CLINTON -- The city could lose up to $80,000 in cemetery perpetual care funds deposited in Centennial Bank but not insured by the Federal Deposit Insurance Corporation.
City Manager Dennis Cluff said a resolution adopted by the city council in 2000 specified that funds had to be deposited into Centennial Bank. Cluff had begun the process of changing the resolution to bring to the council for a vote at the next meeting when the bank was closed by federal and state regulators March 5.
He had hoped to take a portion of funds not insured by the FDIC and put it in another bank account that would have been covered by the FDIC. Cluff said there was no indication that the bank was failing.
Cluff said he had met with bank officials and had negotiated removing a portion of funds from the CD and paying early withdrawal fees only on the amount of money that was being withdrawn, not the full amount. Cluff said the early withdrawal fees would have been about $15,000.
According to a written statement, the account began in 2000 with approximately $36,000. When Centennial Bank closed, the city had more than $330,000 in a certificate of deposit, but the FDIC insures up to only $250,000. Cluff said the city will receive a check for $250,000 from the FDIC, but he's unsure how much of the remaining $80,000 the city will be able to recover.
"This is certainly a dark moment in my administration," said Mayor Mitch Adams.
Adams said this is a hard lesson for the city to learn, and he believes the Legislature should enact a law to protect cities and other public funds.
"If my crystal ball had been functioning properly, this would have never happened," said Adams.
Cluff said it was impossible to know the bank was closing. He said unlike the closing of Barnes Bank, where 30 days' notice was given to those who had an account, there was no warning given to account holders at Centennial Bank.
Public Works Director Michael Child told council members he had a personal account at Centennial Bank and was told by the FDIC that Barnes Bank gave notice to account holders because a buyer was already lined up. He said because there was no buyer for Centennial and the bank failed, no notice was given.
Cluff said only one account per city is covered per bank, so the city will have to find multiple banks to set up new CD accounts.
The council passed a resolution and ordinance that now does not specify the financial institution where funds are to be deposited. It does designate that funds must be covered by the FDIC.
"We'll deposit into two accounts this time," said Cluff.
Cluff said it could be months before he finds out how much, if any, of the uninsured funds the city will be able to recover.
He said the bank will first liquidate assets and right now it is speculation as to how much the city will get.
"It's very unfortunate that they closed the doors before we got there," Cluff said.
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