Prompted by reporting by another local news outlet, Abbot Hall’s cash management practices and interest yields have become the talk of the town.
In a series of interviews with the Current, most town officials attributed the town’s failure within the past year to seize higher interest rates than those offered by National Grand Bank to turnover in the Marblehead Finance Department.
The lack of a treasurer essentially made moving money impossible for months because state law vests the town treasurer with exclusive authority over where to deposit taxpayers’ money, officials told the Current.
After the Select Board hired Amesbury resident Thatcher Kezer as town administrator in the middle of 2022, he made filling the treasurer and finance director positions a top priority. Yet the positions remained vacant for months until the Select Board hired native Rachel Blaisdell in early December as town treasurer and Gloucester resident Aleesha Nunley-Benjamin as finance director in early February.
But the turnover is just one of several long-standing issues, Select Board member Erin Noonan said.
“The absence of a town treasurer and finance director certainly precludes the ability to move municipal funds among banks,” Select Board member Erin Noonan told the Marblehead Current. “However, the town’s finance department has been beleaguered for years with many challenges. Chronic underfunding has resulted in an understaffed department with obsolete technology and the inability to reconcile cash, accounts receivables, payroll, etc., in a timely manner.”
She added, “This has also prevented the town from modernizing certain operations to meet 21st-century governing needs.”
The state mandate
State law creates a firewall between the Select Board and cash-management functions.
“[State legislators] have specifically mandated that this role be independent of select boards,” Marblehead Select Board Chair Moses Grader told the Marblehead Current. “You don’t want political influence involved. You want to have one person accountable for these decisions.”
The closest the Select Board gets to the town accounts is its authority to appoint a town treasurer.
“They don’t have the right to say anything about the management of accounts,” Blaisdell told the Current.
Jim Nye has been a member of the Select Board for 18 years and president of the National Grand Bank, which has been offering the town the lowest interest rates of any of the financial institutions with which the town has done business, which town officials have attributed to the fact that the town’s account at National Grand is a transactional rather than an investment one, with money flowing in and out constantly.
Asked whether his dual roles create a conflict of interest, Nye points to the state law.
“I didn’t tell John McGinn what to do when he was the treasurer and finance director,” Nye told the Current. “I didn’t tell Steve Poulis what to do, and I won’t tell Rachel [Blaisdell] what to do. None of the Select Board does.”
Last year, the Massachusetts Ethics Commission completed an investigation into “a concern about the town having numerous accounts at the bank where you are president,” explained Brian McWilliams, a special investigator in the Ethics Commission’s Enforcement Division, in a determination letter issued in April.
McWilliams concluded that there was no conflict of interest between Nye’s public service and bank leadership.
“Relying on what you told us and on any necessary follow-up investigation, we have determined that no further action is required on our part,” McWilliams wrote.
However, the Ethics Commission also encourages public officials to consider taking action even when there is merely an appearance of a conflict of interest. Actions officials might consider include everything from completing a disclosure statement to recusal to stepping down altogether.
Asked whether he thought he should recuse himself when matters like appointing the finance director and the town treasurer come before the Select Board, Nye said he did not. He pointed out those votes were unanimous. He also said the town is small, and there are bound to be conflicts.
Higher interest rates
In a series of recent articles, the Marblehead Beacon has pointed out that the town could benefit from moving its money out of National Grand Bank institutions with higher interest rates. In particular, it has highlighted the Massachusetts Municipal Depository Trust, which holds about $34 billion on behalf of cities, towns and other public entities. It offers public entities investment accounts with minimal transactional services.
In its financial analysis, the Marblehead Beacon calculated that Marblehead could have reaped $300,000 more in interest had the town’s money been deposited in an MMDT account instead of National Grand.
“Their math is correct,” Kezer acknowledged. “But the underlying argument is wrong.”
Accounts at MMDT and the NGB accounts have been characterized as identical, but it is like comparing “apples to oranges,” Kezer said.
A more apt description would be that the account at the National Grand Bank is like the town’s checking account, which the town uses to pay its bills, payroll and vendors. In this account, the balance is constantly fluctuating as vendors’ invoices are paid, payroll checks are issued, and deposits come in from residents’ property and excise tax payments. The amount of the town’s money in the National Grand Bank oscillates between $15 million and $25 million.
What MMDT offers is more of an investment account that traditionally provides higher rates because money is not leaving it at the pace of a checking account, according to Kezer.
According to Kezer and Blaisdell, MMDT does not offer the full suite of financial services that the town is availing itself of at National Grand Bank, which a representative of MMDT confirmed.
“MMDT does not offer accounts payable and payroll accounts in the sense that MMDT will not cash checks or send direct deposit files to employees,” Wayne Perry, the senior unit manager for MMDT participant services, wrote in an email. “We can do occasional vendor payments via wire, but it does not offer the full accounts payable and payroll functions.”
Marblehead does have some money — $13.1 million — in an MMDT account earning interest at a rate of 4.77%.
The Beacon juxtaposed the National Grand Bank with commercial banks offering higher interest rates, but Blaisdell and Kezer said those interest rates take into account other benefits that National Grand Bank provides the town, like no transactional fees. Unlike most transactional accounts, National Grand pays interest on deposits. It also provides a level of service that the town has come to value over a long period of time, Grader said.
The National Grand Bank is a 192-year-old institution, and Blaisdell said the town of Marblehead has had accounts with the National Grand Bank since the 19th century. Its accounts are among the Pleasant Street bank’s oldest.
Kezer and Grader said the town maintains a positive outlook. With Nunley-Benjamin expected to start work this week, the Finance Department will be fully staffed.
“In her interview, she demonstrated a strong strategic sense and a ready understanding of the elements needed to strengthen our Finance Department,” Grader, a former chair of the Finance Committee, told the Current after the Select Board hired Nunley-Benjamin. “We seek to build our Finance Department into a stronger operating organization capable of more efficiently meeting the Government Finance Officers Association’s standards, providing Marblehead taxpayers more seamless visibility into the town’s finances and improving the delivery of its vital central services.”
The public attention to the interest the town has been yielding on its accounts comes as Marblehead marches toward a Town Meeting during which officials are expected to propose a general override of Proposition 2 1/2 to address a structural deficit, though the exact amount has yet to be determined.
The interest rate discussion is “distracting me from addressing the structural deficit and building a budget that sets Marblehead up for success,” Kezer said.
(Editor’s note: This story was edited to clarify the source of the statement in the third paragraph that “the lack of a treasurer essentially made moving money impossible.” As indicated by the quote that follows from Select Board member Erin Noonan, it is town officials who are making that claim.)
I wouldn’t call the Beacon (blog) a “news outlet,” but appreciate the nuance in this article. I have a much better understanding of town finances having read it. The interest rate issue should not distract from the real and complex issue of the structural deficit.