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ESG Challenge: Sarah Benatar, Treasurer, Coconino County, Arizona Interview — Transcript

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0:04hi Sarah I'm so great to have you here
0:08today um thanks for having me could you
0:12please introduce yourself and share your
0:14path to becoming Arizona's youngest ever
0:17County
0:18Treasurer yeah so I'm Sarah benitar I
0:22have been serving as Koko County's
0:24Treasures since
0:262014 um prior to this role I was in ious
0:30positions with either nonprofit uh
0:33govern or government actually um so
0:36everything from unit way of Northern
0:38Arizona legal aid uh National Park
0:41Service NASA and a school district um
0:45actually in Eugene Oregon uh kind of
0:47fell into the role I the treasurer
0:50before me became the CFO for our County
0:53and actually recruited me um to go for
0:56her appointment um and so I was actually
0:58appointed uh it is an elected position
1:01so I did run in 16 2020 in the middle of
1:05campaign season right now um but Public
1:09Finance is something I'm very passionate
1:11about um and just giving back so being
1:14able to be in a position where I'm able
1:16to use my experience um my credentials
1:20in a way to benefit not just the county
1:23but all the taxing districts within the
1:25county has been just the honor of a
1:29lifetime to be able to do this and I
1:32understand the County Treasurer wears a
1:35lot of hats can you share what your key
1:37responsibilities are yes so uh we do
1:41actually do wear a lot of hats um the
1:44main goal of the treasure is we are the
1:46custodian of all public monies which
1:48means that we are responsible for the
1:50safekeeping of those monies we serve as
1:53the bank the chief investment officer
1:56and also the tax collector for every
2:00County department and that includes all
2:02the courts um every single taxing
2:05district located in the county so that
2:07means every school district every fire
2:09district water district the Community
2:11College Etc so we manage all their funds
2:15um and do all their banking needs that's
2:18everything from they've got payroll um
2:21doing Bond debt service credit lines and
2:25uh big piece of it is managing their
2:27Investment Portfolio
2:30and I think we'll we'll dig into what
2:32that means uh a bit more in this
2:34interview so the as um for the students
2:40that aren't familiar uh Coconino County
2:42is the largest county in Arizona with a
2:44seat and Flag Staff and includes um
2:47noteworthy features like the Grand
2:50Canyon can you share how your county is
2:52being affected by climate change and how
2:55that is affecting the county
2:57financially absolutely so we there's a
3:00lot of studies out there that show that
3:02Coconino County is whether it's top 10
3:04or top 15 but we're usually in the top
3:0715 of counties that are going to be most
3:09impacted by fire specifically and
3:12whenever there's a fire that leads to
3:15flooding and so a great example is the
3:17summer um at the bottom of the Grand
3:19Canyon have a Supai that's actually in
3:21our County um all the flooding that
3:23happen down at the Grand Canyon again
3:26impacts us we I have so many fires um
3:31usually every year uh gratefully this
3:34was a low Fire season I hate to say that
3:38um but you know usually there are
3:40several massive um high level incident
3:44top priority across the country fires um
3:47in our County unfortunately and so what
3:50that has resulted in is
3:53is financially impacts the county in
3:56various different ways so first of all
3:58it does impact your bond rating um and
4:01that makes sense because when we're
4:02talking about taking out debt we're
4:05talking about leveraging property tax
4:07revenues to pay off at debt if you are
4:10in a high risk area for fire damage or
4:14flooding what results in happening is
4:17property values go down potentially or
4:20in some cases unfortunately if there is
4:22a fire that does burn down houses
4:25floodings that take houses those
4:26properties are actually off of your tax
4:28Ro thus creating a situation where
4:32paying bat Debt Service can become a
4:34little more complex so that is one area
4:36just in debt service and bond ratings
4:38that's it's impacting the other part of
4:41it too is just being able to respond to
4:44these events so yes eventually there is
4:47going to be some State funding coming in
4:49some federal funding coming in but the
4:51truth of the matter is when there is a
4:53major uh climate emergency uh we have to
4:57respond right away and that means you
4:59have to have the cash to respond right
5:02away that means you have to have the
5:03cash to pay for the overtime for your
5:05firefighters that means we have to have
5:07the cash to pay for immediate cleanup um
5:10immediate mitigation to prevent for
5:13example if you have a fire in may you
5:15have to then do all the cleanup and
5:17start doing mitigation work so then
5:19hopefully when monsoon season comes in
5:21August we are not seeing huge flooding
5:24occurring in those areas as well and so
5:28all that costs money do we have the cash
5:30to pay those expenses and so that is
5:32something that we've adopted into our
5:34policies um of just mitigating not just
5:38for in terms of cash needs of our
5:41districts in the county uh not just for
5:45inflation but quite honestly responding
5:47to climate emergencies and climate
5:49change and so that is something as well
5:52and of course you think about just the
5:53human capital and and property damage um
5:57whether it's to government buildings to
5:59whole communities to an individual's
6:02property to their home to schools all
6:05that you know has actual value to it um
6:10and to personal residences if they lose
6:12their home you've now displaced someone
6:14in your community and we need to provide
6:16them assistance and support to get them
6:18in a safe secure place and then we're
6:21also starting to see insurance premiums
6:23going up um cost of living going up so
6:27the actual Financial toll on County on
6:32our county is significant and then even
6:35working with our taxing districts even
6:37down to your school district is
6:39significant because if they are for
6:41example fire happened we and we did have
6:44this happen recently fire happened on a
6:46mountain City uh a school within City
6:50Limits um is now in a flood zone and so
6:53they actually were in the process of um
6:56doing rebuilding the school had to kind
6:58of change some around take that into
7:00consideration but in the meantime you're
7:02talking about you know sandbags and
7:05Jersey barriers and all that stuff to
7:08prevent flooding into an elementary
7:11school um and that's kind of the toll
7:14that it is really taking on our
7:17communities and our governments and our
7:20County so it shows up in a lot of
7:23different ways that's a that's a long
7:24list it does it does it's a long list
7:27there was that one pretty much you think
7:29about
7:30it it touches everything from cash flow
7:33to budgeting to Staffing to responses in
7:39terms of just physical damage it's and
7:42then the human toll it it's a lot I
7:44imagine with the with the cash flow that
7:47reduces your ability to generate Returns
7:49on the capital that you have and I
7:51imagine that you don't necessarily get
7:55you know interest from the state and
7:57federal sources money for compensating
8:01you for what you have spent right so how
8:03how does that show up in terms of the
8:05additional kind of costs of
8:08capital that's a great point right like
8:11we talk about so I have a cash flow
8:14model that really looks not just that
8:16historical data but truly historical
8:17data of the years that we have seen Peak
8:20climate um events in our County and that
8:25really helps me determine how much cash
8:27we're going to need in the up having
8:29fiscal year um and we have it multi-year
8:33but really we are truly adapting it real
8:35time because this just keeps happening
8:38different kinds of responses and so
8:41what's that mean well you think about
8:43your bank your bank is not having all
8:45your cash just sitting there for you to
8:47come collect the dollars it's being
8:49invested and so for us we're in the same
8:51boat that money is being invested so and
8:54to earn at least a little bit of an
8:56income it's you know how are we timing
8:59whether it's it's agency or corporate
9:00bond purchases or treasury bills you
9:02know in the summer months keeping more
9:05money in for example money market
9:06accounts um so that way you know the
9:08money is at least we can pull it next
9:10day and it's earning some interest
9:12versus just sitting in a checking
9:14account so it does take a lot of time to
9:17determine the best investment um
9:20decisions and then like you said you
9:22know we're expending those monies it's
9:24not like the feds are giving or the
9:26state is giving us the interest lost
9:28because we had to put the money up front
9:31um and often times too when we talk
9:33about federal and state revenues there's
9:36sometimes it comes where you can't
9:38actually put that in any interest
9:40earning accounts so that's the other
9:43thing is maybe we'll get the revenues
9:45but we can't go back and can't go
9:48forward even and collect um interest on
9:50that so it is reimbursement but there
9:52are also screams that tied and uh to
9:55those types of revenues as well so it it
9:58is essentially ins shorted making it
10:00where our interest income is not where
10:02it should be because we are not able to
10:05invest strategically in a way that of
10:09course looks more at yield um but when
10:12it comes to taxpayer dollars we actually
10:15prioritize Safety First and liquidity
10:18then yield so we're making sure taxpayer
10:20money is safe we're making sure that
10:22that we have enough cash to meet the
10:24liquidity Dem uh demands of the district
10:27and then we are looking at yield
10:30so you just described ways that your
10:33your office was reacting to those
10:35financial risks are there any other um
10:38mitigation factors that you have you
10:41have adopted um specifically around
10:43climate
10:44risks really it's yeah so the other
10:48piece of it is in our investment policy
10:51we actually do consider climate risk as
10:54a risk factor when doing safety and when
10:57we discuss safety of public dollars that
10:59is is actually really important um and
11:01so we may be one of the first um if not
11:05the first county level um I do know some
11:09State treasurers have it but when you
11:11start looking into local government um
11:13that may not be on there but for us it
11:14was really important um and
11:16understanding that even when we are
11:18making decisions in terms of corporate
11:20bonds we're purchasing um we need to do
11:23our due diligence because we understand
11:25firsthand if you're in a flood zone what
11:27that means right if you are not
11:29addressing climate change as an
11:31organization we understand what that
11:33means overall for increased costs and
11:36expenses and also the toll in human
11:38capital and so that for us is something
11:40that we do include um in our investment
11:43policy as a safety um as a factor that
11:47we look at when we discuss safety of
11:49public funds so that is the other piece
11:51of it um and it does Ripple into you
11:54know everything that we do um and then
11:57the other piece of it too is we are uh
11:59try and be more proactive um in terms of
12:02partnering with like the flood control
12:03district and public works and our fire
12:07districts and really trying to provide
12:09them with support and resources um to
12:13you know try and and just help our
12:16constituents whether it's discussing
12:18insurance issues or trying to connect
12:21them with additional funding to do more
12:24mitigation efforts um to prevent fires
12:27from occurring uh Etc and so that's a
12:31big piece of it I mean even something as
12:32small as where flood control district is
12:35doing mitigation work they need to
12:37connect with lenders we just talk to
12:40lenders all the time in our office
12:42because of the property tax thing so we
12:44are making those bridges and connecting
12:46so that's another piece of the layer too
12:49is we are truly being very proactive and
12:53understanding that climate risk is
12:55something we need to be taking on in
12:57terms of every aspect of our office um
13:00and so that means customer service as
13:04well and the point you made about ESG
13:07considerations in your Investment
13:09Portfolio is a perfect lead in to the
13:10next question um the anti-g trend in
13:14some regions is affecting which banks
13:15are allowed to do business in your
13:17county so can you talk about the
13:19proposed anti-g legislation in Arizona
13:22and how that would affect your
13:24county yes so um that has been I got I
13:29want to say three years now it's been a
13:32couple years um we have actually seen uh
13:35several anti-g legislation um and some
13:38are a little more specific like firearm
13:42discrimination anti- Dei others are more
13:45broad like
13:47ESG um trying to put definitions of
13:50pecuniary versus non-pecuniary and
13:52saying essentially um defining that as
13:55we should be chasing yield um and
13:57essentially ignoring risk um Etc here in
13:59Arizona and we have been very fortunate
14:01we have actually been able to keep them
14:03from being um getting all the way
14:06through into law we they keep getting
14:08super close I I do want to be very
14:10transparent that it has been a very
14:13difficult battle um and so you know it
14:17the biggest concern really
14:20as these types of legislation we've seen
14:24them come across in other states and the
14:28cost for local government has increased
14:30significantly whether it is um reducing
14:34what banks we can do business with
14:36whether it is increasing cost to even
14:39issue debt because the list of even
14:41Financial Underwriters and institutions
14:43who can participate in uh you know the
14:46whole part of bond issuance um has
14:50significantly reduced um and even it
14:54impacts our Brokers and our money
14:56managers and so we look at for example
14:58banking so concerning Arizona was
14:59banking just given the complexities of
15:02how we do business um there are not that
15:05many banks that respond to bids I I
15:08think there's maybe five total in
15:10Arizona um and so you know if one of us
15:14gets three bids that's a huge deal if we
15:16get two it's a huge deal right um you
15:19know we are actually our count is about
15:20to go out to bid next week actually um
15:24and so you know we we think about
15:27Coconino usually gets two to three bids
15:29which actually is a lot more than and a
15:31lot of folks think this might be a rural
15:33issue well it's not you look at a like a
15:36county like Maricopa where Phoenix is at
15:39they received one bid and so This truly
15:41is not just a rural issue this is any
15:45size County in Arizona and quite
15:48honestly in any state risk of potential
15:51that you are now going from five
15:53potential Banks to one and when we see
15:56that happens we know that removes the
15:58free market and costs go up and when
16:01costs go up in government it is the
16:03taxpayers who unfortunately are footing
16:05the bill so when we are hearing anti-g
16:10it's going to limit who we can do
16:11business with because some banks may not
16:13be able to
16:14certify that means that at the end of
16:17the day our taxpayers are picking up the
16:19bill um which is not something any of us
16:21want whether regardless of what side of
16:23the aisle you're at and so Arizona I
16:26think has been unique that we have had a
16:28by
16:30partisan
16:31um uh effort to oppose the
16:36anti-g um legislation that's been
16:38introduced here so you have repu uh
16:41Republican treasures and Democrat
16:42Treasures um and you know Democrat
16:45Treasures we are sign like in the
16:47minority Republican Treasures do have a
16:49super majority across the state um but
16:52we have opposed this legislation because
16:53it is anti-free Market has been the
16:55strongest argument and also just local
16:58control you know we it should be up to
17:00the our population our taxpayers our
17:04constituents voted for your treasure to
17:06make these decisions and so and here is
17:09my little one I'm sick
17:13um one ready for her
17:15Cameo okay um she's ready for her Cameo
17:19um but we have had um you know
17:22situations where let me pause this so
17:25it's not loud um where
17:29sorry I lost my train of thought there
17:31so sorry uh bipartisan engagement on yes
17:36thank you so um just oh the other
17:38argument with the bipartisan thing is
17:40the anti-free market increase of taxes
17:43but also local control you know we are
17:45voted as treasure to make these
17:48decisions um pretty much taking that
17:50right away from us is actually stripping
17:52our voters of you know their power and
17:56what they were you know what they who
17:59they chose to make this these decisions
18:01and so that's another piece of it has
18:04just been this should be a local
18:05decision in terms of what I'm including
18:07in my investment policy um what I want
18:10to include in my bank RFP which for us
18:12we actually do include um a whole
18:15section on corporate responsibility and
18:18part of that does discuss what they are
18:20doing around climate risk and climate
18:22change but that should be a decision
18:24that we make at a local level not the
18:27state deciding for us
18:30so we we're in this competition
18:33interested in the role of business in in
18:36shaping these uh influencing this
18:39landscape what role are businesses and
18:42especially financial institutions
18:44playing in the debates around ESG and
18:46how would you want business to engage on
18:49this
18:50topic so it's actually um been
18:53interesting because here in Arizona
18:55which I think is a little different than
18:57what you may have seen in other States
18:59we actually are partnering with the
19:01Arizona Chamber of Commerce we're
19:03partnering with the Arizona Bankers
19:06Association together to oppose these
19:08kinds of legislation which I think is
19:11very unique um and they're they
19:14understand and and you know everyone has
19:16different reasons but one thing that we
19:18all agree on is again anti-free Market
19:21this is really and then an overreaching
19:24um in terms of telling a corporation
19:26what they can and cannot do but policy
19:28they can and cannot adapt and so what we
19:31have done is really been able to work
19:33with them on you know okay we're all
19:36opposed to this um you know come
19:39together um and and show a strong voice
19:42of this is why this is bad um and again
19:45it's organizations that you may not have
19:47thought would come together I I mean
19:48there was a bill where I was like I
19:50don't think I've ever seen the ACLU the
19:52Chamber of Commerce the bankers
19:54Association and your County treasures
19:56all working together to oppose
19:59right um but that's powerful and I told
20:02you this is not a partisan issue this
20:04should not be a political issue it's
20:06just bad um it's just bad policy for
20:10various reasons and so I think on a
20:13across um across the um country you do
20:18need to have these types of Corporations
20:21at the table and quite honestly speaking
20:24up and speaking out and seeing how this
20:25will impact them because the truth is if
20:28any of these pass and from their
20:31perspective some of them will just walk
20:33away they'll they'll walk away from
20:36government and that is not a good thing
20:40it is not a good thing for our taxpayers
20:42and so you know some companies will
20:45leave um and none of us want that
20:48because we do know the Ripple effects it
20:49will have um and so you know them
20:53understanding and wanting to be a
20:56supportive player in terms of um you
20:59know supporting local governments I
21:01think has been really phenomenal and
21:04quite honestly we need to see more of to
21:06be very very honest with you I would
21:09like to see the national Chambers of
21:10Commerce right taking a similar voice
21:13that you're seeing in in States like
21:16Arizona great um a great call to action
21:20are there any other final points you
21:22would like to add or a message you would
21:24like to leave us
21:26with a good one you know I do want to
21:29say you are starting to see um other
21:32states you know really speaking out um I
21:35believe it
21:36was Wyoming for example um has started
21:40to come out um and and take a more
21:42public stance against anti-g actually um
21:46I introduced a resolution that passed
21:47unanimously this summer at the National
21:49Association of counties so it is geared
21:53again you know moving away from the
21:54buzzwords and talking about what this is
21:56actually doing it is a a uh free uh
22:00preserve like the free market um and
22:03preserve local control um resolution so
22:06anything on a federal level that would
22:08potentially strip us of local control
22:11and and quite honestly reduce who we can
22:13do business with um the National
22:16Association counties then can take a
22:18stance on a POS which was needed for
22:20some federal um bills that we're
22:22starting to see so we are starting to
22:25really see that this is a conversation
22:27and moving away away from the buzzword
22:29ESG and talking about look if if you Pro
22:33this goes through this is truly the
22:35impact that it's going to happen and
22:37quite honestly discussing the the the
22:40business implications and the true
22:43Financial cost of it um that has been
22:46very meaningful and and and really has
22:49gotten um I think people to take a step
22:52back and so you know it's a work that
22:54I'll continue to be working on and
22:56leading on um and and hopefully we won't
23:00be seeing more uh but unfortunately I
23:03don't think this is going away we are
23:04seeing uh more increase nationally and
23:07some national groups that are are are
23:09really doing that and you know I just
23:12again there is value to it um you know
23:15we use it in the work that we do but I
23:18also you know understand that I'm not
23:21here to tell another colleague you
23:22should put this in there my job is look
23:25if we allow it where they strip us the
23:27ability to do so so it isn't just
23:29hurting my policies it's actually
23:32hurting who we can do business with and
23:35at the end of the day they're not going
23:37to break the law a bank is not going to
23:39break the law to do business with me or
23:41any of us which means then what are we
23:44going to do and that's where we're
23:46seeing costs go up cost should not go up
23:49because I'm paying more money because
23:52you've now taken aware ability to to be
23:55competitive in this industry
23:58but I think uh you've given us already a
24:01path forward thank you so much Sarah for
24:04for taking the time to share your
24:06experience and your insights thank you
24:09and thank you for the time and go Blue

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