A 1 percent rise in interest rates this year also means Bernalillo County has experienced “paper losses” of about $23 million on investments this year, Deputy County Manager Teresa Byrd told commissioners.
Interest rates are likely to rise further this year, putting the county at risk of losing millions of dollars in bond investments, said Tom Doran, a financial consultant with Jeffrey Slocum and Associates Inc., a Minnesota firm. Each 1 percent rise in interest rates will reduce the value of county investment by about $20 million, he warned.
“The risk is that rates will go higher, not lower,” Doran said.
County Attorney Randy Autio told commissioners he and other county staff planned to draw up a new investment policy in cooperation with the treasurer within a couple weeks. He recommended commissioners schedule a special meeting to consider a new policy.
“Our (investment) policy right now is very broad and very general,” he said. “We need to sit down with our treasurer to hammer out a new policy.”
Ortiz did not attend the commission’s Board of Finance meeting Tuesday, but he sent a letter to commissioners saying he had received Slocum’s report on Friday and had not had time to review it.
“Regrettably, because of this, I will not be able to attend the Board of Finance special meeting,” Ortiz wrote. He also expressed concern that the commission’s plan to discuss county investments “may impermissibly infringe on my continuing authority with respect to investments in Bernalillo County.”
Bernalillo County property tax proceeds are collected twice a year. Part of the funding is held in cash to meet operating expenses, and some is invested by the treasurer. Within the last two months, county officials were forced to sell some bonds before they matured to meet day-to-day expenses, which realized a loss of about $758,000.
The county’s investments took a hit in September from rising interest rates, dropping in value from $256 million on Sept. 13 to $234 million three days later, according to an analysis by RBC Global Asset Management, a financial advisement firm.
Commissioner Debbie O’Malley said the board needs to send a strong message to Ortiz that ” we need to stop the bleeding.” She and other commissioners asked Autio if the treasurer would be obligated to follow a new investment policy set by the board.
Autio said after the meeting it was unclear how closely the treasurer has to follow the commission’s instructions.
Ortiz “has the authority,” to manage investments, Autio said. “He’s an elected official. He gets to manage those investments with the Board of Finance,” which is comprised of commission members. “But the law is implicit that (the treasurer) has to follow the policy set by the Board of Finance.”