Cash management. (From the Library).(How Conservative Are Municipal Investment Practices in Large Cities?)(Brief Article)

"How Conservative Are Municipal Investment Practices in Large Cities?"

Dwight V. Denison

Municipal Finance Journal, Spring 2002, pp. 35-51.

Public scrutiny of government investment has increased in the aftermath of events such as the bankruptcy of Orange County, California. In the last 40 years, municipal governments shifted their idle cash balances from relatively low-yield certificates of deposits to a variety of higher-yield instruments. But in the quest for higher returns, are governments subjecting public dollars to unnecessary risk? Denison set out to answer this question by surveying the municipal investment managers of 54 U.S. cities with populations of 200,000 or more. The author chose to focus on large cities because of their higher idle cash balances and greater likelihood of pursuing aggressive investment strategies in the face of fiscal pressure. Managers were asked to identify the local legal restrictions they face and the frequency with which they use permissible investment options. The survey ...