By By PAUL KEANE – Special to The Standard
While cutting the federal interest rate is advantageous to borrowers, Escambia County Commissioners found out Monday that it can be devastating to municipalities.
Commissioners learned during their Monday morning meeting that a certificate of deposit purchased two years ago will mature on Thursday, meaning the money must be re-invested. Dan Britton with the South Alabama Trust Company told the commission that interest rates to earn money on that CD aren't nearly as promising as they were two years ago when it was purchased.
Britton told the commission the best it could hope for is an interest rate around 1.5 percent, a huge drop from the six percent interest earned on the original CD. That drop in interest will mean a loss of $50,000 a year in revenue for county coffers.
Britton added that the State Treasurer's Office has established a "safe program" that most banks participate in. That program helps keep rates fairly stable while also allowing municipalities the chance to allocate other revenue and funds -- such as the Oil and Gas Fund -- to interest-bearing accounts.
Commission Chairman Larry White agreed, saying procedures had already been put in place to make that happen.
Commissioners approved Britton to take the money from the maturing CD and find a Treasury note or bond that will produce interest in the range of 1.59 percent or higher, and that the term on that be in the 18-24 month range or less, if possible.
In other action, the Commission:
The banks in question include: Bank of Brewton, BankTrust of Brewton, Colonial Bank in Brewton, Escambia County Bank in Flomaton, First National Bank of Atmore, Regions Bank in Atmore and Brewton and United Bank in Atmore and Flomaton.