Highland staff seeks direction to diversify city reserves beyond state pool

City Finance Director David (first name used in transcript) and Benjamin Sehy of METER Public Funds presented options July 15 for moving a portion of Highland’s cash reserves out of the state Public Treasurer’s Investment Fund (PTIF) into a separately managed, laddered portfolio that would buy short- to medium-term securities to stabilize interest income.

David told council Highland’s pooled cash balances have ranged between about $26 million and $30 million over the past eight months and include enterprise and other restricted reserves. He said staff’s goal is not to chase maximum yield but to reduce year-to-year volatility in interest earnings and improve budget forecasting. “One of our main jobs…is to invest [public funds] wisely. The first priority is security, second liquidity, third return,” David said.

Benjamin Sehy, investment officer with METER Public Funds, described a proposal that would keep roughly 50% of operating funds in PTIF for immediate liquidity and place approximately half in a laddered, separately-managed account (3–5 year maturities), permitting Highland to lock yields now should short-term rates fall. He estimated METER’s all-in fee at about 0.10% (10 basis points) and said that includes custodial and reporting services; he noted PTIF’s administrative fee is far lower (about 0.005% or half a basis point).

Councilmembers asked about risks and tradeoffs: whether this plan increases credit risk, whether the city would lose liquidity, and what the likely net benefit would be. Sehy said the separately-managed account would be conservative (treasuries, agencies, high-grade commercial paper) and that the plan intentionally retains substantial liquid balances in PTIF and bank accounts. He estimated a realistic long-run yield advantage of about 0.40–0.50% annually for the longer portfolio compared with short-term holdings, after fees, and said the arrangement would be month-to-month rather than a long lock-up.

Councilmembers asked staff to return with a comparison of PTIF fees and alternatives and to solicit at least one other vendor bid; David said staff would do that and schedule a follow-up with more detail. No formal vote was taken at the meeting.

Direct quote: Benjamin Sehy of METER said, “We think that you should keep about 50% in the PTIF… and so that would be funds that you could get tomorrow if you needed them.”