STAR Ohio can't meet all investment needs
I read with interest your recent editorial on the State Treasury Asset Reserve program, popularly known as STAR Ohio.
STAR Ohio was instituted in the 1980's by Ohio Treasurer Mary Ellen Withrow, and has proven to be an outstanding investment vehicle for many governmental subdivisions. By depositing funds in STAR Ohio, public sector treasurers are assured of safety, liquidity, and a reasonable market return. However, even state Treasurer Deters would say that STAR Ohio has limitations, and that large balances not requiring immediate liquidity should typically be invested elsewhere.
By law, STAR Ohio is a money market fund and cannot invest in securities maturing in greater than 60 days. As such, daily returns will closely trend market interest rates and can be extremely volatile. In January of this year, STAR Ohio was paying 6.17 percent, which by early August had dropped to 3.69 percent.
When I took office in 1998, virtually all of Mahoning County's investable funds were in STAR Ohio, even though immediate access to the majority of the funds was not required. Starting that year, we began to structure our own portfolio of safe, similar securities -- U.S. treasuries, federal agency notes, top-grade commercial paper, etc. -- but with longer maturity dates, thus capturing better overall returns.
The benefit of managing our own portfolio is especially profound during a period of falling interest rates. Late last year, anticipating significant Federal Reserve softening, we purchased securities with locked-in returns of over 6 percent (some as high as 7 percent plus). The net effect of this strategy will be additional proceeds of over $1 million for Mahoning County this year, without in any way risking taxpayers' principal.
I agree that STAR Ohio is a superb investment option to bank CDs, for smaller subdivisions not having the funds required for efficient securities purchases, and for the liquidity needs of larger subdivisions. But when significant longer-term assets are at stake, a managed investment approach is more appropriate.
JOHN R. REARDON
X The writer is Mahoning County treasurer.
Don't save money if it endangers student safety
I have been contacted by the Ohio School Boards Association to help support the increased use of vans in place of yellow school buses for transporting small groups of students. This is not the first time school districts have wanted to use vans. They say that using the yellow buses is too expensive and that vans can be just as safe.
As a member of OSBA and a school board member for 10 years, I could not disagree more with OSBA's position. Van proponents list all the safety equipment they must have. I want to talk about what they don't have: A driver who holds a commercial driver license and who must pass a physical each year. Nor do vans have fuel tank protection. In the event of a crash, the fuel tank is protected by a steel cage. Most of today's yellow school buses use diesel fuel, which is usually not explosive. A yellow school bus must be built strong enough maintain its structural integrity even when completely upside down.
If school districts cannot afford to have yellow school buses to transport students, then maybe it would be better not to have those activities.
ROGER L. SAMUELSON
X The writer is a member of the Champion Board of Education and the Trumbull Career-Technical Board of Education.