CAPE MAY – At its meeting March 21, Cape May City Council approved a resolution allowing the city to invest funds in the New Jersey Asset & Rebate Management Program (ARM).
ARM works similarly to a pooled money market fund for state municipalities. It provides investment services for bond proceeds and general operating funds.
The ARM was created in 1988 as a joint investment trust under the Interlocal Service Act.
The goal of opening city funds to ARM investment is to take advantage of higher interest rates on those investments than are available through local banks.
There was a discussion prior to the vote because no one could assure the council that the funds on deposit in the ARM are fully insured by the New Jersey Governmental Unit Deposit Protection Act (GUDPA). GUDPA provides insurance protection when state municipalities have funds on deposit in excess of thresholds covered by the Federal Deposit Insurance Corporation (FDIC).
A reading of the ARM website says the fund is consistent with New Jersey regulations governing the investment of public funds. It does not mention GUDPA directly, but it states clearly that funds on deposit are not covered by the FDIC.
The city’s auditor, Leon Costello, indicated that he would clarify the insurance issue related to the ARM.
The approval of the ARM as an investment option does not automatically move funds to the ARM. The resolution did amend the city’s Cash Management Plan to provide for the ARM as a depository of public funds.
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