$6,000,000 For the City and a Confirmation of Our Reporting on City Cash Holdings!

Based on reporting earlier this week, members of City Hall investigated our claims and found that we were correct in that a large opportunity was being missed with regards to our ~117m cash deposits.

Some very good news to share! The other day, we published a post outlining that the City of Erie holds a substantial amount of cash on its balance sheet, deposited in a banking checking account that pays next to no interest (and also only insures deposits up to $250,000). Our research found that the city had deposits totaling about $117 million. Fortunately, City Council President Chuck Nelson took notice of what we published. He immediately brought the issue up with the Mayor, Treasurer, and other related staff involved in managing the city's finances. It was confirmed to him that the City could, in fact, hold its cash assets in investment securities beyond just simple checking accounts, just as we called for.

In our earlier piece (linked below), we pointed out that the $117 million in cash deposits, if actively managed and invested into short-term debt securities, could earn a yield north of 5% due to the Federal Reserve's recent dramatic increases in the Federal Funds Rate, a policy action taken to combat inflation. It seemed crazy to us for that amount of cash to sit there and slowly dwindle in value due to inflation. However, Nelson's inquiry made it clear that the city's large cash balance could be held in Treasury Bills (short-dated Federal Government debt securities). Once this was confirmed, City Hall began making the necessary moves to move the cash from deposit accounts to Treasury bills. This swift financial decision was based on an opportunity identified and an argument made by the Independent Erie Review just days ago.

So some money was moved around - what was the net result? A huge windfall for the city. The $100 million plus balance will be invested into 3-month Treasury Bills (yielding 5.255 as of today's market close) soon. As a result, the city will see a large influx of cash to ~$6,000,000 in unexpected revenue for the 2023 fiscal year. Those earnings are more than enough to offset a potential budget deficit this fall and with enough left over to cover a large portion of our city's yearly debt-related payments.

We couldn't be happier. We started this publication to write about the city’s operations, ways it could improve, our financial condition and paths for improvement, and potential routes to future prosperity in Erie. To learn that, in less than a week since launching, our work published here directly led to the city generating $6,000,000 in revenue that would have otherwise never materialized. Many past budget fights and deficits have been fought over for much less.

Obviously, $6,000,000 is a large amount of money, but for added context, it's about 6-7% of the City’s yearly operating budget. City Hall must be thrilled to have such a large source of revenue fall into their lap seemingly out of the blue. We couldn't be more pleased with the swift action taken by City Council President Chuck Nelson's interest and swift action, as well as the work done by the city's team that oversees financial matters. This is a win for all involved!

Here is the original article outlining the city’s large cash balance and the opportunities missed by remaining in a checking account versus active treasury management that would see cash balances actively rolled into high-yielding short-term debt. When we wrote this, we were cautiously optimistic something could be done to remedy this missed opportunity. Today, we are thrilled to say our efforts went noticed and led to the city finding itself with $6,000,000 in new, unexpected revenue!