Imagine the power that cash holds in today’s marketplace. With short-term rates still hovering above 2.0%, the income generated on idle cash can have a major impact on one’s entity and those they serve
As we enter the budget season mid-year or at year end, the challenge of stretching tax dollars often leads to less resources or decisions of where to cut, especially when tax caps can easily be outweighed by insurance premium increases, pension obligations, cost of living increases, or other essential services.
Too many times the frame of mind in forming a budget comes down to cost controls, rather than revenue-producing opportunities. While this may be understandable at one level, it is not a mind-set that will move your entity forward. At best, you will be in constant ‘treading water’ mode.
A great example is the value of one’s cash. So many see the need to have idle cash available for ‘just in case’ circumstances rather than viewing cash as an asset to generate additional income and opportunities.
At three+one® we can help a public entity find new sources of revenue through all levels of cash. In 2019, three+one®’s flagship service cashVest® will provide proprietary liquidity analysis and data that will result in over $100 million of new revenue to communities that will lead to:
- Closing a budget gap
- Preventing additional tax increases
- Providing additional teachers, police, firefighters & EMTs
- Technology upgrades
- New community services
- After-school programs
- Student field trips
- Arts & Cultural community events
- New musical instruments
- Enhanced sports Programs
- Continuing Education & Online Learning
Obviously, the list can go on. Simply put, the power of cash can have a wonderful impact on one’s budget today and in the future. The time is now to have a conversation with the team at three+one® about our cashVest® liquidity analysis service. The result could make all the difference between stagnation and growth in your 2019 and 2020 budgets.
As one looks through the eyes of a taxpayer, how do you think they would react to any one of the following responses from a public official when asking about how the entity manages their public cash?
1.) Why bother? Cash has no value.
2.) I don’t have the time, given all our other priorities.
3.) All our money is already invested in our bank.
4.) I don’t want to risk not having cash when I need it.
5.) I don’t currently have the staff or resources to look into this.
6.) It’s probably not going to be worth the effort.
7.) My board won’t approve it.
8.) It’s only going to bring in another $50K to$100K. That’s not enough to really impact my bottom line.
9.) All our cash is spread among so many banks and bank accounts, it would be a giant hassle.
10.) I don’t want to upset my bank or bankers.
Just imagine if those you serve heard those responses as they open their tax bill or tuition bill.
Given the financial stresses and tight margins public and higher Ed institutions experience, the need to have a single asset sitting dormant provides little cover when asked this hard question: “Why didn’t you?”
cashVest® by threeplusone® is our proprietary liquidity analysis service that helps public entities take unrecognized and underappreciated cash and turn it into a revenue-generating asset.
Cash has real value in today’s marketplace—on average 2.25%. That can add up to real income in the six- or even seven-figure levels.
As a treasurer of a public authority and a trustee to a university, I truly understand the stresses on a finance staff. One more request can mean putting something else aside. However, you do not need to do this alone. The threeplusone® team can analyze all your cash, develop time-horizon patterns on it, and work alongside you in having a conversation with your bank(s). The end result: higher earnings on your cash.
Regarding private higher Ed institutions, our liquidity analysis will substantiate your Financial Accounting Standards Board (FASB) liquidity-disclosure requirement in 2019.
Join the ranks of our clients whose most common question after using cashVest® by threeplusone® for the first time is: “Why didn’t I do this sooner?”
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.
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.
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.
The most important resolution for threeplusone® in 2019 will be to make a difference for the public entities and higher Ed institutions we serve.
This year, we’ll strive to help such entities across America generate over $100 million in new interest income as a result of our working with them. These are new dollars that would not have been realized were it not for threeplusone’s liquidity analysis and data services being applied in identifying all cash as a revenue-generating asset.
This difference can mean so much and do good for those who public entities and higher Ed institutions serve.
So what are these differences, you may ask? Just consider a potential top 10:
• Lowering taxes or tuition costs
• Filling a budget gap
• New capital purchases
• A new playground
• New emergency vehicles
• New hires
• Additional police or firefighters
• Reducing OPEB obligations
• New technology purchases/enhanced infrastructure
• Covering the increase costs of healthcare
These are changes that can come by making all your cash work harder than ever in the interest of those you serve.
It is the mission, passion, and moral obligation of the threeplusone team to make a difference to those who serve in public entities and higher education and, in turn, to those they serve.
One thing is clear: $100 million can make a real difference in 2019. The money is there to be realized, especially for your entity and community.