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Lovington finance director warns city may be losing hundreds of thousands by keeping funds in local sweep account
Summary
The city's finance director told commissioners the municipal sweep account at a local bank yields materially less than the State Treasurer's office, estimating millions in forgone interest over recent years and urging the commission to give him direction on moving idle funds; local bankers defended their pledge and community reinvestment role.
Lovington's finance director presented an analysis on May 11 showing the city's sweep-account yield at Lee County State Bank trailed the State Treasurer's office rate, and urged the commission to direct him to move excess idle cash to the state program.
Finance director Mr. Fier told the commission the State Treasurer's office was paying about 3.6636% at the end of April, while the bank's sweep account returned roughly 2.227% for the month, a difference he calculated as roughly 1.39 percentage points. Using the city's reported cash balances, he said the city had forfeited substantial interest income and presented a hypothetical that larger balances could mean annual losses in the low hundreds of thousands of dollars.
"I need direction. Let me do my job. Let me invest the money as I see fit at the state treasurer's office," Mr. Fier said, arguing the city could keep only the working balance locally and move longer-term reserves to earn higher yields.
Representatives of Lee County State Bank, including the bank president and a speaker identified as Josh, countered that the bank's sweep structure complies with the treasurer's office and New Mexico statutes, emphasizing collateral pledging and FDIC coverage strategies. The bank speakers also highlighted the local economic benefits of keeping deposits in community banks, noting loans, payroll and charitable giving that remain in Lovington.
"We partner with other financial institutions and we pledge collateral; these funds are protected and work in the community," the bank representative said, while acknowledging the state's rates can be higher.
Commissioners asked staff to gather clarifying documentation, including a written confirmation about the sweep-account practice's compliance and a cost/benefit analysis for cash placement options. The finance director said he would provide the commission with investment options once the budget workshops clarify the city's near-term cash needs.
The commission took no formal vote on a change to investment policy at the May 11 meeting, but members directed staff to return with additional analysis and legal/regulatory clarification before any reallocation.
What happens next: commissioners asked the finance director to present a plan that includes (1) proposed balances to keep locally, (2) amounts to place in the State Treasurer's office or other compliant instruments, and (3) the timeline and potential effects on budgeted expenditures and capital projects.
