No Longer Profitable . . . - The Missourian: Columns

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No Longer Profitable . . .

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Posted: Friday, May 10, 2013 6:28 pm

We have an announcement to make: Banking is something (like other businesses) we know little or nothing about. But we do know that when no bank in this area is interested in being the depository of Franklin County funds, it no longer is profitable, and it no longer carries any prestige. It’s another example of the changing economic times.

We well remember the day when there was competition to be the depository of county funds.

The economy is different today. We all know that. Bank officials undoubtedly know that better than any of us.

We also know there are more regulations today that place restrictions on banks. They are of a protective nature, so the Feds say, and we do believe they are well-intentioned. They also tie the hands of banks in some ways. The Bank of Washington has been the depository of county funds for decades. It has been the successful bidder. It has had terms that were very favorable for the county and not so favorable for the bank. The depository agreements provided for the county to draw interest on invested funds. The funds would be invested until needed by the county to pay bills.

The Bank of Washington informed Franklin County that due to the economic times, a low interest rate environment, it is not economically feasible to serve as the depository. Two other banks informed the county that they weren’t interested in bidding to be the depository.

The county eventually will be able to negotiate a depository agreement with a bank, or several banks, but the day of expecting good interest rates has passed on until another day.

The county in the past has been able to earn considerable amounts of money in interest. The county’s 2013 budget totals $63 million in expenditures, about $17 million more than in 2012. Most of the county’s property tax money comes in the last two months of the year. Its sales tax money is received monthly in reimbursements from the state, which collects sales taxes for cities and counties. The county has three sales taxes and in total they bring in around $16 million a year.

The county has had to do some borrowing in the past and the interest it paid or didn’t have to pay was favorable in the depository agreement. That no longer is the situation on new borrowing.

We remember when the county decided to seek bids from banks. The county had used a bank in Union for convenience and perhaps political reasons. Ralph Smith was a county official in those days and he pushed for putting the depository out for bids. The county followed that recommendation. The president of the bank that had been the depository for years gave Smith a pat on the back. “Now you are getting smart,” the bank president said.

The county funds were much smaller in those days, but being the county depository boosted the deposit numbers and added to a bank’s standing.

Most businesses have had to meet the challenges of changing times. Perhaps banks have felt the impact a bit more because of the imposed government regulations and enforcement of them.

/opinion/columns