Local governments watching investments

LIMA - The hot catchphrase coming out of the country's current economic mess is that we need to think of Main Street as well as Wall Street. It turns out, they mean that literally.

The money people at Allen County's Main Street courthouse, along with governmental bodies all across the country, are watching the Wall Street meltdown and trying to figure out what their next move should be.

"Everybody is struggling with that, where's the safest place to keep your money. I'm not sure anybody knows for sure right now," said County Treasurer Jim Link.

Most if not all government entities keep money in investments. In most cases, those investments are handled conservatively, placed in bonds, certificates of deposits or the State Treasury Asset Reserve, a pool of invested funds managed by the state.

The fact that those funds are invested conservatively is good news for communities. They may not be making as much money as they hoped, but unlike more aggressive investors, they are not losing their shirts.

"The majority of that is in bonds, so we're about as safe as we can get," Link said.

Despite the sorry state of the markets, Allen County's investments are actually doing better than expected. Predicting a sour market and decreasing interest on the county's portfolio of CDs, then-Treasurer Rhonda Eddy, who has since taken over as county auditor, dropped her projection of interest income from $2.4 million to $1.8 million. The interest rates did drop - from about 5 percent to 2 percent and 3 percent - but later in the year than expected. The county is now on track to make about $2.38 million on interest income, Link said.

"The floor dropped out, it just didn't start dropping until the middle of the year. That's good news for us," Link said.

That positive news comes after a couple of weeks of sweating for Link and most of the men and women looking over public funds. While Fannie Mae and Freddie Mac were making headlines with their decline and ultimate federal bailout, Link and the rest watched closely with the knowledge that 42 percent of the state's STAR account was invested in the two mortgage giants.

In the midst of the Fannie/Freddie buyout, Ohio Treasurer Richard Cordray sent a letter to all local offices assuring them that the investments were safe. The state fund was in bonds, not the riskier stocks or mortgage-based securities.

"They said those were the safest investments. Next thing you know, two weeks ago they're saying they're bad. Now we think they're good again," Link said.

Treasurers across the region are telling the same story. At Lima City School District, Treasurer Ryan Stechschulte is keeping a close eye on the $10.6 million the school has spilt between STAR Ohio and Treasury bills.

"They seem to be holding, but we're reviewing our investments right now to make sure we're not overly invested in housing," Stechschulte said.

In Putnam County, Treasurer Tracy Warneke is expecting to make what she budgeted for the year on interest income. But she's not optimistic about the future.

"So far right now we're not too much lower than we were last year, that's because most of the CDs we got last year when the interest rates were higher. But we'll probably feel the effects next year," Warneke said.

Warneke said she planned for $655,000 in interest income this year. Right now, they're at a little more than $513,000.

The city of Lima will probably come in below what it budgeted for interest income for the year, according to Dan Hefner, interim finance director. For 2008, the city hoped to make $1.25 million in interest. By the end of August it had had brought in $700,000 and was watching returns decrease.

"We are going to miss our original projection by some due to the fluctuation in the market," Hefner said. "But the important thing is we maintain a steady rate of return."

Lima has about $17 million invested, most of it in CDs divided among various banking institutions, Hefner said. The city maintains a conservative investment strategy, a remnant of about 15 years ago when it lost money in the more aggressive derivatives market.

"There are other kinds of investments out there in the market that might make us more money, but that brings the chance of real lows. The city's main concern is security and liquidity with security first," Hefner said.