Arapahoe County Banking on Local Success

03 June 2009

By Brandon Johansson - The Aurora Sentinel

AURORA | Several local banks are each $5 million richer because of investments from Arapahoe County Treasurer Doug Milliken.

But there is a catch that comes with taking deposits of millions in taxpayer cash: Local banks have to loan the money out, and they can only lend it to local businesses.

"I am expecting job creation and business expansion to occur as a result of this program, which ultimately benefits our citizens and local businesses. In addition, there is full security to Arapahoe County, as well as a better financial return," Milliken said in a statement announcing the plan.

The plan is relatively simple: Milliken purchased certificates of deposit in local banks with the expectation that the banks will provide loans to small and medium-size businesses in Arapahoe County. Each CD purchase will be protected by the Public Deposit Protection Act and will be fully collateralized to 102 percent, as well as be secured by U.S. Treasury bonds placed in the ownership of the county, according to the statement.

"By purchasing certificates of deposit in locally owned banks, my goal is that county dollars will provide banks with the additional funds necessary to invest in small and medium-sized businesses in Arapahoe County," Milliken said.

Milliken said he didn't know of any other county treasurers in the state or around the country who have similar programs.

"There (are) none doing this at all, other than us," he said.

The plan is different from the $40 million in annual investments Milliken typically makes, usually looking for the safest and highest-yielding positions in a variety of markets.

Milliken stressed in an interview last week that because the CDs are federally protected, the investment is just as safe as other investments he makes on the county's behalf.

"It is completely safe," he said.

Milliken said that to qualify for the program, banks must be locally controlled and the businesses they loan to must be locally based - no chains that just have a location in Arapahoe County.

"They can't invest it out of state, and they can't do anything else with it. It has to go back into the economy locally," he said. "It's local, local, local."

Milliken invested $5 million in CDs from Colorado Business Bank, Citywide Bank and Guaranty Bank and Trust. Each bank will use the same criteria normally used to determine if a business is credit-worthy to obtain a loan, and each bank will be required to report on how taxpayer money is being used to support local business, according to the statement.

"For our bank, it's exciting to be involved in such a unique program that includes local businesses and local banks, along with Arapahoe County on the same team to make a difference," said Darrell Schulte, president of Colorado Business Bank.

Milliken's plan also has the backing of Aurora Chamber President Kevin Hougen.

"This investment is a commitment to our business community that even in difficult financial times, the county is looking beyond problems to causes, and through the treasurer's office is developing solutions for business success," Hougen said.

Doug Lott, the president of Citywide Banks in Aurora, said the program was a good way to help local businesses.

"It's always good when money that's collected in a particular area is reinvested in that area," he said.

Lott said that in recent months, as the economy has floundered, the bank has continued to dole out loans at the same pace it always has, though the bank is looking at perspective loans a bit closer than they did in the past.

In difficult economic times, Milliken said the program is particularly important.

"A lot of people really need capital to keep their business going and employ new people and expand," he said.

And the investment will multiply, he said, because businesses will use it to pay suppliers who will pay their staff, and so on.

"There is such high unemployment, and the unemployment leads to foreclosures and leads to misery and leads to a further decline, it's like a spiral down," he said. "We're trying to get the spiral up."