2017-10-27 / Front Page

City coffers full

By Wm. Duke Harrington
Staff Writer

SOUTH PORTLAND — According to the latest quarterly investment report submitted to the South Portland City Council by city Finance Director Greg L’Heureux, as of the end of the previous fiscal year on June 30, South Portland had $60.96 million in cash and investments, up 15.3 percent from the $52.86 million it had on hand at the end of fiscal year 2016.

The portfolio includes $16.01 million in various checking accounts and money market funds (earning an average annual yield of 0.549 percent), $13.29 million in certificates of deposit (CDs) with local banks (earning an average of 1.361 percent), $25.33 in laddered CDs — which mature in stages rather than all at once, and are mostly taken out with banks from away — (earning, on average, 1.465 percent), and $6.32 million in U.S. agency notes (earning 1.584 percent).

These funds are dollars the city has beyond what has been appropriated for municipal, school and sewer fund operating budgets for the current fiscal year, although some dollars are in accounts dedicated to specific future spending.

“A large portion of these dollars are funds for capital projects that have been approved, sewer funds, grant funds, and TIF (tax increment financing district) funds which are restricted,” L’Heureux said.”

Although the 15.3 percent jump in these fund balance accounts may seem large — given that the total only fluctuated between $49.5 million and $52.9 million from 2012 to 2016 — L’Heureux explained in a Sept. 22 email to the Sentry that most of the change is attributable to funds finally flowing into city coffers, and thus into reserves, basically repaying the city on money it had fronted for various projects. This includes $950,000 in federal grant money for the Main Street reconstruction through Thornton Heights and $3.5 million from the Maine Department of Environmental Clean Water Sewer Revolving Fund for the same project. Some of that money is now reserved for future work.

“The city deferred the start of the fourth phase of the Thornton Heights/Pleasantdale project for a year and funds accumulated for that project which will not be used until 2019,” L’Heureux wrote. “That project is anticipated to be over $2.3 million dollars and those funds are set aside for completion in both the TIF funds and sewer fund.”

Also in the tally is $1.1 million from the new public works garage project on Highland Avenue.

“The city did not bond for the municipal services facility until late August of 2016,” L’Heureux wrote. “The city started construction for that project in 2015 and instead of doing bond anticipation notes, the city used available cash flow to cover the early expenditures for the project. At June 30, 2016, the city was carrying a cash flow deficit on the project of $1.04 million. Subsequent to year-end [June 30, 2017], the bond proceeds reimbursed the project deficit.”

Lastly, L’Heureux said state and federal grant dollars for the school department arrived this year before the end of the fiscal year, June 30, and so were counted. In the past two years, those funds, running between $634,000 and $1.9 million, did not arrive until after the start of the following fiscal year.

Because the fiscal year 2017 financial audit has not been completed, L’Heureux did not have a final breakdown on where all of the funds are held, but according to the report, the $52.86 million in city had on hand at the end of fiscal year 2016 broke down as follows — in the undesignated fund balance: $17.80 million; in dedicated city reserve accounts: $7.25 million; in the school’s undesignated fund balance: $800,942; in various school reserve accounts: $2.01 million; in the sewer fund: $10.44 million; set aside for capital investment projects: $7.46 million; available in TIF (tax increment financing) district accounts: $7.46 million; and held from grants and other sources: $3.63 million.

Among CDs and money market accounts at Maine banks, South Portland has $2.33 million deposited at Camden National in four accounts, earning an average of 1.31 percent based on maturity dates between now and 2021, for total interest to be earned of $7.656. The city has $3.70 million in four accounts at Androscoggin Bank, at an average 1.27 percent field on accounts maturing through 2020, good for an eventual $12,967 in interest. And at TD Bank it has deposited $4.272 million in six accounts, at an average yield of 1.44 percent through 2020, for total interest earned at that time of $21,736 million.

South Portland currently holds 114 laddered CD accounts, mostly with out-of-state banks. The lowest interest rate it is earning is a flat 1 percent from nine institutions: Bankers Bank of Kansas; Heritage Bank; Bank of Northern Michigan; First National Bank of Buhl, Minnesota; Bar Harbor Bank & Trust; Cathay Bank; First Bank of Troy (now Key Bank); Cornerstone; and, Bank United of New Jersey. Those CDs were taken out between 2012 and 2016, with final maturity dates between December 2017 and August 2018. The best interest rate is 2.35 percent on $249,000 deposited with Wells Fargo in April of this year. Final maturity on that CD will come in 2022.

Among its U.S. agency notes, South Portland has 12 accounts, totaling $6.4 million in deposits, which are set to mature between 2018 and 2031. If the city had tried to cash in or sell all of those notes at the end of June, or if the notes had been “called,” the market value would only have been $6.32 million. The lowest interest on full maturity is 1.1 percent on $400,000 in bond notes purchased in March 2016 from the Federal Home Mortgage Loan Corporation, which mature in December 2018. The highest rate of return will be 3.62 percent on $500,000 in bonds purchased in December 2016 from Federal Home Loan Banks, with a 2031 maturity date. However, most of these notes, like the laddered CDs, have interest rates that increase over time, and the issuer can sometimes “call” the notes before full maturity.

Staff Writer Duke Harrington can be reached at news@inthesentry.com.

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