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Bernalillo County may need to liquidate investment portfolio

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Copyright © 2014 Albuquerque Journal

Bernalillo County faces the “very real possibility” of having to liquidate its investment portfolio – and take a $23 million hit – to avoid even steeper losses down the road.

That was the assessment of Commissioner Wayne Johnson and others Tuesday after hearing county executives say they are preparing a new round of budget cuts to offset the declining value of county investments.

The problem, county officials say, is that rising interest rates harm the value of the investment portfolio.

Selling bonds for less than the county bought them for, then, might be the best of several unpalatable options, officials say, because waiting might bring even bigger losses.

“I think it’s a very real possibility,” Johnson said of liquidation. “It’s scary real. This is exactly what I was afraid of.”

County Treasurer Manny Ortiz, whose office oversees investments, wasn’t at Tuesday’s commission meeting, and the Journal couldn’t reach him for comment afterward.

County Manager Tom Zdunek also hinted Tuesday about the possibility of liquidation, but he didn’t say directly whether he expects to recommend it.

A team of experts from the state Treasurer’s Office and other agencies is working with Bernalillo County to recommend how to restructure the portfolio.

“I’m struggling with how much we can afford to lose,” Zdunek told commissioners. “I don’t see an opportunity for it to get better.”

The County Commission and state agencies have repeatedly raised questions in recent months about the treasurer’s investment strategy. They say too much of the county’s cash is tied up in long-term bonds that risk losing value when interest rates climb.

In November, the commission unanimously approved a vote of no confidence in Ortiz.

Ortiz contends he and his staff have invested wisely. The county earned $4 million in investment income last year, he has said.

Zdunek on Tuesday also revealed that the county expects to face new liquidity and cash-flow problems because of the investment situation, though he wasn’t specific. Last year, the county lost about $758,000 when Ortiz sold investments at a loss to free up cash to cover county expenses.

County Commission Chairwoman Debbie O’Malley said the cash-flow problem means the county may even be forced to consider borrowing money, which would be a short-term alternative to selling investments at a loss.

“They’ve got to get the money somewhere,” she said.

Additional spending cuts of some kind are also in store, O’Malley said.

“We’re looking at having to make some very severe changes,” she said.

Commissioner Lonnie Talbert said he hopes Ortiz will heed the advice of professionals. The county is working to hire an investment adviser.

“Not only do we need help,” Talbert said, “the doggone treasurer needs help.”

Commissioner Maggie Hart Stebbins said she won’t be surprised if the state’s experts recommend liquidation as a strategy to cap the county’s losses. She said she was thankful for State Treasurer James Lewis’ help.

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