities to receive increased interest income by pooling their funds with other cities and towns.”
Information provided by Miller indicates that as of Dec. 31, 2013, the city had a total of $5.3 million in reserve funds, including $1.1 million in the general fund operating reserve, $1.4 million in the general fund five-eighths cent sales tax reserve, $2.6 million in the general fund restricted emergency reserve, $187,000 in the street fund reserve and $18,000 in the capital projects fund reserve.
Miller provided additional background information at the May 5 meeting.
“Over the past several years interest rates became so low that their overhead costs were not being covered in the management of the pooled funds,” Miller said. “After several years with no increase in interest rates by the federal government, they decided to shut down the program as a money-loser.”