MOUNT VERNON — Interest earned on borrowed police station money will cover about half of the city’s $1.2 million note payment.
The city has earned nearly $83,000 in interest so far this year on the $26.973 million it borrowed in June for the project, City Treasurer David Stuller told City Council on Monday. He expects that to climb to $600,000 to $700,000 by year’s end as certificates of deposit and Treasury bills mature.
“It’s not going to totally offset the payment,” Stuller said of the interest. The city earns about 3.5 percent on its investments, while the note carries a rate of about 4.75 percent.
The city earned $49,102 on the police station money in August.
State law and the city’s investment policy limit the types of investments. Those include money market funds, CDs, Treasury securities, corporate bonds and commercial paper.
“We have most of the money in money market funds right now for the police station, but when we have a [construction] draw schedule, we’ll be able to refine that a little bit better,” Stuller said.
The city has 19 CDs, each capped at about $245,000 to stay under the $250,000 federal deposit insurance limit. Treasury securities carry a federal government backing.
Development brings higher withholding revenue
Stuller told council that interest across all city funds totaled $68,000 in August and $677,000 for the year. The city’s cash balance fell from $38 million at the start of the year to $33 million.
“We stagger the investments, so every month there’s something that’s coming due. Then when that comes due, you go out to the furthest point and invest it there,” Stuller said.
“So you always have something coming in, but also you have it working for you long-term, so we get a pretty good deal that way.”
Stuller also said residential income tax withholding is at an all-time high.
“I think it’s because of some of the development we’re doing. People are moving in, maybe working outside the city, but paying withholding here,” he said.
“I think this year we’re going to be above what we were last year. So as you go into budget season, that’s a good thing to know.”
