Bank change predicted to pay off for Tyrone
Borough Council expects to save $115,000 a year
TYRONE — In what would normally be little more than a housekeeping matter, Borough Council this week ordered the consolidation of borough accounts in a single bank.
The payoff this time, however, is significant: $115,000 a year, according to Borough Manager Ardean Latchford.
Previously, the borough maintained all operating funds with First National Bank, while keeping general and water reserves with Reliance Bank, according to Latchford.
Virtually all borough funds now will go to Reliance, based on a quote the borough sought in tandem with a move to new accounting software.
First National was paying 0.7 interest on most of the borough money it held and between 0.42 percent and 0.55 percent on other small accounts, Latchford said.
But First National paid no interest on $2.75 million “in lieu of charging us fees,” Latchford said.
Reliance will pay 1.61 percent on all money transferred, “without charging any fees or requiring us to forego interest,” Latchford said.
Moreover, Reliance will tie its interest payments to the Pennsylvania Local Government Investment Trust, which may benefit the borough, because market and interest rates are predicted to rise, Latchford said.
“Once PLGIT catches up with the 1.61 percent Reliance is offering, our interest rates will increase with the market,” he said.
After being told of Reliance’s offer, First National responded with a proposal to pay slightly higher interest than Reliance, but the bank would have required the borough to maintain $280,000 in reserve at no interest, along with a “structure that (would) require an extreme amount of oversight and time,” Latchford said.
The proposed First National interest rate would be tied to a money market account, with all bills and payroll to be transferred in and out of that, with a limit of six transfers to other accounts, Latchford said.
At the suggestion of Finance Director Shannon Wilson, the borough will retain a small amount in a First National account to maintain employee benefits and to keep the borough’s relationship with that bank open.
The changeover will occur over several months, as the software comes into play, officials said.
Mirror Staff Writer William Kibler is at 949-7038.