CARIBOU, Maine — The city is getting $3.4 million back from the Maine State Retirement System, $3 million of which the City Council has decided to invest in 5-year certificates of deposit with Aroostook Savings and Loan.

“Approximately 25-30 years ago, the city invested some extra money into the [Maine State Retirement System], and that amount has grown to the $3.4 million in surplus funds that we have today,” City Manager Austin Bleess said.

Changes made by the Governmental Accounting Standards Board have affected the retirement system, which can no longer invest the surplus funds from municipalities, according to Bleess.

City Council members shopped around for investment opportunities before deciding where to place the money. It was a proposal from the Caribou-based Aroostook Savings and Loan that stood above the others, with bank President and CEO John Swanberg swaying the council to invest back into the city.

“Keep your money at home so it builds your community,” Swanberg said.

“Anytime you put money in the local economy it turns sevenfold,” Bleess said.

The city will pay into the Maine State Retirement System on a monthly basis to cover the employer cost share of retirements for city employees who participate in the state retirement system. The city will make these payments utilizing the interest income from the five-year CDs with Aroostook Savings and Loan.

“Only the police and fire department employees participate in the [Maine State Retirement System]. The five-year investment is at a 3 percent interest rate, which will generate an annual interest income of $90,000,” Bleess said.

The annual interest income on the $3 million investment will cover the employer share of the retirement costs on an annual basis, he said.

The city will use the remaining $400,000 it is getting back from the retirement system “be used to boost city reserves and to pay out unused sick/vacation time for current city employees today rather than when they retire,” Bleess said.

Back in the 1970s, the city of Caribou didn’t offer a retirement plan for city employees. Allowing the accumulation of unused sick/vacation time to be paid out at retirement was used as their retirement plan.

“By paying out the unused amounts today, this would allow the employees to invest in a retirement plan of their choosing and get the liability off of the city books,” Bleess said.

Bleess expects the city’s money to be deposited into Aroostook Savings and Loan sometime this July.