Auditor‑Treasurer outlines county investment strategy, jail bond arbitrage risk and local option sales tax receipts

Beltrami County Auditor‑Treasurer Jody Treat briefed commissioners on the county’s investment portfolio, objectives and how bond proceeds and local option sales tax receipts affect cash flow and debt strategy.

“ The objectives of our investment policy are to ensure the safety of the principal,” Treat told the board, saying the county’s top priorities are preservation of capital, liquidity to meet cash‑flow needs and yield that reduces the levy. She described a laddering approach to maturities designed to maintain consistent portions of the portfolio coming due at regular intervals.

Why it matters: Treat explained how the county invested $40 million in jail bond proceeds with Ehlers and how construction spending benchmarks affect the county’s arbitrage exposure. Because the county missed an initial spending benchmark tied to the bond issuance, certain interest earnings above the county’s arbitrage rate become a rebate payable to the IRS unless offset by tax‑exempt investments. Treat said the county’s arbitrage rate is 3.72 percent and its portfolio was earning about 4.98 percent, producing an approximate arbitrage differential of about $410,000; staff are pursuing a strategy to reduce that liability by buying tax‑exempt investments.

Treat discussed where county funds are held: local bank CDs and money markets (First National Bank, Security Bank via reciprocal deposits, First State Bank of Big Fork), the MAGIC pooled account (Minnesota Association of Governments Investing for Counties), Wells Fargo Advisors (agency bonds) and Ehlers (bond proceeds invested in U.S. Treasuries, agency and municipal bonds). She said she structures maturities around seasonal cash needs — for example, lower cashflow periods before May property‑tax payments — and around projected spend rates for the jail project.

Commissioners asked how interest earnings are allocated. Treat said interest earnings are applied countywide and reduce the levy; funds with negative cash balances do not receive interest. When Commissioner Winger asked for an estimate of downside risk if the economy falters, Treat declined to speculate and said she relies on the county’s investment advisors for scenario analysis.

Treat also reviewed incoming local option sales tax collections, which began July 2024 and currently average roughly $400,000 per month. She said annual receipts at that rate give the county flexibility to accelerate debt reduction or buy down debt service but cautioned the totals are economy‑dependent.

No formal decisions were taken in the work session; Treat said staff will continue to work with advisers on arbitrage management and report back to the board if recommendations require action.