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Agencies Grab $1.2 Billion After State Fund Reopens

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By CATHERINE DOLINSKI, The Tampa Tribune

Published: December 7, 2007

TALLAHASSEE - Local governments withdrew $1.2 billion in less than four hours on Thursday when a state-run investment pool reopened for the first time in a week.

The State Board of Administration, which oversees the Local Government Investment Pool, reopened the $14 billion fund Thursday morning after freezing it Nov. 29. The freeze was an emergency response after worried investors withdrew $10 billion from the fund over the course of two weeks last month. Concerns over the fund's investment in risky mortgage-backed securities sparked the run.

At the close of Thursday's activity at 11 a.m., investors had withdrawn nearly $1.2 billion from the fund and made $7 million in new deposits, bringing total net withdrawals to $1.19 billion. SBA officials said they were "pleased" - particularly by the new deposits - noting that heavy withdrawals were expected given the "pent-up need" for cash.

The temporary freeze created mayhem for some investors, particularly smaller ones that rely on the fund to make payroll and other critical payments.

To prevent another run, the SBA's trustees - Gov. Charlie Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum - restricted new withdrawals Thursday to $2 million or 15 percent of an investor's stake, whichever is largest. Withdrawals exceeding that cap are subject to fees. Only the 86 percent of the fund comprising its safest and cleanest assets are subject to withdrawal; the riskier 14 percent remains frozen. Thursday's action brought the liquid portion of the fund to slightly less than $10.9 billion.

Hillsborough County was not among those investors facing immediate crisis, but was more heavily invested than any other county with $871 million in the fund. Pasco County followed close behind with about $507 million.
Hillsborough Clerk of Court Pat Frank's office withdrew $4.7 million on Thursday. While property tax collections are keeping many local governments in the black, December is a slow time for the clerk's office, which relies largely on court costs and fees. Sink will meet with officials from Frank's office today to discuss problems with the investment pool, said Dan Klein, chief deputy clerk. The clerk's office manages investments for the Hillsborough County Commission, which did not withdraw money Thursday.

Hillsborough County Public Schools withdrew $76.6 million, the maximum it could take out without triggering fees, said Stephen Hegarty, district spokesman. Of that, $40 million will shore up the payroll, he said; the rest heads to accounts payable and the district's bank account.

Pasco County leaders also decided on Thursday to withdraw $65 million. The county commission, school board and clerk of the court will not make any new deposits into the fund and instead put their savings in federally secured investments until administrators can ensure potential losses will be recovered.

"My concern is they will freeze the fund again," Pasco County Commissioner Michael Cox said.

Crist, Sink and McCollum responded optimistically at the close of the pool's activity Thursday. "Many investors have told us how useful this fund has been to their operations over its 25-year history," they said, adding, "we hope to see former participants help out by re-entering the fund."

Reporters Anthony McCartney, Julia Ferrante and Marilyn Brown contributed to this report. Reporter Catherine Dolinski can be reached at (850) 222-8382 or cdolinski @tampatrib.com.

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