Cap on investment fund withdrawals could hinder local governments

Hundreds of Colorado’s cities, counties and special districts could be unable to pay their bills as two investment pools holding billions of local governments’ dollars brace for investors making a run on their accounts, Colorado Treasurer Cary Kennedy said Monday.

The pools, which hold roughly $2.5 billion in assets for local governments in Colorado, have restricted what money investors can withdraw in the face of investors across the country making a run on money-market investment funds, Kennedy said.

She said these funds, including the Colorado Surplus Asset Fund, have limited their clients from withdrawing more than 5 percent of their investments per day.

This could present an issue down the line, Kennedy said, for the cities, counties and other local districts that have used the funds like checking accounts in the past.

“We could see down the road, with cash flow for our local governments, not being able to access the funds,” Kennedy said. “They use these funds largely as their bank accounts.”

Joint Budget Committee Chairman Bernie Buescher, D-Grand Junction, said the two funds’ actions come as other money-market accounts across the country — typically seen as safe investments — have started taking hits as investors grow nervous.

“Money-market funds, nationwide, have all of a sudden become an investment that folks are concerned about,” Buescher said. “This is unprecedented.”

Despite these concerns, Mesa County’s largest government entities said they will not be affected by the funds capping their withdrawals.

Jessica Peterson, spokeswoman for Mesa County, said the country has $12 million invested in the Colorado Surplus Asset Fund.

The withdrawal caps, Peterson said, will not affect county operations.

“We’re solvent. We’ve got very diversified investments,” Peterson said.

Jodi Romero, financial operations manager for the city of Grand Junction, said the money-market funds’ new withdrawal caps will not affect the municipality’s ability to pay its bills.

“We have funds available at Alpine Bank that meet our daily or monthly expenses,” Romero said.

She said Grand Junction has roughly $12 million invested in money-market accounts.

Margaret Steelman, clerk for the city of Fruita, said the city is not planning to withdraw any of the more than $4 million its has tied up in money-market accounts.


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