Peachtree City might start putting some of its cash savings in two-year certificates of deposit in the hopes of getting more in return for interest earnings.
City Councilman Eric Imker has urged such a policy change, suggesting it could provide the city with an additional $150,000 a year.
However, it’s not as simple as using two-year CDs. A state law restricts governing bodies such as city councils from “binding” future councils, so any such policy has to abide by that principle, according to City Attorney Ted Meeker.
But it’s still possible to pull it off, as long as compliance with that code section is met, he added. That would mean that the newly-elected council in January 2012 could enter a two-year CD at that time, Meeker said in a memo to City Finance Director Paul Salvatore.
Another concern according to Meeker is that there may be a fee charged if the investment is ended prematurely, meaning if the city needs to liquidate the CD to use the funds prior to the end of the two-year period.
“That would be problematic,” Meeker wrote.
The difference is in the rates of return offered for one-year CDs, which is between .2 and .5 percent, and those offered for two-year CDs, which rise up to as much as one and a third percent, Imker has said previously.
The city has upwards of $6 million in the bank at any one time, but it is projected to earn less than $50,000 in interest this year, Imker said at the April 7 council meeting.
The new investment policy will be presented to council at its regular meeting Thursday night at City Hall starting at 7 p.m.
