MEDINA COUNTY, OHIO – “In these volatile economic times it is difficult to increase returns on investment portfolios. But we were able to do just that” Medina County Treasurer John Burke stated at the recent Medina County Investment Advisory Board meeting. Held quarterly, the Investment Advisory Board includes all three County Commissioners, the County Clerk of Courts and the County Treasurer as chairman.
At the meeting Treasurer Burke reviewed the County’s Investment portfolio. Year-to-date interest earnings through August 2016 were $589,606 compared to $495,020 last year – an increase of $94,586 or 19%. The projected interest income earnings were $880,000 for 2016. Treasurer Burke said that the investment portfolio, which currently is about $70 million, should make more than that estimate by the end of the year.
This extra income for the County is placed in the General Fund to be used by the Commissioners for expenses and services provided to county residents. “Investment income is one way we can contribute to the County revenue and help pay for services that our residents have come to expect. It helps to keep the need for additional taxes low,” Burke said.
Treasurer Burke reviewed $39 million of new investment purchases to the portfolio since last quarter. He explained that the market has drastically changed from last quarter. Nine-month to one-year investment interest rates have increased. In comparison, investors now have to go to a 3-year maturity in Government agency rates such as FHLB and FNMA to match the new short term rates. “Consequently,” Burke said “the current portfolio of about $70 million has been invested in shorter term investments. Our average weighted maturity is now 1.51 years.” He explained that to seek higher returns and to take advantage of current market trends the makeup of the portfolio has increased FDIC insured investments in the county’s portfolio to 37%, commercial paper to 33% and dropped U.S. agencies to 30%.
County investments are governed by the Ohio Revised Code which does not allow investing of county funds in stocks or equities because of the risk involved in those types of investments. Interest bearings investments must have a five-year or less maturity. The portfolio is currently invested in about 72 different interest bearing securities. The County Treasurer also sends monthly reports reflecting the content of the investment portfolio to the members of the Investment Advisory Board and to the Treasurer of the State of Ohio.
All county treasurers in Ohio are required to take continuing education courses each year approved by the State of Ohio Treasurer and Auditor. “This helps us keep up to date on market trends and changes in investment regulations” Burke explained.
Economic conditions were also reviewed at the meeting. Treasurer Burke noted that the Federal Reserve has set a target rate of inflation at 2% and has indicated they will not increase their interest rate prior to the end of 2016 after the elections. Their last interest rate hike was in December of 2015. According to Meeder Investment Management of Dublin, Ohio, the probability of an interest rate hike by the Federal Reserve in the next year has increased from 30% to 70% since the end of June. This is another good reason to increase the short term investment holdings in the County’s portfolio.
If you have any questions, please call the Medina County Treasurer’s office at 330.725.9748.
Please Note: the information contained in this article was not intended to be nor should be considered investment advice.