For Immediate Release
October 4, 2022
Treasurer Baumgartner Raises Earnings Projections for Spokane Public Investment Fund in Response to Rising Interest Rates
Spokane, WA- Treasurer of Spokane County Michael Baumgartner has raised the 2022 and 2023 earnings projections for the Spokane Public Investment Fund, managed by the Treasurer’s Office on behalf of over eighty regional government entities. The new projections shared with local taxing districts estimate year end investment income distribution totals of $16 million in 2022, approximately double the projection made in September 2021. Approximately $28 million of investment income is projected to be distributed in 2023.
“We are going through a period of extraordinary macroeconomic changes, and it’s important for our office to explain to the public how these changes affect public investments,” said Treasurer Baumgartner. “Previously, pandemic era monetary policy kept interest rates near zero percent which decreases the yield of our public investments. A rising interest rate environment provides an opportunity to re-invest maturing investments at higher rates.”
Tax dollars collected on behalf of school districts, fire districts, and other regional local entities are pooled into a $1.5 billion investment fund managed by the Treasurer’s Office. The Fund invests in fixed income debt instruments including U.S. Treasuries and other highly rated bonds. Investment income is distributed monthly to participants, supporting their budgetary needs without raising taxes or increasing fees on the public. The effect of rising interest rates is that maturing bonds in the Fund are re-invested at higher yields.
“I am pleased to report that we are projecting an increase in investment income for both 2022 and 2023;” said Baumgartner, “However, it is important to emphasize that a higher rate of return is not the primary objective of the Spokane Public Investment Fund. Our first responsibility is to the safety of those taxpayer dollars. We protect the capital of our local governments and ensure we have the liquidity to meet their operational requirements. After safety and liquidity, our goal is to realize a market rate of investment income.”
Since 2019, the Spokane Public Investment Fund has distributed over seventy million dollars in investment income. For more information on Treasurer’s Office investments visit www.spokanecounty.org/treasurer.
Source: FHN Main St. Advisors, Bloomberg
The Federal Reserve has raised its benchmark interest rate from near 0% to 3.25% as of September 2022 with market expectations anticipating a target Fed Funds rate of 4.5% by year end. The Federal Funds rate influences the yields on short-term debt instruments that are common for public investment funds.
Source: Treasurer's Office data. Month-end yields for the Spokane Public Investment Fund. 12-Month Moving Average of Washington State Treasurer's Local Government Investment Pool, 18-Month Moving Average of the benchmark ICE BofA 0-3Yr Treasury Index.
Month-end yields of the Spokane Public Investment Fund have increased through 2022 and are projected to continue to increase in 2023 as maturing investments are re-invested at higher yields.