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from: http://www.arizonarepublic.com/business/articles/1125Fedreserve25.html

Arizona's money now cleaner thanks to cash-processing site

Dave Cruz/The Arizona Republic

Cool millions. Federal Reserve Phoenix Processing Center Director Robert Kellar Jr. stands next to $43 million in $100 bills being carried into a vault by an automated robot at the center in west Phoenix.

By Russ Wiles

The Arizona Republic

Nov. 25, 2002

Up until about a year ago, Arizona had a dirty-money problem. Literally.

Currency circulating throughout the state was unusually soiled, tattered, marked up with graffii and just plain worn out. The problem stemmed from Phoenix's ample distance from the nearest Federal Reserve cash-processing facility in Los Angeles.

"Phoenix was the only city of its size to be so far from a Federal Reserve bank or branch," said Roger Replogle, a Federal Reserve group vice president in charge of cash processing.

Arizona banks had been complaining for years because the long drive of worn-out currency to Los Angeles, via armored trucks, drove up their costs. Banks pay for such shipments, including insurance.

The lengthy drive also meant extra time that cash stayed on banks' financial books in the form of currency, which doesn't earn interest until deposited with the Fed.

To minimize such costs, Arizona banks got into the habit of holding currency well past its prime. "Currency was staying in circulation longer (in Arizona), and it was of a poor quality," Replogle said. "It also was inhibiting our ability to detect counterfeits."

So the Federal Reserve finally did something about the problem. In early 2000, the nation's central bank broke ground on a $20 million, 65,000-square-foot complex in west Phoenix, its first construction project in a new city since adding a Miami branch in 1971.

Today, the imposing year-old complex at McDowell Road and 47th Avenue serves as the only stand-alone cash-processing center in the Fed system, functioning like a giant money filter that sucks in decrepit currency and pumps out crisp, new notes.

The complex last week began offering tours on a limited basis after a lengthy post-Sept. 11 delay.

The Fed doesn't print money in Phoenix but rather imports it from a Bureau of Printing and Engraving site in Dallas. Nor does the Phoenix facility handle coins, aside from stockpiling a cache of Sacagewea dollars that banks and their customers don't seem to want. Currency deemed unfit by cash handlers gets shredded.

"It goes into a 40-yard-long dumpster that we fill up," said Robert Kellar, director of the Phoenix Processing Center.

After that, it's on to landfills. Only a small portion of the worn-out linen is recycled.

The Phoenix facility processes 1.8 million bank notes a day, returning about 60 percent back into circulation. The average life of a note varies from about 22 months for $1 bills to roughly nine years for $100 denominations. The government produces currency at a cost of 4.27 cents per note.

Besides snagging unfit bills, Fed workers and their automated machines watch out for counterfeit bills, which also get yanked.

Fifty-eight people work in the Phoenix center, roughly half culled from Arizona and the rest transfers from other Fed centers. The Phoenix unit likely will see modest employment growth down the road given that it's operating at just 12 percent of capacity. All workers undergo extensive background checks.

In addition to human laborers, the facility counts two robotic "automatic guided vehicles" whose sole job is to ferry cash between the center's warehouse-sized vault and various currency-processing rooms. The two machines have affectionately been dubbed "Bonnie" and "Clyde" by their two-legged coworkers.

As you'd expect, the facility features numerous glass walls and bubble ceiling cameras. Fed officials won't discuss security in detail.

"We have the most up-to-date technology and training, along with ample weaponry should we come under attack," Replogle said.

Nor do Fed officials tell how much money is held in the complex on a typical day.

They do admit, however, to shredding as much as $10 million in a single day through machines that can process 80,000 notes an hour - all in an effort to shore up confidence in the money supply and keep the public otherwise happy.

"You'd be surprised how many people want crisp, clean currency," Replogle said.

Reach the reporter at russ.wiles@arizonarepublic.com or (602) 444-8616.


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