This announcement builds upon the previous joint announcement last month of investing $45 million from the city’s stabilization reserve account into United States Treasury Notes that will see a Return on Investment (ROI) of approximately $2 million by the end of the calendar year that will be utilized to provide continued tax relief initiatives and programs for residents.
Mayor Sarno will sponsor two additional orders for the City Council to approve that will boost the Springfield Pension Reserve Fund and the OPEB Trust.
The first order will request that the City Council approves a transfer of $15 million from the certified free cash account into the Springfield Pension Reserve Fund. This transfer, if approved, would bring the total amount in the Pension Reserve Fund to approximately $17 million. CAFO Plante and Treasurer/Collector Lonergan, who continue to monitor the interest rates of US Treasury Notes (which currently sit at around 4.873%), will seek to invest these monies into 1-year US Treasury Notes. The approximate rate of return from investing the $17 million from the Pension Reserve Fund, based on an interest rate of 4.873%, would yield an estimated $769,000.
Additionally, Mayor Sarno will sponsor a second order requesting that the City Council approves a transfer of $6.7 million from the certified free cash account into the Springfield OPEB Trust. This transfer, if approved, would bring the total amount in the OPEB Trust to approximately $13 million. CAFO Plante and Treasure/Collector Lonergan, again, will continue to monitor the interest rates of 1-year US Treasury Notes to invest in. The approximate rate of return from investing the $13 million from the OPEB Trust, based on an interest rate of 4.873%, would yield an estimated $590,000.
The estimated total Return on Investment (ROI) from both investment strategies would yield approximately $1.35 million.
The Sarno Administration, working in partnership with City Councilors Attorney Michael Fenton, Finance Chair Tim Allen, and Maria Perez, want to seize the opportunity and take advantage of the historic high interest rates in US Treasury Notes. The ROI would help boost the city’s overall financial stability and support two important municipal finance accounts; the Pension Reserve Fund and OPEB Trust for city retirees.
The City of Springfield is able to take advantage of this innovative financial investment strategy thanks to the sound, prudent and strong fiscal management policies under the Sarno Administration, which has brought the city from junk bond status to the highest bond rating in the city’s history.
Springfield Pension Reserve Fund
Initial Investment | Principal Payment | Interest Payment | Total Payment | Total Return |
$16,996,656.25 | $17,755,000 | $11,096.88 | $17,766,096.88 | $769,440.63 |
OPEB Trust
Initial Investment | Principal Payment | Interest Payment | Total Payment | Total Return |
$13,000,000 | $13,581,000 | $8,488.13 | $13,589,488.13 | $589,488.13 |
Once again, the city of Springfield is believed to be the first community in the Commonwealth to utilize this unique and innovative approach to continue to provide sound, prudent and strong fiscal management policies to support key municipal financial accounts by taking advantage of the high federal interest rates.
Mayor Sarno states, “Since taking office, one of my administration main focus and priorities continues to be practicing sound fiscal management policies that have brought us back from the brink of bankruptcy to having the highest bond rating in the city’s history, with a healthy reserve that prepares us for any unforeseen emergencies. This is a safe and prudent plan that we have researched and been working on for some time and allows us to take advantage of innovative investment strategies when they present themselves. Once again, as we have done with investing approximately $45 million from our stabilization reserve account to yield over $2 million so we can continue to provide tax relief initiatives and programs for residents. I will again, ask the City Council to approve two sound financial orders that will help boost both our Pension Reserve Fund and the OPEB account with an approximate total return on investment of over $1.35 million.”
“With interest rates as high as they are, now is the time to take advantage and advance this beneficial and innovative investment strategy for our city retirees/seniors,” Mayor Sarno continued. “Springfield is believed to be the first community in the Commonwealth to utilize this unique approach. I want to thank City Councilors Attorney Michael Fenton, Tim Allen and Maria Perez for working with my administration on this innovative plan. I also want to thank my award-winning finance team, led by CAFO TJ Plante, Treasurer/Collector Stephen Lonergan and Comptroller Patrick Burns for their continued efforts and monitoring these interest rates so that we can strike while they are hot.”
CAFO TJ Plante stated, “We have always tried to be strategic with our investments and now we have a rare opportunity to generate a significant return on investment by investing in Treasury Notes. We are at the perfect time with the percentage of the yield being the highest in decades and having the cash to invest.”
City Councilor Attorney Michael Fenton said, “Once again, this is a shrewd, inventive, and unprecedented way to invest in and boost our Pension Reserve Fund and OPEB Trust for our city retirees and employees. Our sound fiscal management policies have enabled us to take advantage of this opportunity and capitalize on the high interest rates in US Treasury Bills. Our prior announcement regarding the investment of stabilization reserves attracted attention from across Massachusetts, the region, and the country, and this latest announcement is an expansion of this prudent program. Over the last decade Springfield has emerged from bankruptcy to leading the region in fiscal prudence. Today, we again, reap the literal profits from over a decade of sound financial management.”
Councilor and Chair of the Finance Committee Tim Allen added, “Since taking office as the Ward 7 City Councilor, one of my priorities has been increasing the funding to our underfunded pension liability. I want to applaud Mayor Sarno, CAFO TJ Plante and Treasure/Collector Stephen Lonergan for working with me and my colleagues on the Council to make sure that the pensions and benefits for our city retirees are properly funded. This innovative and prudent investment strategy takes advantage of the historic high interest rates in US Treasury Notes and will continue to support our retirees, much like what we previously announced last month on investing our stabilization reserves to provide continued tax relief for our residents.”
Councilor Maria Perez thanked Mayor Sarno and his administration for working together with herself and Councilors Tim Allen and Michael Fenton. “This prudent and innovative investment will help boost our Pension Reserve Fund and OPEB for our city retirees who deserve a healthy funded pension system. This investment is a sound strategy and was only possible thanks to our smart financial management policies that focus on sustainability no matter what economic uncertainties we might face.”