Municipal Investments

Your Jan. 4 editorial on municipal investments was right on the money: As tempting as it is in these recessionary times for cash-strapped local agencies to go after high yields, the dangers are far too great. And sadly, it’s usually the taxpayers who end up taking the beating in these ill-advised investment ventures.

But lest local agencies draw from this the lesson that they are better off putting their cash under the proverbial mattress, they should first consider the state’s Local Agency Investment Fund (LAIF). This pooled investment fund, which I chair as state treasurer, offers a stable, secure and prudent place for cities, counties, school districts and other local agencies to invest their money. By putting safety and liquidity over yield, the fund has successfully weathered other economic storms--and still managed to command impressive returns for local agencies.

While there may always be some local agencies that put yield over safety, most understand the need to protect taxpayers by following a prudent investment strategy. That is one reason why our fund has proved so successful: In the year since I took office, a hundred new accounts have been added to LAIF, boosting the fund’s size by $2 billion to more than $8 billion.

KATHLEEN BROWN, State Treasurer, Sacramento