SBA update

As of August 28, 2008, Wakulla County funds have continued to be drawn down as available from the State Board of Administration Local Government Investment Pool. The reinvestment of these funds are being done with emphasis on diversity, and currently only in Qualified Public Depositories.

Qualified Public Depositories are defined under Chapter 280 Florida Statutes, are banks that have qualified with the State of Florida CFO, are collateralized beyond the FDIC limits, and should be the safest of all investments for local governments in Florida.

We continue to monitor the County's cash position, and have had no issues or concerns with overall liquidity and our ability to pay all obligations of the County in a timely manner.

While monitoring this, Wakulla County, along with all other local governments who had invested in the SBA, continue to be disappointed that the State has shown no willingness to take any responsibility for the problems their staff and their lack of oversight brought to the fund.

All of our remaining balance invested with SBA is “frozen” by the State in Fund B ($300,000 as of July 31st). Fund B is where the residual of the poorest of investments made by the State staff were placed during the clean up of SBA’s funds that took place after the run last November.

Some of the investments made by SBA were subject to overall market risk of the credit markets. But many of the investments that ended up in fund B were made contrary to the policies and objectives of the SBA at the time they were made. Many of the local governments funds were invested by SBA staff in these questionable investments at a time when there was not a good market for these investments and that continues to trouble many of us.

We continue to expect the State (the Trustees who were responsible for overseeing this fund are Governor Charlie Crist, Attorney General Bill McCullum, and CFO Alex Sink) to do the right thing, even though the State is in difficult financial times themselves. The right thing would be for the SBA trustees and the Florida legislative leadership to commit to making whole any local government that stands to lose any principal due to the action of the SBA and State (not the same as market risk).

The State has a law firm that has filed certain paperwork with some of the investment advisor firms that the State may file suit against for their role in the poor investments they sold SBA. That may or may not go anywhere.

In conclusion, the SBA has made many improvements in how they manage and invest and report investment activities for the local governments and I view all of these as positive steps.

However, we have decided not to place any new funds on deposit with the SBA until we sense a more responsible approach on the actions of those entrusted by hundreds of local governments in Florida, especially with regard to the fund B investments.

We will keep you posted on this as there are new developments, but expect there to be little developing with the remaining fund investments until the overall real estate and credit markets come back up.