This may sound like more dreary financial news, but there is a silver-lined cloud amidst the storm, and remarkably so for Brisbane. As was mentioned by newly-appointed Mayor Richardson during last night's City Council meeting, the City's loss after Lehman's collapse was just $6,000. This represents a fairly small amount, for reasons explained as you read on. But first, a photo from the meeting, the first-ever City Council meeting in the new Community Meeting Room located at City Hall (more to come, along with an overview of a very celebratory night):
Lehman's main customers were big institutions, with the County of San Mateo having invested 5.7% of its funds in short-term unsecured loans. Therefore, when the investment firm collapsed in mid-September, some jurisdictions felt the financial blow harder than others. The Menlo Park City School District was one of the most impacted agencies, themselves hit with a $3.5 million loss. On the other hand, jurisdictions which invested with State-operated programs such as LAIF (Local Agency Investment Fund) were not as hard hit. Fortunately, this was the case for Brisbane, itself invested in LAIF at the time Lehman collapsed. LAIF, an investment alternative for California's local governments and special districts, pays a lower interest rate than the County, but has grown from 293 participants in 1977 to more than 2,715 participants and $21.3 billion in October of 2008.
The City of Brisbane regards safety of principle a higher priority than yield on investment, and in this occurrence, this more conservative way of thinking ended up being the better approach.
There is, however, a slight loss for all San Mateo County cities due to the 1992 state-enacted legislation (Prop. 98) that shifted partial financial responsibility for funding education to local governments (cities, counties and special districts). The state did this by instructing county auditors to shift the allocation of local property tax revenues from local government to "education revenue augmentation funds" (ERAFs), directing that specified amounts of city, county, and other local agency property taxes be deposited to these funds to support schools.
Beginning in 2002-03, the City began receiving ERAF reimbursements from the County since so many County school districts are basic aid. However, due to the County having a portion of their investment pool in Lehman Brothers, approximately $6K of our ERAF funds was lost. Though this is not a very significant amount, all cities in the County were named in news articles dealing with the lawsuit now being brought before Lehman Brothers, in hopes to recoup the $155 million loss, including $25 million of school district finances.
In this tumultuous age, there is no telling what actual finances will be recovered. We in Brisbane are just fortunate to not be as negatively affected as could have easily been the case. Whatever the outcome, we'll have to do what another oft-heard expression suggests...just "wait and see".