PEPPER PIKE — Ryan Nelson of RedTree Investment Group presented an update of the Orange City School District’s $31.87 million investment portfolio. He noted that interest rates fell in 2019, but the district continued to prioritize the safety of the principal.
“The economy is moving sideways at best,” Mr. Nelson told members of the Orange Board of Education at its Jan. 27 meeting.
He explained that the U.S. economy has displayed mixed signals recently and the recession that was predicted in 2019 did not occur. Mr. Nelson said that job growth is steady and noted that the U.S. economy has had 111 consecutive months of job growth, the longest streak in U.S. history. According to Mr. Nelson, interest rates fell 100 basis points, or 1 percent, throughout 2019 and inflation remains low.
He presented three primary goals while investing the Orange schools’ public funds, including safety of the principal, liquidity and market rate of return. The overriding objective, Mr. Nelson said, is to preserve the principal investment.
The district also is seeking sufficient liquidity to meet ongoing operating needs, he said. Liquidity describes the degree to which an asset can be quickly bought or sold. Orange officials also prioritize the market rate of return, which refers to the treasury market, not the stock market.
The Ohio Revised Code governs what Ohio schools are allowed to invest in. For example, school districts are not allowed to invest in the stock market or long-term corporate bonds. They are allowed to invest in local bank products, certificates of deposit, STAR Ohio, STAR Plus, U.S. treasury securities, U.S. government agency securities, municipal bonds and commercial paper, according to Mr. Nelson.
“The maximum maturity is five years,” he said. “These are very safe and secure types of investments.”
The district uses Huntington Bank as its main depositor along with STAR Ohio, Mr. Nelson said.
As of Dec. 31, the portfolio’s average yield is 2.1 percent and the weighted average maturity is 1.83 years. About 48 percent of the assets are U.S. agency notes, 23 percent are certificates of deposit, 17 percent are commercial paper and 12 percent are U.S. treasury notes, according to Mr. Nelson.
Moving forward, Mr. Nelson said that since interest rates are expected to decline or remain sideways, portfolio decisions will be dependent on incoming economic data and events. His investment strategy moving forward is to maintain a longer duration portfolio until RedTree has more clarity on the economy and interest rates.
In other news, the school board unanimously passed a resolution to oppose EdChoice, a voucher program requiring public school districts that may be poorly rated to pay up to $6,000 per student per year for a child to attend a private school. The recent EdChoice expansion has added hundreds of new buildings to the list of schools that must pay the vouchers, although none from the Orange school district are on the EdChoice list at this time.
The resolution states that the board “reaffirms its commitment to free accessible public schools which are adequately and equitably funded to guarantee a comparable education for all children and therefore opposes and respectfully requests the repeal of the ill-conceived EdChoice voucher program of the state of Ohio,” the resolution reads.
The next board meeting is Feb. 10 at 6 p.m. at the Pepper Pike Learning Center, 32000 Chagrin Blvd.