Each year, Florida municipalities receive significant cash inflows during property tax season, typically between November and March, driven in part by ad valorem collections and early payment discounts. These inflows often represent a substantial share of annual revenue and create temporary cash surpluses that, when managed strategically, can generate additional interest income while preserving liquidity for essential services such as infrastructure, public safety, and operations.

Effective liquidity management can help turn these inflows into opportunities by prioritizing safety, liquidity, and returns in accordance with Florida Statute 218.415. During peak cash season, when cash balances rise faster than expenditures, municipalities can prudently invest in 30- to 360-day windows rather than leaving funds idle in low-yield operating accounts.

Local Government Investment Pools (LGIPs) provide potentially secure and flexible investment options. LGIPs managed with stable net asset values (NAV) are designed to support daily liquidity while generating interest income. These pools typically seek to maintain a constant $1.00 net asset value, offering same-day liquidity and a conservative investment profile suitable for operating funds.

Floating NAV LGIPs can serve as an alternative to money market-style pools, with next-day liquidity and a modestly longer duration profile. These pools allow net asset value to fluctuate slightly based on market conditions, aiming to provide incremental yield while maintaining strong capital preservation and liquidity characteristics. These pools are often appropriate for reserve funds or cash not needed in the near term.

Fixed maturity LGIPs, sometimes referred to as choice or term products, allow participants to invest funds for a defined period, at a known yield. These pools are designed to match liabilities, or specific cash flow needs and minimize market volatility by holding securities to maturity. They are generally well suited for municipalities with predictable timing of future expenditures or reinvestment needs.

These LGIP structures invest in high-quality, short-term fixed-income securities and operate under Florida’s statutory guidelines for diversification, safety, liquidity, and yield.

Laddering strategies complement LGIPs by staggering maturities in instruments like Treasuries or certificates of deposits (CDs). For instance, a $5 million inflow, divided into portions maturing over 4-12 months, will help reduce interest rate risk and align with tax cycles for reinvestment.

Registered investment advisors add value to this process through cash flow forecasting, pool selection, maturity structuring, and compliance oversight. By combining LGIPs with individually purchased securities, municipalities can pursue incremental yield improvements while reducing administrative burden and operational complexity.

A disciplined liquidity strategy that incorporates stable NAV LGIPs, floating NAV LGIPs, fixed maturity LGIPs, laddered securities, and professional advisory support can transform seasonal property tax inflows into a recurring fiscal advantage, helping to strengthen both near-term operations and long-term financial stability.

About Deep Blue Investment Advisors

At Deep Blue Investment Advisors, we specialize in helping government finance officers expand their horizons by diving into fixed-income management solutions with tangible results. Our team of experienced investment management professionals can help tailor a portfolio to your investment needs while providing regular reporting, portfolio compliance, and performance meetings. You can always count on us to prioritize our relationships, provide guidance, and act in your best interest.

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*This article is for informational and educational purposes only and does not constitute investment advice, an offer, or a solicitation to buy or sell any securities or to adopt any investment strategy. Deep Blue Investment Advisors is an investment advisor registered with the U.S. Securities and Exchange Commission. Such registration does not imply a certain level of skill or training. The views expressed are those of the author as of the date of publication and are subject to change without notice. While information contained herein is believed to be reliable, Deep Blue Investment Advisors makes no representations or warranties as to the accuracy, completeness, or timeliness of such information. Past performance is not indicative of future results. Investment decisions should be made based on the entity’s investment policy, statutory requirements, risk parameters, and overall financial circumstances.