Copyright © 2013 Albuquerque Journal
Bernalillo County commissioners and their top executives have serious questions about how Treasurer Manny Ortiz has invested the county’s cash.
In interviews and documents, they have expressed concern that too much of the county’s money is tied up in long-term investments and that the treasurer might have to sell some of the investments at a loss to generate the cash needed to pay for routine operational expenses.
“We’re struggling to make payroll, not because we don’t have enough money, but because we’ve got it tied up in longer-term instruments,” Commissioner Wayne Johnson said in an interview Monday.
Deputy County Manager Teresa Byrd said the county already has delayed maintenance and is incurring similar expenses to help with the cash crunch.
“We’ve slowed everything down as much as we can to” limit the need for selling investments, Byrd said.
The county gets much of its funding from property tax payments twice a year. Some of the money is invested by the treasurer and some is kept as cash, then drawn down to pay operating expenses that occur month in and month out.
Ortiz suggests the commission’s concern is overblown.
The debate may come to a head today, when the County Commission meets with Ortiz to discuss and analyze the county’s investment portfolio.
Ortiz, who took over as treasurer in January, said in a letter to the county manager and commissioners that the county has enough cash to pay its bills. The Journal wasn’t able to reach him for comment Monday.
“While you have been nervous that we don’t have adequate liquidity or cash on hand, I assure you and can show and demonstrate to you and our Honorable Commissioners that your fears are simply unfounded,” Ortiz said in the Sept. 27 letter.
The county’s outside financial advisers have raised questions about the investment portfolio, according to presentations released by the county manager’s office or commission.
One adviser, RBC Global Asset Management, said the county’s portfolio had a purchase cost of $256 million on Sept. 13 but a market price of $234 million three days later. That means the county would lose about $22 million if it sold the entire portfolio, according to an analysis prepared by RBC last month.
The “portfolio is likely to be further impaired” by changes in interest rates over the next year, RBC said.
A second firm that reviewed county investments, Jeffrey Slocum & Associates Inc., said the county faces “significant interest rate risk.”
That means some of the county’s original investments would see their value drop if interest rates go up, Byrd said.
To provide the county with the cash it needs, she said, the treasurer might have to sell investments for less than he paid for them “unless the market turns around all of a sudden.”
The discussion is complicated by the fact that both the commission and the treasurer are elected by voters and have a certain amount of autonomy.
“One of the biggest problems we have,” Commissioner Debbie O’Malley said, “is that we’re paying the bills but then we have no control, it seems, over the money to pay the bills.”
The treasurer’s office is sometimes described as something like a banker for the county. The treasurer is the custodian of public money and has the freedom to select the best investments for the county, Ortiz said in his letter to the county manager and commission.
He said he intends to work with the manager and commission to maximize return on county investments, minimize risk and keep enough money easily accessible to pay bills.
“Since I’ve been treasurer,” Ortiz said, “the investment income has exceeded the budget approved by the Bernalillo County Commission. As treasurer, I am diversifying the investment portfolio to minimize the risk of loss resulting from an over concentration of assets.”
Slocum noted that bonds issued by the Federal Home Loan Bank and Fannie Mae comprise 77 percent of the county’s investment portfolio.
Ortiz said his office is waiting for some software that’s been promised by the county administration.
“When and if we receive the module this will help satisfy the anticipated cash flow needs of the county in a timely manner,” Ortiz said.
He also says his office manages county money “based on information that should be provided by the Finance Department” of the county.
A particular challenge, Ortiz said, is that the county receives the bulk of its property tax revenue only twice a year, but routine expenses happen throughout the year.
Ortiz served as investment officer under the previous treasurer, Patrick Padilla, before winning election to the job himself last year. The two switched jobs this year, with Padilla becoming investment officer.
Johnson said he brought his concerns to the Treasurer’s Office last year.
“The county is in a situation it doesn’t have to be in,” he said.