City investment revenue drops slightly due to lower interest rates
Craig resident’s tax dollars are safe despite the havoc on Wall Street. That’s because Colorado statute prohibits the investment of municipal funds in the stock market.
The city can invest in government securities and mutual funds low risk markets.
“It has to be government securities we can invest in and righfully so. You don’t want to risk that money,” City Finance Department Director Bruce Nelson said.
Though there is little risk, there is also little return, especially with falling interest rates.
“Obviously interest rates are falling. That’s what effects us, not the stock market,” Nelson said.
The city earned 4 to 5 percent in interest last year and is earning 1.8 percent this year, but the effects of that decline are minimal, Nelson said.
“It’s a small part of the budget,” he said. “It’s part of a $6.3 million budget.”
The city earned $141,000 in interest in 2000. That number plummeted to $80,000 in 2001 and is still falling. The city budgeted to earn $80,000 in interest this year and as of May, had earned only $19,000.
But, Nelson said, the principal is safe.
“Obviously interest rates are down more than we anticipated,” Nelson said. “We do budget that interest for projects and cash flow, so next year we’ll take a hard look at that.”
Nelson said the city is used to dealing with fluctuating numbers. When dealing with property tax, sales tax and other taxes as your main source of revenue, you have to be flexible, he said.
Though the city will survive market fluctuations, city employees who are invested in a 401K may not. They’ve seen their retirement funds consistently decrease, Nelson said.
“We’re all crying,” City Clerk and Personnel Director Shirley Seeley said.
City employees have the option of changing their investment structure online or by telephone, so it is not known if any are making changes in their panic, she said.
“Those looking to retire in the next two years may have to put it off,” Nelson said.
But Seeley said most city employees are in the 30 to 40 year age range, so none that she knows of are readying for retirement. She estimates she’s the closest and isn’t ready to do so because “it just doesn’t pay well.”
Seeley said many city employees are invested in a “Plus” fund, which is a guaranteed return albeit a fairly low return.
“So many times thy tell you to stick it out, be in it for the long haul,” she said. “I lot of people just left their money in and are trying to ride it out.”
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