The Good Side of Borrowing

The Good Side of Borrowing

Debt financing is a necessary tool for all public entities when they are faced with major capital projects. School districts purchase new fleets of buses, counties manage infrastructure projects that span multiple years, and cities construct public spaces meant to attract residents and tourists. Though these endeavors carry a large price tag, they also provide worthwhile benefits.

The Good Side of Borrowing

Government entities, having limited sources of revenue, strive to pass balanced budgets each year. Debt financing allows for the opportunity to pursue more ambitious public works by funding the projects over several years.

Moreover, when a public entity borrows for a project, the financial burden is spread across generations of taxpayers. This is more equitable than asking current residents to pick up the entire tab for public parks and buildings that will be utilized well into the future.

If you’re a finance official who is currently navigating the debt-financing process, it is imperative that you know your duties don’t end once the funds are secured. Your cash is more valuable today than at any point in the past decade and these proceeds can significantly help reduce your initial borrowing costs.

Collaborating with project managers to develop an accurate draw schedule will help you maximize your earnings without sacrificing liquidity. Additionally, the IRS has arbitrage laws that limit the amount of interest certain entities can earn on borrowed proceeds. Don’t shy away from working to offset borrowing costs because arbitrage calculations seem intimidating. Rather, talk to your municipal advisors and work with vendors who specialize in these areas.

Finance officials will be called on to lead debt-financing efforts when their entity is considering a large project outside the scope of their routine activities, or if the state mandates a specific capital project.

Public entities that work with threeplusone® to receive time-horizon data feel confident that their operating and reserve funds are always earning the highest yield possible without sacrificing safety or liquidity. We encourage our clients to be proactive in managing their bond proceeds with a similar level of detail in order to offset borrowing costs to the fullest extent possible.

Top 10 Predictions For 2019

Top 10 Predictions For 2019

Over the last several years, three+one has blogged frequently about the changing landscape of banking and the value of cash as an asset.

Last year at this time, I made a prediction of the top 10 trends for 2018. My batting average edged up over that of 2017, from 70% to 75% in 2018. As we head into 2019, the top 10 trends I see evolving are as follows:

Top 10 Predictions For 2019

1.) The outlook on cash will continue to be very positive, with cash becoming an even more valuable asset; expect it to be earning 3.0%+ by year-end 2019.

2.) Liquidity analysis and data will become more prevalent and as a standard requirement, given the value cash has become. In 2019, the Financial Accounting Standards Board (FASB) has mandated that all non-profit organizations disclose such information on financial statement. We expect the Governmental Accounting Standards Board (GASB) to follow suit in coming years.

3.) The Federal Reserve will still raise short-term interest rates at a slower pace than in 2018, due to a divided outlook by members of the Fed’s board. The 30-day Treasury bill will reach 3.0% during the year. This will lead to a continual trend of U.S. Treasuries being purchased as an alternative to bank-deposit products.

4.) I do not expect an economic recession in 2019; rather, I believe the nation’s signs of economic growth will continue on a pace of 3.0% or greater. Consumer confidence will remain high, and unemployment at historic lows.

5.) Given the new leadership in the House of Representatives, pressure will mount to have greater oversight of banking, stalling any additional rollbacks of Dodd-Frank. I also foresee calls for banks to set aside additional reserves in case of financial market stresses appear to loom.

6.) Expect the big banks to continue building their presence in large metro areas, with regionals concentrating on mid-tier cities and counties, and community banks on smaller cities and towns. Community bank mergers will continue throughout 2019.

7.) Blockchain and 5G technology will lead the way for greater pressure on entities to upgrade their technology infrastructure.

8.) The average bank Earnings Credit Rate (ECR) will exceed 1.50%.

9.) Given the staggering growth in online purchasing and lower oil prices, prepare for a dip in sales-tax projections. This gap can be made up through the proactive management of “all” cash, generating significant revenue to offset the sales-tax shortfall.

10.) three+one will help public entities and higher Ed institutions earn an additional $100 million+ in new interest earnings, enabling a greater return to those they serve.

At three+one we strive to help clients navigate through the changing landscape of banking and an environment of rising interest rates.

Like 2017, 2018 was a great year for those entities that put our recommendations into practice. Next year promises to be even more rewarding, given the trends we have identified here.

If you don’t know where to start, please call us. If you have benefited from our work, please share the word. We’d like to help more entities like yours make real improvements to their budgets and bottom lines in 2019.



After a long overdue wait, Bank of America Merrill Lynch recently reiterated that cash is once again considered a preferred asset*.

Given the increase in short-term interest rates, cash should be considered a strong asset class going into 2019, provided it is proactively managed. It is expected that bank deposit rates and the 30-day Treasury yield could hover between 2.5% and 3.0% in 2019, given the current outlook of the Federal Reserve.

I know I sound like a broken record, but cash has great value and needs to be managed accordingly. That includes ensuring that all legal, safe, and liquidity requirements are met.


It should be noted that threeplusone has been a pioneer in developing liquidity analysis and data services for the proactive management of cash for public and higher Ed entities. By identifying and establishing a time horizon on all cash, one’s financial institution(s) can use threeplusone analysis & data to help capture the value of this asset in the marketplace, thus leading to substantial new sources of interest earnings.

Cash as a preferred asset class is back, one that could lead to tens or even several hundreds of thousands of dollars to your bottom line.

It’s great that the market is now recognizing what we have been saying all along: Cash, as it has had in the past, has value right now and will have it in the future.

*CNBC, Fred Imbert and Michael Bloom, November 23, 2018

The Analytics Revolution

The Analytics Revolution

The Information Age and resulting new technologies have led to a a paradigm shift in the way the world makes decisions. Look no further than professional sports to see how the approach to formulating strategies has changed.

The Analytics Revolution


Coaches, who in the past defended their most important decisions using factors like “gut feeling” and “momentum,” are now making calls based on the probability of winning games according to the data. Analytics gives these leaders the opportunity to completely remove emotions from the situation and take an unbiased approach based on the numbers. The underlying statistics have always been there but now, thanks to technology, they have easy and virtually unlimited access to them.

Modernized treasury management within public entities and higher Ed sectors is no different. Cash can be spread out across many accounts at multiple institutions all earning different yields. Combine this with restrictions or limits on withdrawals and required balances, and one’s cash management picture can be a lot more complex.

Treasury officers are eager to get their hands on data and analysis from one central location that enables them to feel both comfortable and confident when making their cash-management decisions. Analytics makes it possible to maximize the potential of public funds without sacrificing safety or liquidity—and save valuable time during the decision-making process.

This type of information and analysis can include time-horizon data, effective rates for all entity funds across different providers, current market rates, and much more. Finance officials who collaborate with threeplusone have this data at their fingertips; that gives them the ability to maximize taxpayer dollars like never before.

Much like coaches in professional sports, finance officials are accountable to a large group of constituents who will not hesitate to voice their opinions if the results are not in line with their expectations.Having the data in hand and an appropriate application of analytics that backs up your decisions can be the difference maker in getting your finance office the hard-earned recognition it deserves!

Either Way

Either Way

Recently the Federal Reserve has come under increased pressure to pull back on its rising-rate strategy, which started at the end of 2017.

Over the last 24 months, short-term Fed fund rates have risen from a zero baseline to 2.25%. The Fed’s rate target is between 3.0% to 4.0%. This strategy has come under pressure due to new concerns over a potential stalling in the nation’s economic growth.

Either WayWhether the Fed continues on its current path or not, the effective and proactive management of your cash should be a top priority. Either way, all cash has value and the ability to match liquidity to the time duration will determine the yield that can be earned through your financial institutions.

By having a quarterly liquidity analysis, your entity will be able to capture all the necessary data to determine your need for cash vs. maximum investment opportunities. The result: all available cash will be earning the highest yield, while remaining legal, safe and liquid.

Keep in mind that cash-flow forecasting is far different from a liquidity analysis. Cash-flow forecasting projects highs and lows of cash levels of revenues vs. expenses. A liquidity analysis weighs all patterns of cash within an entity for its cash needs vs. the time horizon of dollars for investment.

Cash-flow forecasting and liquidity analysis should be projected side by side, on a regular monthly or quarterly basis. Doing this leads to greater efficiency and higher interest earnings on “all cash.”

The three+one team specializes in providing liquidity analysis and data to public and higher Ed entities. Our proprietary modeling creates time-horizon levels on all cash and matches it to its value in the marketplace, leading to new sources of interest income.

Either way, whether the Fed boosts short-term rates or holds them steady, your cash has great value. Now’s the time to seize the opportunity for both your entity and those you serve.