TIFFIN– Tiffin City Council member Mike Ryan has not changed his mind about the city’s investment policy.
He failed to change others’ minds last week as well.
Ryan asked for the city’s investment policy to be placed back on the council’s March 27 agenda because, he said, “I didn’t agree with the decision, I’m going to bring it up every council meeting until the sun doesn’t shine … I may never get my way, but as a council member, I can put it on the agenda every time and the pubic is going to hear about it.”
The investment policy has been the subject of heated council debate twice already this year, and last week the discussion was no more civil than before.
According to former mayor and current council member Royce Phillips, the Tiffin City Council created an investment policy about three years ago, capping the amount of funds the city could keep in any single financial institution, including its operating funds and bond proceeds. The policy created an investment committee consisting of the mayor, city treasurer and one city council member designated by a council majority to oversee enactment of the policy. The primary objectives of the policy are to ensure safety, maintain liquidity and facilitate reasonable returns on the city’s invested cash.
Because the policy must be renewed annually, Tiffin City Administrator Michon Jackson brought it before the council in January, noting the city was out of compliance with its own guidelines. At that time, Tiffin had about $7 million in Solon State Bank, largely bond proceeds designated for capital improvement projects. The policy puts a cap on deposits of no more than $2.5 million in any one of three local financial institutions.
The council’s January debate centered around Phillip’s concerns that having city funds in Solon State Bank– where Tiffin Mayor Steve Berner works as branch manager– constitutes a conflict of interest. Phillips moved at that time to withdraw all funds from Solon State Bank.
Berner countered by citing a written informal opinion by Megan Tooker, Executive Director and Legal Counsel of the Iowa Ethics & Campaign Disclosure Board. Tooker’s unofficial position stated as long as Berner did not use the city’s resources to further his employment, refrained from taking any official action on which bank the city would use, and assigned a councilperson to chair the city’s finance committee, the situation would not constitute an unacceptable conflict.
Phillips’ January motion was defeated 3-2.
In February, Jackson brought the item back before the council, asking to temporarily amend the policy to allow the cash to stay in Solon State Bank, where it was earning a .5 percent rate of return in an interest bearing money market account. Jackson researched other financial institutions and found none offering more than .25 percent at that time.
A tie vote failed to amend the policy, and Jackson was directed to move enough funds out of Solon State Bank to comply with the policy’s caps. It resulted in an estimated loss of over $1,000 per month in interest earnings, setting off a spate of criticism from a few citizens and council members Mike Ryan and Jo Kahler.
Again last week, Ryan demanded to know why his fellow councilors would not consider keeping the city’s funds in the facility offering the highest rate of return.
“Our policy hamstrings the investment,” said Ryan. “We’ve said you can’t put more than $2 million in Solon State Bank. Why? Can someone give me a solid reason we can’t put our money in our bank right here in town that is paying the highest interest rate?”
The council questioned the safety of investments at various financial entities, and Jackson noted that while credit unions offer an additional letter of credit to cities beyond the typical limit of $250,000, banks carry comparable FDIC insurance on balances up to that amount.
Council member Peggy Upton said since the bond proceeds are expected to be spent on immediate projects, the actual interest amount lost each month will decrease accordingly.
“We are going to be spending this money,” said Upton. “Tiffin is not going to accrue the kind of funds where we have to worry about this issue again, so we (would be) changing the policy based on this one time incident.”
Kahler wasn’t swayed.
“But until we spend the money, let’s get the best interest,” Kahler insisted, slamming her fist on the table. “Besides that, we should support our local businesses.”
Kahler’s remark brought applause and a verbal “Here, here,” from audience member Jenni Carthoff.
Upton’s bigger worry was the interest the city is paying on the bond proceeds, which have been sitting idle as city projects have repeatedly been delayed.
“We bonded the money too early based on the advice of our financial advisor and on a construction schedule that may or may not have been realistic. Supposedly Ireland Avenue was ready to go, and here we are, nine months later,” Upton said. “Everybody is making a big to-do over this interest money which is essentially a drop in the bucket, but we ‘re not upset about the money we are paying in interest on those bonds, and that’s what, four, five, six percent?”
The city’s interest payment on its bond funds is $380,000 per year, or about $31,666 per month.
“Why aren’t you mad about that?” Upton asked.
Berner’s only contribution to last week’s discussion was to refute Upton’s position that the bonds were issued too early. In fact, the city should have incurred its debt by the end of its prior fiscal year, Berner said.
“We were already two months behind when we met with Jeff Heil (the city’s financial advisor) and me and Michon met with the (Johnson County) auditor. He was sufficed by our argument that we would bond by September to satisfy that requirement. To say it was too early– yes the projects weren’t ready and we are not spending the money, that’s true– but no, it was not too early. It was actually too late.”
Ryan appealed to the audience in attendance to reiterate his point.
“I want all of you to go out into the community and say, ‘what do you think…. should our council put our public funds in the place where it gets the most return, or should they follow some arbitrary guideline?’” Ryan said.
Upton also turned to the audience.
“You can also ask them if (the council) should disregard ordinances and resolutions and policies willy-nilly, so they get things to makes sense in one particular direction without looking at the overall picture,” Upton said. “You can also ask them how they feel about losing the amount of interest because we borrowed those bonds funds too early. If anyone wants to be outraged about something, be outraged about that.”
Phillips offered little comment during the council’s discussion. Ryan’s motion to amend the policy resulted in a 2-3 vote, failing once again.
After the meeting, when asked to explain why he sat silent, Phillips said nothing was presented that persuaded him to reconsider.
“It’s failed twice. Nothing has changed. Why should the vote change?” Phillips said.
He said he still has concerns over the conflict of interest presented by Berner’s employment, as well as the city putting its resources in one place.
“The investment policy was made by the council against my advice three years ago,” Phillips said of his previous tenure as mayor. “I actually wanted to spread it out further. They wanted to leave it in three places, and they’re the ones who came up with the $2.5 million figure.”
Upton said she was surprised by the uproar the policy has generated.
“I am frustrated that we are revisiting this issue for the third time, over a continuously dwindling amount of money, when we have the elephant in the room over here– the interest we are paying on this bond money because we can’t get Ireland Avenue going. And no one wants to amend or resolve or do anything to fix that,” said Upton. “I think we could probably have done it better six or nine months ago. But not at this point.”