Local counties reported decreases in investment income revenues last year and local treasurers and experts are projecting these declines will continue in 2013.

In Greene County, investment income declined 68 percent between 2007 and 2012, according to data obtained from the county treasurer. The highest decrease, 30 percent, was reported in 2009 with subsequent smaller declines reported in later years. More recently, the investment income dropped 5 percent in 2012.

“Overall investment rates have declined in the finance world, not just for us” said Greene County Treasurer, Richard “Dick” Gould.

When Gould took office in 2005, the county had been purchasing five-year investments that earned between 2.25 and 2.5 percent interest. Now, similar investments are earning under 1 percent, he said.

“A lot of that has to do with the Feds and their quantitative easing,” Gould said.

Montgomery County experienced a similar decline, about 67 percent, between 2007 and 2011. The highest decrease, 32 percent, was reported in 2011, according to county investment committee data.

Despite a combination of record low interest rates and limited investment options, Montgomery County Treasurer Carolyn Rice reported the rate of return on the county’s investment portfolio, about 2.8 percent, was above the 1.05 percent benchmark, according to a report from the county investment advisory committee.

“Counties are not really losing money,” Rice said, “they just aren’t making as much investment income as they used to.”

The Federal Reserve System’s federal fund rate, which impacts interest rates on credit cards, bank loans and investments, has been at a historic low since 2008, according to local county treasurers. And on Tuesday, the Federal Reserve announced plans to keep this rate somewhere between 0 and .25 percent, which will keep investment return rates low.

“In the short-term, the Fed’s decision to continue its policy generally helps portfolios because deviating from the policy by increasing interest rates would imply a capital loss on bonds,” said Marc Poitras, a University of Dayton associate professor of economics. “Also, the Fed’s easy money policy is probably goosing the stock market, so the policy keeps equities high and rising. In the long-term, however, the low rates make it impossible to earn any significant interest income on bonds. And if the policy is merely inducing a bubble in equities, that bubble must eventually burst.”

Unlike personal investments, a county treasurer’s first priority is safety. Return on investment is third on the list behind liquidity. Therefore, state law places limits on what treasurers can invest in with taxpayers’ money in and the length of time their money can be tied up.

“We only get to play in a small corner of the sandbox with the safest investments,” Rice said.

Treasurers are limited to investments that mature in a maxiumum of five years.

“They (state law) keep us in the shorter term because we’re going to need the money,” Rice said.

With low interest rates and state limitations, Gould said he had to look for other ways to generate investment income. The county collects about $110 million in taxes every six months, but only 3 percent goes to the general fund. The remaining money would sit in an account until it was disbursed to the designated jurisdiction or department. Now Gould invests those funds.

“This has earned us money we haven’t earned in the past,” Gould said.