Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, April 3, 1991                   TAG: 9104030460
SECTION: VIRGINIA                    PAGE: B-2   EDITION: METRO 
SOURCE: JOEL TURNER MUNICIPAL WRITER
DATELINE:                                 LENGTH: Medium

CITY SEEKS HELP WITH INVESTING

He's got so much in the bank he needs someone to help him invest it. At one point in the past year, shortly after real estate taxes had been collected, he had $44 million.

Peters is Roanoke's treasurer. He takes care of taxpayers' money, including funds that sometimes are not needed right away to pay bills.

This includes tax collections, bond money for unfinished projects and idle sewer and water funds.

City officials have decided to seek proposals from outside investment managers to handle temporary investments. The fee could be based on the amount invested by the manager or could be a flat amount.

The investment manager would be responsible only for the temporary investment of city funds, and would not overlap with Joel Schlanger's duties as finance director or his overall supervision of city finances.

Funds available for temporary investment can vary widely, depending on the time of the year. The balance dipped to $21 million at one point in the past year. It is the highest immediately after tax collection deadlines, such as this week when the city will take in $16 million in real estate taxes.

Schlanger helps Peters invest the money - ranging from overnight to as long as a year - until it is needed. "Our two offices work well together," Schlanger said.

In fact, they earned $2.8 million by investing city money last year. But changing banking and financial conditions are making their job tougher, Peters said.

Interest rates on short-term investments have dropped more than 4 percentage points in two years. And the number of banks and other financial institutions eligible to accept investments of public funds have decreased.

"We made a pretty good amount in the past year, but we think we could make it more if we had higher interest rates locked in for a longer period," Peters said.

If the city had access to more-advanced computers and someone with training and knowledge in investments who could devote full time to the job, Peters said, it could take better advantage of rising and falling interest rates and broader investment opportunities.

Peters and Schlanger looked into the possibility of creating a new position that would be responsible for temporary investments, but concluded that the city should hire a professional money manager.

The cost for a new full-time position to invest idle funds - salary, fringe benefits, computer equipment, software and other expenses - could be up to $100,000, Peters said.

"With the budget situation being what it is, and the city trying to hold the line on jobs, we did not think it would be considered favorably to create a new position this year," he said.

The city pension system, which has more than $100 million in assets, has used money managers to oversee its investments for nearly a decade and has been satisfied with the result, Schlanger said.

City Council also has revised the city code so officials can invest idle funds in a broader range of securities. Schlanger said this, too, should help increase investment income.