"What I am earning is the going market rate, and I just don't see how they can take our investments and squeeze that much more earnings out of them. Besides, using a private firm would greatly reduce liquidity. It would be much more difficult to get at those funds in case we needed them," said Eckersley, who places much of the portfolio in commercial paper--bonds on private corporations--that can be invested at a 5 1/2 to 6 1/2% rate over a 24-hour span.
But the investment bankers say Eckersley and her staff are unable to take advantage of international markets like those in London and Japan that trade from 3:30 p.m. to 6 a.m. Pacific time.
"We could offer the complete tracking of interest rate markets 24 hours a day because this is all we do here," said Richard Rouche, senior vice president with Prudential-Bache.
Private investors say they could increase El Segundo's interest income by 5% or more by trading on the international market.
Decline to State Earnings
Representatives of each of the firms declined to say what they had earned on similar portfolios over the past year or over the past five years. However, Prudential Bache and Pacific Century both said they had earned 13% for cities with smaller portfolios.
The city will likely hire one of the competing firms by December, Jones said.
Under the proposed agreement, city officials will review the investment earnings every three months. If the firm is successful in increasing the city's investment earnings, the city would relinquish its control over the rest of the investment portfolio over a one-to-two-year period.