The stock market’s been behaving badly so the City Beat thought to check in with Grand Forks City Hall’s finance director John Schmisek.
What’s happening with our investments? Did we take a beating? Nope. I think I knew this at one point but the city can’t invest in anything but T-bills and other government guaranteed securities. Says so right here.
Apparently, they have no such restrictions in Minnesota. Duluth is paying the price (Guess I’ll have to check to see how East Grand Forks’ been doing.):
Duluth made a short-term investment of nearly $3 million into Mainsail II on July 20, 2007. It was due to mature on Sept. 4, 2007. But the fund’s rating dropped from high grade to junk on Aug. 21, and the value of the city’s investment dropped to $1.05 million.
There’s more trouble for cities though, even without those investments:
Add to that the abrupt and unexpected loss over the last several weeks of usually sound investments and credit in the municipal bond markets – the place to which local governments turn for relatively cheap, fast money – and it becomes clear that cities are facing their own financial crisis, arguably the worst in decades….
"This is the first time for at least two decades that all three major general tax sources – property, income and sales – have all declined at the same time," said Michael A. Pagano, a co-author of the report and dean of the College of Urban Planning and Public Affairs at the University of Illinois, Chicago. "That’s the real frightening thing for cities."
"It’s not like the 2000 or 1991 recessions; those hit the coasts first and flowed to the middle," Dr. Pagano continued. "This one doesn’t differentiate between high-tech and low-tech cities, manufacturing towns or new exurbs."
Sounds like that perfect storm John was talking about a while ago.