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County’s investments in a slump

Treasurer: Low rates hurt revenue

– In addition to the revenue declines from a slumping economy, Allen County government is also suffering from slumping interest rates.

The Allen County commissioners sat for their annual Board of Finance meeting Friday, when they heard County Treasurer Sue Orth’s report on the county’s investments and interest it earns on the money it has in the bank.

The news was not good.

“The average interest rate is 21 percent lower than last year,” Orth said, adding that rates weren’t high last year, either. “We will most likely see these rates for the next two years.”

When the economy slows, the Federal Reserve lowers interest rates, which makes it easier – and cheaper – to borrow. But it also lowers the interest rates that banks pay depositors. As the stock market falls, safer investments such as government bonds become more popular, so the interest rates they pay fall as well.

Allen County’s highest-paying investment right now is paying 0.75 percent interest, according to Orth’s report. One is paying 0.25 percent interest.

How much difference has this made?

According to Orth’s report, the county made $8.4 million in interest in 2007, before the recession. In 2008, with the economy in a tailspin, it earned $4.6 million.

And it kept getting worse.

In 2009, interest income dropped to $1.1 million, and it fell to $742,118 in 2010. By 2012, it had dropped to $325,320.

An additional insult was that bank fees increased, Orth said.

“To some extent, something is better than nothing,” Commissioner Therese Brown lamented. “But this looks like almost nothing.”

There is, however, a silver lining: Cheaper borrowing has also saved the county millions of dollars.

In 2007, a $26 million bond for the Memorial Coliseum came with a 4 percent interest rate. By 2009, the $25 million borrowed for the Maplecrest Road extension project had a 2.5 percent interest rate – paying 4 percent would have cost another $4.6 million over 20 years.

But rates continued to fall: in 2011, a $13.5 million loan for the Allen County Juvenile Justice Center had a 2 percent interest rate, while officials were able to get a 1.5 percent rate for an additional $5.1 million Coliseum bond.

“It definitely makes a difference,” Commissioner Nelson Peters said.

Slow improvement

The commissioners heard a quarterly economic report from the Community Research Institute’s John Stafford, who reported that the local economy continues to make slow, steady improvement.

Stafford also shared new data on educational attainment.

According to the Census Bureau’s American Community Survey, the unemployment rate for those in Allen County without a high school diploma was 18.6 percent, nearly double the 10.3 percent rate for those who finished high school.

Those with some college or an associate degree had an unemployment rate of 9.3 percent, while just 2.5 percent of those with a bachelor’s degree or higher were unemployed.

“This is something we all know, but the numbers are shocking,” Stafford said.

dstockman@jg.net

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