A Hard Conversation

n order to celebrate three years of three+one blogs we will be celebrating by posting three of our staff-picked favorites. Throughout our travels and from the conferences we’ve attended we’ve tripled the size of our list. That means that many of you will be reading these for the first time! Enjoy and stay tuned for more commentary, advice, and news.

One of the top questions the nation’s public and Higher Ed financial officers ask me as I travel across the country is:

A Hard Conversation

“Which is better when paying for bank services, hard fees or soft fees?”

In today’s world of public banking, the practice of using bank deposits to cover the cost of banking services has come under far greater scrutiny.

More and more, we’re seeing soft charges for banking services—through the use of bank deposits and the Earnings Credit Rate (ECR)— being replaced with actual hard fees.

At first blush, even the mention of hard fees may be unacceptable to you. But, after a closer look, the practice can produce a significant rise in net income to an entity like yours.

As a case in point, an entity with monthly bank fees of $1,000 coupled with $10 million in deposits would have a far more positive financial outcome if hard fees were charged vs. soft ones.

The use of soft fees, coupled with an ECR of .20 basis points, will earn a net income of $20,000 versus a hard fee of $12,000 coupled with deposits earning .75+ basis points. Such an arrangement will produce net earnings of $75,000—a difference of over 300%! The bank charges are transparent and can be deducted against the earnings of the deposits.

My advice is to talk to your banker(s) and do the calculations. First start with your bank analysis statements and compare them against the potential you can earn on deposits out in the marketplace. On average, a Bank Deposit Investment Account (BDIA) can earn between .75 to 1.10%+. Combine that with other bank deposit savings accounts and state pool funds, if available, and you could see minimum income earnings of .75 basis points on your cash. Best of all, this can be done while still meeting all your regulatory, legal, safety, and liquidity requirements.

The more money you add to your bottom line, the less financial stress on your entity, your community—and you. In the end, having this fee discussion with your banker may turn out to not be “a hard conversation” at all.

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See Us At These Upcoming Events and Conferences:
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

Do I Still Have Control?

What would happen if counties and their associated public entities shared more services?

Nationwide, states are pushing for it and taxpayers are expecting greater teamwork.

Would such a plan lead to more efficiencies, lower costs, and fewer tax hikes? Can it be done without these associated entities losing their sense of control? Could it result in a win/win for all involved?

When it comes to banking services, the answer is a resounding “yes.” The ability to create the right level of buying power is critical, especially in the changing landscape of public banking.

With fewer bank branches in smaller towns or villages, the ability to negotiate competitive banking fees and deposit rates has become a challenge.

By combining the forces of a county’s towns, villages, and school districts, collaborating entities can have immense power in today’s banking environment.

Do I Still Have Control?

As an example, if a town or village acts alone—and has only one bank to serve its banking needs—the level of service fees will be high and the deposit rates will be very low.

On the other hand, if several entities work together, combining their buying power across a greater geographic area, an increased number of banks will be in play. More account options would become available, allowing each entity to have its own bank account(s) but at lower negotiated costs and with higher deposit rates, thanks to higher dollar levels.

How do you achieve such a level of cooperation between public entities and their banks?

At three+one we have the expertise and resources to access the banking and liquidity needs of all the entities involved. We can help by putting together a single blanket banking services Request For Proposal (RFP) for both transaction fees and deposit rates. Once assessed, the ability to pick one or several banks is possible—leading to a significant level of savings on fees and earnings on deposits.

The end result will be more banking services for all the entities involved, greater choice, lower costs, new levels of income, and less burden on taxpayers. Best of all, they won’t lose control of their most important asset: cash.

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See Us At These Upcoming Events and Conferences:
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4

Millennials Are What?

This past week, members of the three+one team attended the New York GFOA annual conference. The keynote speaker was award-winning author and filmmaker, Josh Tickell, who spoke on the topic “Passing the Torch, Working with the Millennial Generation.” His message echoed with me as I was reminded of my time with my millennial coworkers and as a father of four daughters born to this generation (born from 1980 to 2000).

Millennials Are What?

Millennials have significant technological skills, work well with numbers, and are passionate about achieving their goals. They make up over 25% of the nation’s population and their influence is clearly on the rise. As they continue to integrate into the workforce, their economic, social, political, and religious impact will be significant.

Higher Ed has already felt the impact of the millennial generation. The youngest of that generation (those born in 2000) will be heading off to colleges and universities in the next two years. But the millennial generation has been the almost exclusive student base of higher Ed institutions for the last 15 to 20 years. Colleges and universities across the country have felt millennials’ impact and now is the time for the public sector to feel it.

People younger than 30 only made about 7% of the federal workforce in 2013 compared to 25% in the private sector. This disparity between the government and its people will naturally resolve itself as older public officials leave the workforce and their positions are filled by the technologically adept and more open-minded younger generations. But until they do, it’s your job as a government official to proactively meet the needs of this critical and growing number of your constituents.

Millennials were raised during a time of great technological advances with an underlying philosophy of efficiency and optimization. That’s been ingrained into everything they do and what they expect.

Millennials are quick to adopt and evolve; for example, they hear about online and mobile payment services and then immediately see the inefficiency of cash and checks. So when they use cash and checks in their encounters with public entities, it adds to their belief that government services are antiquated and inefficient.

Millennials make up a generation that is accustomed to easy access, transparency, and a wealth of information at their fingertips. Staying open to new ideas and actively communicating with the public are all things millennials expect.

While grasping with the influence and impact of millennials may seem scary and overwhelming to us baby boomers, the future of where we are going has never looked more optimistic. How do I know? I look at my four daughters and the talent we have at three+one. We have a lot to learn from them, as they do from us.

Yes, millennials are on the rise and they will be the force of the future—all 80 million of them.

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See Us At These Upcoming Events and Conferences:
GFOA South Carolina – May 1
National GFOA in Denver – May 21
New York State Association of Counties Finance School- May 2-4