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Bernalillo County investments take another $5M hit

Copyright © 2014 Albuquerque Journal

Add some additional red ink to Bernalillo County’s investment bloodbath.

The county sold more securities at a $5 million loss in recent weeks as part of an effort to reshape its investment portfolio and find safer places to keep taxpayers’ money. That brings the county’s total investment loss this year to about $15.7 million.

Even steeper losses were possible if the county had waited to restructure its portfolio, officials said, and the sales are probably done for now.

“I think the county is on solid footing right now and doing what it needs to do to move forward in a fiscally responsible manner,” County Commissioner Wayne Johnson said Thursday.

Johnson and other commissioners had repeatedly raised questions about the county’s previous investment strategy under County Treasurer Manny Ortiz and his predecessor, Patrick Padilla, who after leaving office was hired as Ortiz’s investment officer. Padilla left the office last year to concentrate on his campaign for state treasurer.

Johnson and other critics said the county had too much of its cash tied up in longer-term investments that are at risk of losing value when interest rates rise. There was also concern over whether the county had enough cash on hand to continue paying its bills.

In any case, the bond sales are aimed at addressing both problems.

Ortiz worked with County Manager Tom Zdunek and a newly hired investment firm to start restructuring the portfolio.

“It gives us the stability we’re looking for,” Zdunek said of the changes.

Overall, he said, the county sold all but seven of its roughly 30 securities.

“By and large,” Johnson said, “most of the bad investments, the long-term investments were liquidated. (The advisers’) plan was to start worst to first.”

The county’s financial consultant, Public Trust Advisors, has handled the transactions through an electronic trading platform, which allows competitive bidding from brokers.

Uncertainty over world events, including the crisis in Ukraine, helped push down interest rates, minimizing the county’s losses, officials said. Initial estimates put the county’s potential losses at $20 million or more.

The county has already adjusted its budget to reflect some of the losses. But spending will remain “very tight” as the county crafts its budget for the fiscal year that starts this summer, Johnson said.

Departments will have to get by with fewer employees, he said.

“You can’t eat $15 million and not feel it,” Johnson said. “We’re looking at efficiencies and downsizing through attrition and reorganization.”

The Journal wasn’t immediately able to reach Ortiz for comment Thursday. He has defended his investment strategy and said earlier this month that he expects the county to earn $7 million in investment income this year.

Nevertheless, Ortiz faces a recall effort. Opponents are trying to gather enough petition signatures to force him into a recall election this year.

State District Judge Alan Malott approved the signature-gathering in January after finding that there was “substantial evidence or probable cause to believe that Mr. Ortiz has committed misfeasance or malfeasance” in the management of county investments.

Ortiz appealed the decision. The appeal is pending.