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Tuesday, July 28, 1998
County assets altered
Clark County's newly appointed treasurer reveals an investment policy that includes long-term methods.
By Steve Friess
Review-Journal
County Treasurer Laura Fitzpatrick has unveiled a new investment policy for Clark County that decreases a heavy reliance on mutual funds and encourages scrutiny of her office's activities.
The previous policy, in which about 38 percent of the $2 billion portfolio was placed in mutual funds, was unnecessarily conservative and cost the county at least $1.5 million in the past year, she said.
Fitzpatrick, who was appointed in March to fill the unexpired term of disgraced former Treasurer Mark Aston, said she intends to slice the amount of money in mutual funds to about $100 million, or 5 percent of the portfolio. That's the amount the county needs to have in liquid assets to cover payroll and other bills, according to both internal and external studies of the cash flow.
Money market mutual funds offer quick access to money and the lowest risk, yielding an average return of 5.3 percent in interest over the past two years, county records show. By contrast, Fitzpatrick said other short-term investments with almost the same limited risk have yielded about 5.6 percent interest -- a difference that can mean millions of dollars.
Internal county Auditor Jeremiah Carroll first recommended the shift away from mutual funds when he discovered during a 1997 probe that Aston increased the amount invested in mutual funds from $374 million in July 1996 to $711 million in August 1997. An external look this spring by four investment analysts backed up Carroll's view.
Aston, who resigned in March after admitting to embezzling $21,497 from the state's County Fiscal Officers Association, defended his investment policy in November after Carroll's audit. In a memo, he urged the Clark County Commission to "not succumb to the voices that would encourage them to chase interest rates to obtain an unrealistic rate of return."
He also said his conservative style would not lose tax dollars the way managers in Orange County, Calif., did when the market soured and bankrupted that county.
Fitzpatrick said her policy exposes the county to almost as little risk and invests money that is not immediately needed in longer-term vehicles such as certificates of deposit.
The change was enthusiastically endorsed Monday by outgoing state Treasurer Bob Seale.
"I think it's outstanding," Seale said. "It's something that's been needed to be done."
But at least one of Fitzpatrick's five primary opponents in her bid for the Democratic nomination for a full term as county treasurer disagreed with the plan.
"I'm against reducing (the mutual fund portion of the total portfolio) down lower than 20 percent," said candidate John Bonaventura, treasurer of a local Internet service provider company and a former state assemblyman. "Five percent is too low. The return on investments can be increased without any more risking by cutting down on some of these consulting fees and advisory fees."
Other Fitzpatrick primary opponents did not return phone calls Monday.
The new policy, approved last week by the County Commission, also calls for the creation of a review committee to oversee county investments. The panel, whose meetings Fitzpatrick said might be open to the media, would include the county manager, comptroller and finance director and possibly a community representative unrelated to county government.
The move is an effort to improve the tarnished reputation left by Aston, who also was reprimanded by other internal audits and by the state Ethics Commission for his conduct as treasurer. Aston often was criticized for viewing his department as distinct from the rest of county government and for not seeking advice or guidance from other divisions.
Fitzpatrick never met Aston and said she prefers to avoid comments on his record. Yet she said she views the office as "an integral part of the county government, not a separate entity. My predecessor didn't communicate very much with other parts of the county."
Bonaventura praised this approach, stating he would like to see the county's investment portfolio available publicly on the Internet.
In another move, Fitzpatrick also altered the county's relationship with Nevada Institutional Investors owner Chris Bunker. Bunker, a former Aston assistant who left the county to start his own firm -- the firm that handled the entire $2 billion portfolio -- was given a short-term contract to handle $450 million.
Fitzpatrick said she is seeking to hire two or three different investors to each handle between $100 million to $150 million of the county's longer-term investments. Bunker's contract expires Nov. 30, at which time the treasurer hopes to have hired the set of investors. Bunker said he will apply.
The rest of the county's portfolio would be managed internally by Rick Phillips, former investment manager for the city of Las Vegas.
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