City finance report highlights strong recent interest income and prompts proposal to relax two‑year maturity limit

City finance staff presented an investment report showing elevated interest income over the past two years and recommended revising the city’s investment policy to allow longer maturities.

The presentation matters because higher interest income has materially helped the city’s general fund, but staff cautioned the windfall is historically an outlier and recommended changes to the investment policy to hedge against forecasted rate cuts.

Staff said total interest income has spiked in the last two years compared with historical levels and that the city’s portfolio currently emphasizes short maturities: roughly $20 million of investments were reported in the 0–180 day maturity range. The city’s investment categories were described as: cash and cash equivalents, the Michigan CLASS local government investment pool, certificates of deposit, and U.S. Treasuries. Staff described Michigan CLASS as historically the top performer but said the portfolio is now more diversified, including direct U.S. Treasury holdings. Staff recommended allowing maturities out to three years (and noted five years is a common standard elsewhere) to give the city flexibility to lock in favorable rates and hedge against falling yields; the city’s policy currently limits maturities to two years (changed from one year previously).

Commissioners asked for a written recommendation that includes suggested percentage allocations by maturity bucket and a cash‑flow projection showing expected near‑term cash needs before adopting any policy change. One commissioner said longer maturities can smooth returns if rates fall, while another suggested setting percentage caps on each bucket rather than making a blanket change. No formal policy change was approved at the meeting; staff were asked to return with a recommendation and supporting cash‑flow analysis.

Actions and follow‑ups: The investment report was presented and received. Commissioners did not adopt a policy change at this meeting; staff were directed to prepare a formal recommendation that includes maturity‑bucket percentages and cash‑flow projections for future consideration.