by Bradley Parsons
Staff Writer
The mayor’s office has asked the City Council to approve new financial strategies by Oct. 1, but Finance Committee chair Warren Alvarez said Thursday the Council would likely need more time to evaluate the changes.
In ongoing discussions with the administration, Council Auditor Richard Wallace has stressed the Council’s caution in considering Mayor John Peyton’s proposed changes to the City’s investing and borrowing. Peyton has said his approach would return about $15 million next year if the changes are approved at the end of September. However, Alvarez said Thursday that was unlikely.
“If we don’t get to it until Nov. 1, then so be it,” said Alvarez. “I’d rather err on the side of caution.
“Oct. 1 is going to be tough to meet. It’s going to be a matter of whether they want to invest $200 million or $400 million.”
Alvarez’ comments came during a meeting with Council members, the Council’s auditing staff, interim Treasurer Mary Arditti and Bank of America investment experts. Peyton’s proposals are relatively new to City finance, requiring the Council to climb a steep learning curve.
Arditti said the administration had tentatively targeted $400 million, but stressed that was a preliminary number and subject to change.
Last week, Alvarez and Council member Jerry Holland traveled to Orlando to appraise that city’s use of similar financial strategies. Interim Chief Financial Officer Walt Bussells will also guide the Council through a workshop, and Wallace said next week’s Finance Committee meeting would focus on the proposed changes.
Even with a crash course in cutting edge municipal finance, Alvarez said the Council would likely seek outside help. Alvarez and Council President Lad Daniels agreed that the Council would have to approve an ordinance that provided parameters for the new strategies’ operation. Alvarez said he would contact Bank of America’s Dean Pinard, who led the Thursday meeting, and others for guidance in constructing the legislation.
Alvarez said the Council must take care in drafting guidelines. He said once they were in place and Peyton’s policies had been approved, the Council role would be largely supervisory. Council Vice President Elaine Brown recommended a quarterly review of the strategies’ progress.
“Once we approve the policies, we’re out of the loop,” said Alvarez. “It’s out of our hands.”
Daniels said he advocated an incremental change.
“I think of when my daughter learned how to swim, she didn’t start on the high dive,” said Daniels.
Peyton wants to overhaul an approach that he said costs the City about $18 million annually. Bussells said the City’s current approach is to invest short term and borrow long term. That structure locks the City into borrowing rates that exceed by 3 percent the City’s return on investments.
To balance the City’s ledgers, the mayor has proposed matching the City’s books. By matching short-term borrowing to short-term investing, Bussells said the current trend of dropping interest rates would return money to the City rather than taking it away.
The City’s current dependence on long-term borrowing is often credited as the most conservative strategy. However, Pinard said a matched-book approach is safer because it wouldn’t cost the City money to maintain.