Those low, indelicate interest rates -- meant to waken borrowing and snug harbor sales -- also mean that some boroughs, cities and states will meet humiliate returns on their short-term investments, just one more shrinking proceeds stream in what is already looking to be a tender year for municipal governments. For some governments, a unequal amount of assets tax and income tax gain is collected at the beginning of the year. To increase their collections, municipalities will often invest that simoleons in short-term notes. But this year, ministry bond rates are down, as are Treasury jaws yields, and both of these are regular investment mechanisms for municipal governments. What had been a virtually reliable income source has nearly evaporated.
In Pittsburgh, for example, the conurbation has been collecting between $6 million and $7 million in vigorish payments in fresh years, both from short-term investments and on the burgh checking account. But for the 2009 budget, the bishopric is enceinte to get about $1.5 million. "We knew that induce rates were low. We arranged that into the budget.
It is a significant hit for us," said Michael Lamb, see controller. Because the discredit incite rates were forecast into the annual budget, they won't fashion a shortfall, said Mr. Lamb.
Still, the privation of $4 million or $5 million from what's been normal is "real money" and represents about 1 percent of the city's $437 million spending plan. Interest rates fluctuate, and as a follow-up cities hit upon this family of eating of potency fee profit periodically, most recently in 2003. The same superstore shifts that hurt some investors domestic others. While the indistinct interest rates mean reduced return for some cities, they also can mean better borrowing terms for tutor districts and smaller municipalities.
School districts on average hare on a June-to-July fiscal year, signification their revenue often spikes midcalendar year. To worthwhile bills at the beginning of the year, districts and municipalities can waft takings bonds -- essentially a short-term borrowing vehicle. The borrowing is repaid with the pressure net from April (income taxes) and midyear (when paraphernalia taxes are due). They are called "tax expectancy notes," or TANs. If they're getting reduce notice rates, that's a decorous thing, said Richard Dunlap, master commander of the Allegheny League of Municipalities.
"But loans are harder to get these days," he said. Sometimes the forces clash against each other. In Washington County's South Strabane, investment returns on CDs and green markets were low.
But supervisors were able to shoplift out a strain hope note at 3.5 percent, a capital rate, back in January. The twist aspect of the competitive rates is that borrowing wouldn't have been unavoidable in the at the outset sort were it not for the lousy economy, said John Stickle, township manager. "The 2009 budget was very tight," he said, noting a sink in edifice permits. "We've had to navigate do with less.
" Bill Toland can be reached at or 412-263-2625.
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