COUNCIL OBJECTS TO POLICY; NEW INVESTMENT PLAN QUESTIONED

CAPE GIRARDEAU -- The City Council Wednesday took the city staff to task over its policy of investing city funds out-of-state to achieve better interest rates.

All the council members present told City Manager J. Ronald Fischer and Assistant City Manager Al Stoverink that they thought city funds should be invested locally. The council took no formal action on the matter.

In the last six months of 1990, the city earned an additional $15,000 in interest income by depositing in financial institutions across the country $2.3 million of the city's $5.85 million available for investment. Last week, several bank officials objected to local funds being sent from Cape Girardeau's economy.

But Stoverink has defended the policy as the best way for the city to get the highest return on taxpayer dollars.

At Wednesday's meeting, Mayor Gene Rhodes said that he had received "several comments and calls" from people opposed to the investment policy.

Other council members said it wasn't appropriate for the staff to take money out of local banks that often donate generously to city projects. Boatmen's Bank, which operates the city's banking services contract, recently donated $25,000 to the city to renovate city property for a police training facility.

"I sure don't think it's fair, two days after Boatmen's contributes $25,000 to the city, to turn around and slap them in the face by pulling money out of their bank and sending it to California savings and loans," said Councilman David Limbaugh.

But Stoverink said the city's investments are handled "professionally, not in the political arena," and that the contribution did not affect how funds would be invested.

"Frankly, I'm offended at the insinuation that we were doing anything to slap Boatmen's in the face," he said.

Stoverink said that if the city pursued its current policy "more aggressively" in the future it could garner more than $100,000 additional interest income each year.

Stoverink contended the only reason local bank officials wanted all the city funds to remain in Cape Girardeau is to profit from the investments.

"Sure the banks would like us to invest all our money in their banks," he said. "It increases their profits. That's the real issue."

Stoverink said the city always lets bids on city goods and services to get the "best buy" for taxpayers' money. He said the investment policy should be no exception.

"If you're going to take the position that you're going to invest all your money in local banks, if you extend that to its logical end, that means the city would get all its goods and services locally," he said. "Then you can throw competitive bidding out the window."

Stoverink said that without competitive bid procedures the cost for city goods and services would increase substantially.

But Limbaugh and Councilman Doug Richards said that banks, like any business, have to realize some profit to operate.

"Sure, maybe the bank's going to make some profit," Richards said. "But that bank is going to turn around and reinvest those profits in the community.

"If we have money in California, I doubt if we're going to call a bank or savings and loan association in California that's probably being investigated anyway, and ask them to donate to a city project."

But Stoverink said the local banks have to purchase federal securities to back deposits that exceed the federally insured amount. He said that, in effect, the banks thus invest the money out of the area.

But Councilman Al Spradling III said: "Investing out-of-town does not seem to be the same as investing in U.S. securities. It's an investment in the whole nation which comes back to benefit us."

Spradling admitted that he was "biased" on the issue, as he is on Boatmen's Board of Directors. But he said he didn't care which bank city funds were deposited in, provided it was local.

"It's a philosophical question," Spradling said. "If you want to raise money, don't invest any of it here. Invest it all over the country and make hundreds of thousands of dollars, and to hell with Cape Girardeau."

Councilman David Barklage, who serves on the city's investment committee, said he thought the committee should have been given more opportunity to review the city's policy before it was implemented. He said the committee has only met twice, despite a City Charter mandate that it meet quarterly.

"One concern we had when we did meet was that we invest more money locally. You did not clearly indicate the position of the committee," Barklage told Stoverink.

He said the council is unable to change the policy without being accused of "feathering our own nests," because Spradling's on Boatmen's board and Limbaugh's cousin is Boatmen's President Jim Limbaugh.

Stoverink and Fischer said the council could direct the staff to change the investment policy if it wanted to. "If you're embarrassed with the policy, then you might just as well do as (Fischer) said and change it," said Stoverink. "But I would strongly recommend against it."

In other business, the council:

Heard annual reports from the Vision 2000 Community Relations Council and the Southeast Missouri State University Small Business Development Center. The council also approved a $5,000 donation to the center.

Approved a law that will allow parking on one side of Kage Hills Drive, except for a section at the crest of a hill on the street where parking will remain prohibited.

Reappointed Ivan Irvin to the city's Board of Adjustments and appointed Rick Wieser to the city's Parks and Recreation Advisory Board.

Announced that a nine-member city "Bicentennial Committee" would be appointed in March and asked that interested people apply at City Hall.