From the “In Case You Had Not Already Heard” department….
This news is a few days old, but I wanted to touch on it because this says a lot about all of the work y’all have been doing to emphasize supporting local.
The city of Phoenix wants to invest close to $50 million in banks and credit unions in metro Phoenix. The city has close to $1.5 Billion in public money available for a large number of investments, so this is really a small portion of that. But since the goal is to make capital available for loans to businesses and individuals, it’s a step in the right direction.
The Arizona Capitol Times spoke with Phoenix Mayor Greg Stanton about it:
Not only is the city following a policy that provides for prudent and efficient investment, but provides additional funds for consumer and small-business loans in the local economy.”
Another reason for the city’s investment is to hopefully get a higher rate of return on some of Phoenix’s other investments. This move isn’t a totally unique one as several cities around the country have been implementing plans like this to manage their money in the fallout from the financial crisis.
It sounds like a novel idea and it stimulates and benefits the local economy, so why aren’t their reports of a high number of states and cities implementing such a plan? Says the Capitol Times…
Investing money in local banks isn’t easy. State law requires that the city’s bank deposits be insured by the Federal Deposit Insurance Corp. to prevent it from losing taxpayer money if the bank fails. The maximum federal insurance on low-risk investments that the city might utilize, such as a certificate of deposit, is $250,000. That could require the city to work with many banks if it hopes to invest anywhere near $50 million locally.
For these reasons, Phoenix mostly invests in U.S. government securities.
Jeff Dewitt, the City of Phoenix Finance Director said the city probably can’t invest more in local banks likely could not invest more in local banks given FDIC insurance limits. The East Valley Tribune also reported that Phoenix has a team of in-house investment managers who oversee its deposits and ensure that city funds are protected while earning the highest yield possible. Dewitt said the city is inviting local banks to submit applications with their investment pitches. He said proposals must be completely FDIC-insured or collateralized and offer a higher rate of return than U.S. Treasury notes.
As Local First so wonderfully reminds us,
The flow of these dollars will recirculate throughout the local economy, creating jobs and securing a strong economic future for our community. If you are a locally-owned and operated bank or credit union: Phoenix’s Finance Department will be accepting applications from local banks that have an interest in providing CDs and other FDIC-insured products to the city. Local banks can contact the city’s Finance Department at 602-262-7166 for more information or to submit an application.”