Washington County school districts bank on investments

MARIETTA — Most people see the increase in interest rates by the U.S. Federal Reserve Board as a nuisance that makes borrowing money, whether through auto loans, credit cards or mortgages, more expensive.

For treasurers of some Washington County school districts, however, the rise in rates has a bright side.

At any given time, the districts have cash reserves in the millions of dollars, and some have for years invested that money in guaranteed vehicles such as certificates of deposit rather than letting them sit in bank accounts. Until recently there was little difference in the return on investment between CDs and bank savings accounts, but the rise in the fed rate has generated some cash for those who invest.

At Fort Frye Local Schools, the district started a laddered investment program in April, in which the district purchases investment vehicles with a variety of maturation dates, treasurer Stacy Bolden said recently. So far, it has reaped $40,000 on the initial $5 million investment and is expected to generate $100,000 annually.

“The District Finance Committee is recommending to the board of education at its October meeting to invest an additional $1 million,” Bolden said. “If approved, this will be invested in late October. With the laddered portfolio approach, the district will have investments maturing annually. Providing that district’s cash balance is still healthy, the funds will be reinvested until needed.”

Superintendent Stephanie Starcher said the district also has realized savings from installation of energy efficient fixtures and systems in buildings.

“Electricity costs have decreased by an average of 24 percent district-wide, which equates to a $47,700 savings in electricity in a year’s time,” she said. “Along with these continuous electricity savings, the district also received a one-time AEP rebate in the amount of $37,300.”

The savings, she said, are being earmarked for long-term facility needs and some programming in high-need areas such as career tech and mental health services.

Wolf Creek Local Schools has had an investment program for years with Waterford Bank, treasurer Rachel Miller said, and, since 2012, with Fifth Third Bank. The amount invested varies, she said, but generally amounts to about three-fourths of the reserve cash fund.

“We can’t invest in anything risky, it’s usually CDs at five years, it just varies,” she said. The CDs are flexible, she said, which allows the district to cash them in before maturity if necessary.

“Typically, we re-invest the proceeds if they’re not needed,” she said. “We have to think of expenses coming ahead, you have to have cash flow … If you have to replace a bus or something, you need to have liquid at hand.”

In 2017, she said, the investment accounts, which vary from month to month, generated about $82,000.

“It’s certainly better than leaving it in the bank,” she said.

Warren Local Schools, Frontier Local Schools and Belpre City Schools treasurers could not be contacted for this article, but Warren’s monthly investment report provided at board meetings shows returns increasing from $752 in January to more than $1,400 in August.

The increase in interest rates comes at the end of a long period of near-zero, with the fed fund rate at a record low of .25 percent since December 2008. Rates began to gradually rise at the end of 2016, with the last quarter-basis-point hike in September bringing it to 2.25 percent. Some five-year certificates of deposit this week were being offered at 3.25 percent, a significant contrast to the less-than-1-percent yield in January 2016.

Frank Antill, Marietta City Schools treasurer, said Thursday the district hasn’t had an investment account in part because, until recently, the rate of return has not seemed worth the trouble, and in part because the district’s cash position made it difficult.

With investments becoming more attractive, however, Antill said he is reviewing the idea.

“We are in the process of trying to boost our cash position,” he said. “Interest rates have jumped in the past few months. They’ve been flat for the past 10 years, and even with investing you have very little ability to make anything. But now this is on my list of things to do. I’ve talked to a few banks.”

The dark side of the interest rate hike is in borrowing, however, and both Marietta and Fort Frye are looking at the possibility of big building projects in the medium-term future.

“As we look at buildings and bond issues, with those interest rates going up, the cost of borrowing is going up,” Antill said. “When you borrow, say, $80 million, a fourth of a percent or even a tenth of a percent really makes a difference.”

COMMENTS