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City administrator presents plan to invest $5 million bond proceeds; council approves investment agreement
Summary
The St. Clair board approved an ordinance authorizing the city administrator to sign an agreement with an investment firm to manage proceeds from a $5 million bond; the city expects to invest in U.S. Treasuries over roughly two years and the advisor will charge 20 basis points.
The St. Clair Board of Aldermen on Feb. 24 approved an ordinance authorizing the city administrator to sign an agreement with a private firm to manage investments of $5 million in bond proceeds.
City officials said the bond was sold in December and staff worked with engineers to produce a cash-flow and draw schedule that estimates when the city will need funds for sewer work and other capital projects. "We gave that information to Martin and his team," the city administrator said, adding that estimates show an investment horizon of about two to two-and-a-half years. The administrator said those proceeds would help pay for sewer lines, repairs and other projects.
The administrator described the fee arrangement and expected return: "our interest rate is 4.24% they get 20 basis points," the administrator said, explaining that the city would receive the net interest and the advisor would be compensated via the 20-basis-point fee.
A representative identified as Martin, speaking for the investment firm, said the securities under consideration would be U.S. Treasury instruments. "That specifically are being discussed are treasuries ... treasury bills or treasury bonds," Martin said, noting the firm uses an internal advisory team to avoid conflicts and to comply with securities rules.
The ordinance (introduced as bill 20258) authorizes the city administrator to sign an agreement with "St Nicholas and Company" to assist the city with investment opportunities; the council approved the measure by voice vote and the bill was recorded as ordinance number 223.
Board members confirmed a technical correction would be made in the ordinance text to show the city administrator — not the mayor — as the signatory of the agreement itself. The council did not record roll-call tallies in the transcript; the measure was adopted after a motion and the chair announced the motion carries.
The ordinance approval follows a brief period of questions from the board about the nature and security of the investments and a staff explanation of the cash-flow assumptions that guided the proposed investment allocations.
