By Luke Britt/Editor
Origin Bank has agreed to pay a fixed interest rate of 5.13 percent on the parish’s $9.7 million Landfill Assurance Trust Fund and the $8.2 million Operating Fund for the next 18 months, which should result in interest earnings that more than make up for the minimal interest the accounts earned over the past several years, Union Parish Police Jury President Brenda Abercrombie announced Wednesday.
The $17.9 million held in the two Origin Bank accounts represents the lion’s share of parish funds on deposit and at 5.13 percent over 18 months should yield close to $1 million in interest. Both accounts earned interest of only .15 percent (15 hundredths of a percent) for several years and, as a result, generated no more than a few thousand dollars of interest per year.
The Landfill Assurance Trust Fund is a state mandated account intended to ensure that funds are available to maintain the landfill for up to 30 years after it closes. The Operating Fund is the main account used for most Police Jury business.
After the interest rate issue was pointed out by a citizen during a June public meeting, the Police Jury asked area banks to submit proposals that would improve the accounts’ interest earnings. Origin Bank and Louisiana National Bank were the only two banks to submit proposals.
“This is a better deal than we thought we could get,” Abercrombie said. “I think it’s better than anyone was expecting, and it shows Origin Bank’s commitment to do right by the people of Union Parish.”
Abercrombie also praised LNB for “making the process competitive.”
Origin Bank CEO Drake Mills said, “Origin has a long history of being community builders and our commitment to Union Parish is strong. We are proud of the partnership with the Union Parish Police Jury and look forward to continuing that partnership for decades to come.”
After 18 months, the parish and the bank will re-negotiate interest rates, Abercrombie said.
The Landfill Assurance Trust Fund leaped onto everyone’s radar when, during the Police Jury’s June meeting, retired Farmerville Police Chief George Cothran asked the jury why the multi-million-dollar fund only earned $4,000 in interest during the previous year. A few weeks later it was revealed that the parish’s Operating fund was earning .15 percent interest, as well.
Origin Bank has asserted that the low interest rates were appropriate for much of the past 15 years because interest rates were depressed, first by a recession and then by a worldwide pandemic. The Federal Reserve System began rapidly raising rates during the Spring of last year from near zero to the current rate of 5.5 percent, one of the most rapid rate increase cycles in the 110-year history of the Federal Reserve System.
Mills conceded that the bank should have adjusted interest rates on parish accounts upward at some point after that rate cycle began but rejected suggestions from the public that Origin Bank was “taking advantage” of Union Parish taxpayers.
“There was never, no matter what was printed, an effort to take advantage of anyone. There was never an effort to do things that weren’t good for this community. That’s where I stand,” Mills said.
“Before Tuesday’s meeting I was leaning toward LNB’s proposal,” Abercrombie said. “I decided the only option for me was to support whichever proposal offered the best interest rate, and until I saw this offer, LNB appeared to have the better offer. Then, Origin made this offer and that changed everything.”
Abercrombie said she received Origin’s offer shortly before Tuesday’s Police Jury meeting in which she said she believed the vote was going to go Origin’s way even before the late offer came in. The jury voted in that meeting 9-0 to accept the revised Origin Bank offer.
According to Abercrombie, shortly after the issue came to light, Origin Bank increased the rate on both accounts to 4.88 percent and guaranteed that rate would stand until the end of the year. During a meeting of the Police Jury’s finance committee on Monday, Mills told the jury the 4.88 percent rate would stand for both accounts indefinitely, “to give everyone the opportunity to recognize that we want to do the right thing.”
At that same meeting, LNB Chief Financial Officer Brandon Norris submitted a proposal that set the interest rate earned on the Landfill Assurance Fund at a quarter percent below the Fed Funds rate. With the Fed rate currently at 5.5 percent, the landfill fund would earn interest at 5.25 percent under LNB’s proposal, slightly less than half a percent more than Origin Bank’s initial offer.
LNB also offered to pay a rate of 5 percent on the parish’s Operating Fund until the end of the year, which, again, was a higher rate than the 4.88 percent offered by Origin. However, LNB’s offer would have adjusted the Operating Fund interest rate down to 2.02 percent at the end of the year. That account is very active, meaning there are numerous transactions every month, and such accounts typically earn less interest than accounts like the landfill fund for which in most years the only activity is a once-a-year deposit.
When Origin Bank submitted its last-minute proposal on Tuesday that offered to fix the interest rate on both accounts at 5.13 percent for 18 months, the bank’s offer became significantly more lucrative for the parish than what LNB had offered.
“A good, fixed rate for 18 months, that’s what did it for me,” Juror Dewayne Ramsey said.
Ramsey, and every juror The Gazette spoke with, said they felt it was inappropriate to punish Origin Bank for years of minimal interest payments by moving the account when, ultimately, it is the jury’s responsibility to ensure the parish gets a good deal on the public funds it manages.
“This was our mistake, not the bank. If you want to chastise somebody, it’s the nine of us that are responsible,” Juror Ben Bridges said before Tuesday’s vote.