cashvest® Across the Country

cashvest® Across the Country

This past week cashvest® by three+one® presented the power of our liquidity management tools to counties all across the country at the National Association of County’s annual meeting. In today’s vlog, our public finance partners detail just how cashvest® helped maximize the value of their cash using data.

The New Normal

The New Normal

The marketplace is evolving beyond our imagination. At the same time, data are moving beyond the speed of light eight times over, and how we manage that data is up to us.

Today, there are over 4.5 billion Internet users. Just consider that every minute:

  • 300 hours of video are being created
  • 510,000 Facebook comments are made
  • 4.4 million Facebook “like” clicks occur
  • 3.5 billion Google searches are made
  • 100 million messages are sent
  • 1.2 million new data points are created
  • 21.9 billion text messages are sent

Mobile phone usage is exploding and it’s just beginning. Over 65% of all emails are read on mobile devices with usage up 83% over 2018.

The way we communicate is changing and COVID-19 is just the start. Now, what is considered personal interaction is an online Zoom session. Keep in mind that people trust technology over people—but people trust technology supported by people even more.

Human interaction is the critical key in providing confidence and comfort, despite the constant advances being made in technology. This has become even more apparent as we have all had to learn to work remotely over the last several months.

FinTech by cashvestThe way you and a finance office will deal with the public, your banks, and cash will continue to change. The power of technology feeds data; that will lead you to new efficiency, savings, doing more with less, and providing new sources of revenue.

As we talk about the evolution of technology and communication, let’s also talk about the evolution of interest rates. Who would have guessed rates would be as low as they are right now? Even so, that doesn’t mean you can’t make money on your cash in today’s marketplace.  

First, you have to use the data that are right at your fingertips. Solid, usable data will allow you to capture all the information you need to have a holistic picture of (1) what cash you have available; (2) what you need and when you need it; and (3) the time horizon on cash for investing and its actual value in the marketplace.

The power of data will lead you to develop a liquidity analysis. Keep in mind that cash flow is the flow of cash you see over the course of time: the ebbs and flows on a weekly, monthly, and annual basis.

Liquidity is composed of each cash transaction between you and your financial institutions. The actual flow of cash from the time you need it, when it actually goes out the door, and the time it takes for the transaction to be processed are critical data points.

The power of liquidity will allow the past to lead you to more accurately charting the future. Be mindful that liquidity data will highlight behaviors that will repeat patterns that determine the outcome.

The benefits of proper liquidity management will lead to the following:

  • Determining how much cash you have and the level of cash needed to borrow for immediate needs. You’ll be able to see the whole picture during certain periods of time.
  • The potential to enhance your credit rating
  • Determining all levels of cash and being assured that all cash is seen as an asset. You’ll have a full picture of all dollars and the level of stresses on your cash during certain time periods.
  • Monitoring all bank fees.
  • Greater peace of mind during times of local, state, and/or national emergencies

Even in today’s marketplace, there are options to put cash to work. From state pools to bank deposits, money market funds to municipal bonds, government securities to CD products—they’re all being offered by the big banks to local community banks.

It’s good to know that there is no one product that fits all cash. Please do not fall for that fallacy. Cash has behaviors that need to be identified and treated accordingly. It’s your fiduciary obligation to those your serve to actively manage all your cash. You should never consider cash to be a passive asset.

Banking TechnologyJust as the marketplace for cash is changing, so too is the marketplace for banking. As I wrote in several blogs over the last few years, the transition from a bank branch to mobile banking was going to evolve. New technologies have led us to be served predominately over a computer rather than at the counter of a bank branch. Little did we know that it would take a pandemic to have one realize just how much of a reality remote working and banking would become.

Clearly, the world is changing for all of us. It’s up to each of us to grab what is in front us and seize the opportunity. In doing so, your office will be better prepared for whatever challenge awaits.

Those we serve deserve our moving with them as the marketplace continues to evolve into “a new normal.”

Count on What Can Be Counted

Count on What Can Be Counted

It does not take a crystal ball to see that uncertainty in our world is at an all-time high. Whether you’re discussing the global economy, local governments, or even our day-to-day lives as citizens, we have very few definitive answers about the future. If you talk to a public finance official, though, you may realize that this is just a more severe version of situations they must consider regularly.

Elected officials and budget officers are continually asked to complete the impossible task of predicting the future. This year will certainly bring new challenges and learning lessons for everyone. It will also expose the strengths of the savviest cash managers—and their budget officers will be thanking them. These finance officials did not leave the value of their taxpayers’ dollars to chance. They used data to confidently lock in interest rates on dollars that weren’t needed for immediate use.

Wayne County, NY and its Treasurer, Patrick Schmitt, are shining examples of this practice into action.

When COVID-19 was spreading across the United States and the Federal Reserve responded by cutting rates from 1.25% to near 0%, Wayne County was able to earn an effective rate over 1.30% across all taxpayer dollars it held—not just those that were invested. With the power of cashvest® by three+one® supporting the County since 2015, its finance policy has been focused on maximizing opportunities available and guaranteeing future revenues.

Today, with the help of three+one®’s MC Short-Term Forecast®, Wayne County is able to monitor and project its liquidity position into the future so that finance officials can plan for any necessary withdrawals from or potential contributions to the County’s fixed-income portfolio.

interest incomeFor the past three years, Wayne County has managed to keep nearly 100% of its funds identified as being available longer than six months invested in fixed income. This amounts to 80% of its total liquidity position producing interest earnings that can be calculated and budgeted because of their fixed interest rates. Had the County only been using a liquid investment pool to manage these dollars, it would have seen the annual value on its funds drop by 75% or more in just a matter of weeks.

The year 2020 has been unlike any other. But, if there is one thing that we can all take from the past six months, it’s that changes are going to continue to happen more quickly and more frequently going forward. Because uncertainty will always be with us, it is essential that public finance officials count on what can be counted—and lock in the value they receive on every taxpayer dollar.

Sharing a Piece

Sharing a Piece

States are facing momentous challenges and budget shortfalls as they try to deal with the impact of COVID-19. It’s easy to see why most of them are tempted to hang onto their share of the $110 billion in CARES Act funding they received electronically in May. Payments ranged from $9.5 billion to California and more than $5 billion each going to New York and Florida, with all states receiving funding based upon their population size. But it would be a colossal mistake for states to selfishly try to hang onto all of that money, or attempt to use it themselves. If that emergency aid is not spent on coronavirus-relief efforts prior to December 31st, it must be returned to the federal government. Put quite simply, states do not have the means or mechanisms in place to effectively use the vast majority of those funds within the next six months.

liquidity analysisState governments are cumbersome, slow-moving bureaucracies that are often several steps removed from the people they serve. State Houses are filled with policymakers and attorneys, and those bureaucracies are not really set up to actually deliver public services to the people who need them the most.

Counties, on the other hand, are much closer to the people they serve. Public officials in both Washington, D.C. and the states already know this. That’s precisely why both the federal government and the states create new programs and then mandate that local governments must implement them and deliver the services. It’s how the system already works…and works well. The federal government passes money down to states for things like education, public transportation, and human-services programs. States then act as conduits forwarding much of that money down to local governments like counties, cities, and school districts to actually provide the necessary public services. We ask, why should the CARES Act money be any different?

There are 3,141 counties in the United States, and they are the level of local government that is the most efficient and effective at delivering public services to American citizens. We entrust our county governments to deliver public safety and law enforcement services. Moreover, counties are the delivery system for the vast majority of all public health and human-services programs such as food stamps, medical care, and housing assistance. From economic development, to coordination of fire, E-911 and EMS services, to public health programs and pandemic planning, it’s the counties who are actually on the front lines, delivering the services that people so desperately need. State and the federal government bureaucrats understand that. Neither has the manpower nor the mechanisms in place to deliver those services. That’s precisely why they depend on county governments to do it for them.

Which is precisely why now, as we battle COVID-19 together, it is more important than ever that states pass along to counties a major portion of the CARES Act money they recently received from Washington. Did you know that 138 of the largest counties (about 4.5% of the total) have populations in excess of 500,000 people and they received about $30 billion in direct federal aid under the CARES Act? But the remaining 3,003 U.S. counties are not slated to receive one single dollar, unless their states decide to voluntarily share the Coronavirus Relief Fund money they received. States could effectively redistribute a large share of those billions of dollars to counties and thus provide the “biggest and best bang for the buck” as we combat this pandemic.

In support of that idea, on June 24th, the U.S. Treasury issued guidelines for use of CARES Act funds which contains the following language:

“Consistent with the needs of all local governments for funding to address the public health emergency, States should transfer funds to local governments with populations of 500,000 or less, using as a benchmark the per capita allocation formula that governs payments to larger local governments. This approach will ensure equitable treatment among local governments of all sizes.” 

Unfortunately for these smaller counties, the Treasury guidance used the word “should” rather than “must.”

liquidity analysisA few states have acted appropriately and should be commended for quickly realizing that the most effective way to put their CARES Act money to work is to pass a large portion of it down to counties. Pennsylvania, Ohio, Michigan, and Florida are leading the way; counties in those states are using CARES Act money to fund things like individual and family assistance, public health programs, rent subsidies to prevent evictions, grants to assist small businesses, employee training programs, and funding to not-for-profit agencies impacted by COVID-19.

A handful of states are still debating whether or not to share the funding they received while most other states, such as New York, appear to be simply keeping the money for themselves.  It is hard to believe that the very same states that regularly rely on counties to deliver their public services will now magically come up with a quick and efficient delivery system to put those CARES Act dollars to work. The hard truth is they simply cannot do it on their own.

States should be tapping into well-established networks such as the National Association of Counties (NACo) who can help them connect with local governments and find out what is working well in other parts of the country. Individual state-by-state organizations such as the New York State Association of Counties (NYSAC) and the Florida Association of Counties (FAC) can be incredibly helpful as well.

This major influx of cash from the CARES Act can also be placed into interest-bearing accounts until it is spent. That move can generate even MORE money to help combat the effects of the COVID-19 pandemic. Yes, the funds must be spent during 2020…but even so, if that liquidity is properly managed during the time it is being held on deposit, it could generate an estimated $100 to $150 million in interest income between now and December 31st. That is $100 to $150 million in “free” money that could enhance and increase the overall impact of the CARES Act funding.

At three+one, our innovative cashvest® program helps municipalities determine their precise liquidity needs for upcoming expenses and also provides them with the critical data they need in order to maximize the value of every dollar they have on deposit. We stand ready to do whatever we can to assist our neighbors to win the battle against COVID-19.

States are facing budget shortfalls because of falling sales tax revenues. Their natural inclination is likely to hang onto the billions of dollars that just got deposited into their coffers. But the CARES Act money must be spent within the next six months, and according to the law, it cannot be used to fill budget gaps created by revenue shortfalls. Since states cannot possibly put all that money to work on their own, they should immediately pass along a significant share of the money to counties—and do it NOW—when it can most effectively address the impacts of the pandemic devastating our nation.

The author served as a county legislator, a county treasurer, and as a disaster recovery coordinator in New York State and has always strived to maximize the impact of federal and state monies at the local level.