In an effort to generate up to $300,000 in additional interest earnings in 2009, the Mehlville Board of Education recently made a unanimous decision to invest district funds into the Missouri Securities Investment Program, or MOSIP.
Board member Venki Palamand said that with an interest return increase of 1 percent to 1.5 percent more than the district currently has with investments at Midwest BankCentre, the district’s $25 million in average monthly balances would generate an additional $300,000 in 2009.
Palamand recommended Mehlville’s involvement in MOSIP after hearing a presentation on the program at a recent Missouri School Boards Association conference.
MOSIP allows public taxing entities like the Mehlville School District to pool monies together, which results in higher interest earnings. MOSIP currently manages an estimated $1.2 billion, including funds from the Lindbergh School District.
Mehlville Chief Financial Officer Noel Knobloch believes that with Mehlville’s investment, the district will earn at least $100,000 more in 2009 than it would under the district’s current investment structure with Midwest BankCentre.
“(MOSIP) is a well-established entity that invests school-district money in municipalities,” Knobloch told board members Nov. 20. “It’s very stringently held to the statutes of the state. They actually work under the investment policy that was written by Treasurer Sarah Steelman. There’s also the intergovernmental cooperative agreement, which is in your book also. We don’t know whether or not we will actually utilize it. We’d like the option. We feel that we could probably gain a 1 to 1.5 percent better rate than we can by investing our monies just in the local bank because when we do it there, we basically can only do (certificates of deposit). We don’t get very good rates on CDs because they have to be collateralized.
“So the opportunity here, because they can have more buying clout and still buy protected securities and they’re not going to be buying anything that’s going to decrease in value because all the entities who are with them can’t afford that, we feel that we can probably make an extra point to point and a half. And if we can keep $15 million to $20 million of our tax money invested while it comes in for a period of time, it could make us an extra $100,000 versus what we would make under the current environment.”
Knobloch added that while the district’s interest investment rates currently are down from previous years, MOSIP allows an option for Mehlville to utilize those funds if necessary.
“Keep in mind we’re still going to make a lot less in interest income this year than we did last year because last year at this time we were making 4.5 or 5 percent and now we’re in the low 2s and even 1.5,” he said. “… We won’t make nearly as much interest income as we had anticipated. This gives us a little bit of an opportunity. It is used by other school districts. Actually, (Lindbergh School District Assistant Superintendent of Finance/Chief Financial Officer) Pat Lanane is a board member. Lindbergh uses it.
“It’s great if you have long-term funds that you can leave there for periods of time. Ours would be in the shorter pool because we would start needing it as we run through the year. But it’s just an opportunity for us to make a little bit better spread on our money … We wouldn’t have money to invest until almost the end of the year … It’s a well-run operation.”
Compared with investing with local banks, Knobloch and Palamand said MOSIP could more easily handle Mehlville’s investment as local banks would be required to come up with collateral for Mehlville’s funds.
“Candidly, our account is not the best account for (local banks) because of the collateralization,” Knobloch said. “It really ties their hands in a lot of situations. So it’s not a big deal to them to not get all of our money all the time.”
“Like Noel mentioned, when we deposit large amounts to the bank, they can’t turn around and make loans with the money,” Palamand said. “They have to stop and buy treasury securities or something that’s stable and hold it in case there’s bank failure … So it’s not necessarily a great deal for a bank either to take a $50 million deposit from us.”
“No, because they basically have to buy $50 million of another security on the other side to collateralize it,” Knobloch said.
“Yeah, to hold it,” Palamand said. “So this gives us a chance to earn a point or point and a half. And translated, it could amount to as much as $300,000.”
“It just depends on what our average investment would be and what their spread might be versus what we could do with the bank,” Knobloch said. “We know with Midwest, we’re going to be in the 2 or less. We know that. So if they can get us 3, 3.5, 4 without risk, which is the other key, that’s what we would be looking for.”
“So what are (MOSIP) investing in to get the better rate?” board President Tom Diehl asked.
“They have the ability to buy and liquidate,” Knobloch said. “They actually trade, so they have the ability to look at an option or a security that’s out there and sell it if it goes up in value or if the interest rates happen to go up or down. So they can play that interest-rate game where you can’t do that with a bank. They buy agencies, government agencies. So they can still get a better rate because they have more clout, if you will.”
The school board also took steps Nov. 20 to save additional money when it unanimously agreed to stop reimbursing district employees for the purchase of cell phones.
District officials in September reversed a unanimous Board of Education decision to reimburse Assistant Superintendent for Student Services Brian Lane in the amount of $331 for his purchase of an Apple iPhone and iPhone supplies after Superintendent Terry Noble had given prior approval.
In addition, the board also agreed to drop its reimbursement rate for district employees’ cell-phone minutes from 35 cents per minute down to 25 cents per minute.
Under district-owned cell phones, employees now will reimburse the district 25 cents per minute for personal calls.
The district provides district-owned cell phones to certain employees “where due to work requirements they are often traveling throughout the district and need to keep in contact with supervisors or make contact with suppliers. These areas are transportation, facilities management and (information technology),” according to district documents. “In addition, one phone is provided to each school to provide a backup in case of an emergency. One half of these phones are Push-To-Talk (PTT) only (33).
“The remaining phones are either on a flat rate of 6 cents per minute or are included in the district minute pool. The monthly cost is approximately $1,200. These phones are for district use only.”