Asaf Elia-Shalev
Joseph Abruzzo can’t seem to get enough Israel bonds.
The government official representing Palm Beach County, Florida, has invested $700 million of local taxpayer money in bonds that are helping the Israeli government finance its war against Hamas since Oct. 7.
At 15% of the county’s investment portfolio, Abruzzo has reached the maximum he is legally allowed to buy, per county policy. The total represents about a quarter of all Israel bonds sold since the war began, making Palm Beach County, which has a large Jewish population, the single biggest holder of Israel bonds in the world.
Abruzzo, who is not Jewish but has Jewish relatives, says his motivations are not ideological and that he’s hewing to state law and county policy requiring that he focus on safeguarding public money. But he also said the investment strategy happens to align with his support for Israel.
“I am proud to stand with what I consider our greatest ally in the entire world — Israel,” Abruzzo said in an interview. “With that said, these are incredibly safe investments. They’re making an incredible return for county taxpayers and it made perfect sense for us from a fiduciary standpoint.”
Palm Beach County is unique in how much of its financial portfolio is invested in Israel bonds, but Abruzzo’s words echo the reasoning of the growing number of state and local governments across the United States that have invested in the bonds in recent months.
The Israel Bonds organization, an arm of the Israeli government, announced earlier this month that it has sold more than $3 billion in bonds since Oct. 7, nearly three times its normal annual total, as the country navigates economic turmoil from the war. The buyers include individuals and financial institutions, but most of the sum, $1.7 billion, was purchased on behalf of taxpayers by government investment officers like Abruzzo, marking a departure from Israel Bonds’ traditional pitch as a chance for individual Jews in the Diaspora to invest in Israel’s development.
“We have seen state local governments all over the country invest in Israel bonds for some time now but we have seen a lot of jurisdictions invest for the first time or increase their holdings in Israel bonds particularly since Oct. 7,” said Justin Marlowe, a research professor at the University of Chicago Harris School of Public Policy and director of the school’s Center for Municipal Finance. “In some cases, we’ve had governments come right out and say that they’re increasing their investments as a statement of solidarity with Israel.”
At a time when anti-Israel protesters on college campuses are calling for their schools to divest from Israel, and for greater transparency into their school’s investment portfolio, the bonds represent a massive swath of Israel investments that are wide open to public review — though it’s not clear how much scrutiny they are drawing. No members of the public spoke for or against the strategy at a March meeting about Palm Beach County’s buying spree, according to video from the meeting.
Experts say the trend of public spending on Israel bonds is notable because state and local governments can’t take the same risks as ordinary investors. Governments have to be more careful because the money they are investing was collected from taxpayers and it must eventually be available to be spent on public needs, explained Daniel Bergstresser, a Brandeis University professor specializing in municipal finance.
“So investing these funds in safe assets is a very high priority,” Bergstresser said. “The bills must be paid.”
For most people managing public sector money, the situation has traditionally meant that they’re going to steer clear of any sort of investment in a sovereign entity, according to Marlowe.
“There are very few sovereign entities that are triple-A rated and can be considered truly risk free the way that U.S. Treasury bonds can,” he said.
In Israel’s case, the political instability and effect of the war on Israel’s economy have led global credit agencies to downgrade or attach warnings to the country’s ratings, which theoretically affects the government’s ability to borrow money.
And not all states allow local cities and counties to invest abroad. Florida passed a law to permit local Israel bond investments in 2008. “A state allowing it is a reflection of the state’s priorities and whether local officials choose to take advantage is a reflection of their priorities,” Marlowe said. “It’s clearly a policy statement on the part of government.”
In total, 35 state and local governments invested in the bonds after Oct. 7. Not all have disclosed their investments but the list includes Florida, New York, Alabama, Arizona, Ohio, Illinois, Texas, Oklahoma, Georgia, Nevada, Louisiana, South Carolina, Pennsylvania and Indiana as well as the Florida counties of Broward, Palm Beach and Miami-Dade, the cities of Miami Beach and Boca Raton, and Franklin County, Ohio, according to the Bond Buyer.
The trend cuts across party lines.
“This is a bipartisan effort. I’m a Republican, but we’ve got a great treasurer in Franklin County’s Cheryl Brooks Sullivan and she’s a Democrat,” said Ohio state treasurer Robert Sprague in a recent virtual meeting of government investors convened by Israel Bonds, according to the Bond Buyer.
Abruzzo holds the elected office of clerk of the circuit court and comptroller for Palm Beach County, an area with a large and growing Jewish population. People living in Jewish households make up about 15-20% of the county, according to Brandeis University demographic studies released by the county’s two Jewish federations in 2018.
Before serving at the county level, Abruzzo, a Democrat, was a member of the Florida House of Representatives and Senate. He sponsored bills to support Holocaust survivors and recognize the 70th anniversary of Israel’s founding in 2018.
Abruzzo said he is a quarter Jewish before clarifying he was referring to the results of a genetic ancestry test. He added that his stepmother is Jewish and he grew up in a mixed Italian and Jewish household, with step-brothers who had bar mitzvahs.
“I like to say that one of my grandmothers made the best tomato soup in the world and my stepmother made the best matzah ball soup in the world,” Abruzzo said. “I’m very familiar with Israel and Jewish heritage.”
He began investing in Israel bonds long before the current war. During his first year in office in Palm Beach, he convinced the Board of County Commissioners to double how much he was allowed to invest in Israel bonds from 5% to 10% of the county’s portfolio.
But at the time, there were only so many bonds on the market and he couldn’t reach anywhere near the cap.
As Israel went to war and saw its economy contract, the government decided to offer more bonds.
“Fast forward to Oct. 7 and a day or two after that horrific event, I was able to speak with [local Israel Bonds representative] Mark Ruben and we purchased $25 million in bonds,” Abruzzo said. “We got very good rates and were excited about it. We then did the largest single-day purchase, which was $135 million.”
But even that wasn’t enough.
In March, he asked the county board to increase the cap again. In making his case, he pointed out that the county is set to earn $83 million in interest on the bonds, part of what official data shows is dramatically higher performance for the county’s financial portfolio since he took office in 2021.
The board voted unanimously to increase his cap to 15%, which comes out to about $700 million of the $4.7 billion in county coffers.
According to experts, the situation in Palm Beach County is highly unusual.
“I’m not aware of any other jurisdiction that has 15% of their holdings in one type of investment,” Marlowe of the University of Chicago said. “That’s not necessarily good or bad. It’s a decision. It’s a policy choice that they’re making. But it does represent a much greater concentration of risk in any portfolio for a public entity than I’ve seen in a long time.”
Bergstresser, of Brandeis University, said he believes the investment strategy is unusual to the point of being possibly unwise.
“Such a large allocation to one foreign issuer is arguably inconsistent with standard advice about portfolio diversification, particularly when avoiding severe losses is as high of a priority as it is in this situation,” Bergstresser said. “Sovereign issuers do sometimes default on bonds that they have issued. If the state of Israel were to default on these bonds, then Palm Beach County would have to find a way to pay its bills without money that it had counted on being available.”
Abruzzo is up for reelection in November, but with less than two months until the filing deadline, no one else has declared their candidacy, meaning that he is currently running unopposed.
Abruzzo said political calculations are not behind his Israel Bonds investments.
“Every decision was dollars and cents, and financial safety,” he said. “This has nothing to do about an election or personal motives. It was not done for political gain.”
But he did weigh in on a political debate roiling the United States and deepening divides within his party over Israel’s war with Hamas in Gaza. With the White House growing increasingly impatient with the Israeli military’s conduct and the left flank of the Democratic Party accusing Israel of genocide, Abruzzo’s stance reflects a staunchly pro-Israel sentiment that’s still widespread in both parties. He rejected calls for Israel to show more restraint.
“A lot has been said about Israel, especially in the far-left circles of my party, but if what happened in Israel on Oct. 7 happened here in America, the country that was harboring the terrorists would look like the moon’s surface,” Abruzzo said.
In total, Israel’s borrowing, including Israel bonds and other financial vehicles, doubled in 2023 to $43 billion. Meanwhile, billions in charitable donations have also flowed in to support Israeli civilians and soldiers.
The successful fundraising drive for Israel Bonds comes after the organization in March last year alienated some American Jews by inviting Bezalel Smotrich, Israel’s far-right finance minister, to speak at its conference amid massive protests by Israelis against their government.
Despite Israel’s credit downgrades, Israel Bonds president and CEO Dani Naveh said prospective bond buyers have not expressed such concerns to him. He said they should rest assured that Israel has never defaulted on its bonds, despite past military crises and regardless of who was in power.
“The state has always kept its obligation, paying its debts completely on time,” Nave said in an interview. “It’s also important to mention that if you take a look at previous security crises, the Israeli economy’s resilience was very strong and I’m optimistic that it will be the case this time as well.”
