You may recognize these building blocks from the floor of your child’s playroom or classroom. While we didn’t create the popular social media post or the impressive array in the above illustration, we are staunch advocates of the message it conveys.
Much like the pile of jumbled blocks at the upper left, data that is disorganized and lacks proper management can be a nuisance to any finance office. Data and information like this will surely cause more harm and headaches than good.
Data management and analysis requires two core competencies: (1) a strategy and (2) technology.
Your finance officials should set clear goals on what they hope to achieve with liquidity data, such as stress-testing, forecasting, and benchmarking. Once clear objectives are established, the only thing keeping you from new earnings and savings is the technology needed to take massive amounts of raw data and build actionable visualizations.
Looking at raw transaction and bank fee data can cause more pain than accidentally stepping on one of these building blocks. cashvest® was designed to alleviate these pressures and give your office new tools to build for the future.
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.
For 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.
After developing customized liquidity-management strategies with public entities that have budgets as low as $2.5 million, I can confidently say that opportunities for smaller municipalities have returned. The weak interest-rate environment of the past decade is no more; your cash has value once again!
The Town of Elma* has proven this to be true with their impressive interest earnings since their first cashVest® report last June. The Town Supervisor’s office has worked closely with threeplusone in order to feel confident making cash-management decisions and comfortable with their liquidity position.
The results speak for themselves. We anticipate Elma to generate over $60,000 in interest earnings in the next 12 months, a 1440% increase over the $3,894 that the Town earned in the previous 12 months before working with us.
Elma’s cashVest score has increased by over 30 points since their initial report; they made advances in all five components of the score. Some of the main drivers of the Town’s success can be seen below.
1.) They significantly increased the value they receive on over 44% of funds.
2.) The Town earned 1.63% on strategic funds in mid 2018, compared to earning .08% on these funds in 2017.
3.) The Supervisor’s office took steps to reduce banking fees by over $15,000. This action freed up significant dollars for investments.
4.) The Town updated their investment policy to ensure that the correct procedures were in place and all available investment options according to General Municipal Law were properly represented. This enabled the Town to create an investment plan that works for their office and greatly benefits the taxpayers.
If your public entity has a budget under $10 million and you’re not budgeting for a substantial increase in interest income in 2019, then it’s likely your cash holds untapped potential.
It’s time to follow the Town of Elma’s lead and put a new focus on liquidity management. By implementing a customized cash-management strategy, its Supervisor’s office has generated new and recurring revenue streams—and shown a strong dedication to its taxpayers.
We can help your entity find similar revenue streams where you may never thought to look.