Investing provides cities and towns a method of generating additional revenue for their operations without increases in taxes or fees, but state law places limitations on how they may invest funds.
SC Code Section 6-5-10 authorizes several investment methods. The allowable methods do not include purchasing stock, and allow purchasing products like certificates of deposit and savings accounts only in some circumstances, depending on how they are collateralized. Because of the limitations imposed by law, city and town councils that invest their funds needs to verify how an investment product is structured, and whether it complies with state law. The state also provides its own investment vehicle available to local subdivisions of government: the Local Government Investment Pool, managed under the SC State Treasurer’s Office. The LGIP invests in fixed-income securities, including U.S. Treasury, U.S. agency and corporate securities, and pays interest monthly.
Numerous public entities have accounts with LGIP, including county governments, school districts and others, with 103 municipalities investing in it. The LGIP reports more than $12.1 billion invested in it, with public entities investing everything from operating cash to bond proceeds, general funds, trust funds and other monies.
Learn more about the Local Government Investment Pool. The Municipal Association’s Handbook for Municipal Officials in South Carolina has a chapter on financial administration, addressing investments and other forms of cash and fund balance management.