Thursday, October 20, 2016
IS TREASURER ZUMBAR "PAYING OFF" FOR STARK COUNTY?
A few days ago, The Stark County Political Report came across this Cleveland Plain Dealer article (Cleveland.com [LINK].
Time to checkout Stark County local governments, no?
With the Pro Football Hall of Fame Village Project (HOF-VP; SCPR blog LINK) and the Stark County Area Broadband Task Team (SCABBTT; SCPR blog LINK) looking for ways and means to get Stark County political subdivision financial (either cash or in kind) support for their respective endeavors, stretching local government monies with added interest earned could be a critical difference in whether or not local government is in a position to help out the HOF-VP and/or SCABBTT.
And, of course, Stark County government has it financial hands full in scratching up money at the margins of the Stark County annual budget with which to make headway on repairing drainage ditches that—unrepaired—are the source of flooding problems in parts of the county when the heavy rains come to Stark.
In checking with Stark County treasurer Alex Zumbar, Stark County did lose about $32,000 for the period in which the return from state of Ohio's STAR (State Treasury Asset Reserve) fund exceeded STAR Plus which begin in December, 2015 and continues to this day.
To his credit, Zumbar (Republican from Alliance) did not try blame Republican Ohio treasurer Josh Mandel for the loss.
However, as the Plain Dealer article points out, Lucas County treasurer (a Democrat) is not so gracious with Mandel.
The SCPR notes that Mandel has no authority as state treasurer to switch the funds to ensure local governments get the highest rate of return.
However, The Report thinks that his office should be notifying participants of rate differences as they occur via e-mail so that there are no excuses among local officials for not having maximized the return on local government funds.
But let's be clear, there are reasons why local fiscal officials might not want to change over from STAR Plus to STAR.
Ohio treasury officials claim that the returns on STAR PLUS are not as volatile as is the STAR fund.
The Report thinks the consistency of return factor is a lame reason when the return is "consistently" and significantly under the STAR account rates.
A reason that might be worth sacrificing some rate of return on, is the fact that STAR Plus is FDIC insured whereas STAR is not.
That Stark's Alex Zumbar in making the switch earlier this month signaled he was not concerned speaks volumes to the SCPR that the lack of FDIC's guarantee (the STAR fund) is not a worrisome factor.
Zumbar is likely Stark County's most astute financial person of a solidly conservative bent whose judgement on financial matters is like "money in the bank" to financiers in and out of government.
Zumbar, who first came into office in what local attorney and civic activist Craig T. Conley dubbed as being Zeiglergate in September, 2010 (then treasurer Gary Zeigler having been unconstitutionally removed from office by the-then Stark County commissioners, according to the Ohio Supreme Court by court decision in June, 2011).
Zeigler's chief deputy Vince Frustaci had stolen what is believed to be upwards of $3 million from the county treasurer over a period of time which culminated with revelations on April 1, 2009.
Subsequently, Zeigler was cited by the Ohio Auditor of State (Mary Taylor) for not having appropriate and adequate policies, practices, policies and secure enough physical facilities in place to have prevented the Frustaci thefit.
Zumbar was in, out and then in again for good on October 31, 2011; Zeigler having reached agreement with the commissioners to retire.
Zumbar is seeking re-election in the upcoming November election. Former state of Ohio Board of Education president Debbie Cain (Democrat, Lake Township) is his opponent.
Programs, policies and practices as well as the physical facilities of the county treasury have been revamped to a "state of the art" level earning Zumbar a place on the SCPR Top Ten List of Stark County Political Subdivision Elected officials.
Currently (as of the date of this blog) STAR generates 0.64% (which is a little over 1/2 percent) whereas STAR Plus produces 0.40% (not quite 1/2 percent).
Readers of the SCPR know that when this blog gets into a topic, the treatment is generally much more exhaustive than The Repository.
And this topic is no exception.
First of all, here is a list of Stark County political subdivisions who as of last Friday had money in STAR Plus that was earning about 1/4 cent less in interest that it could have been earning in a STAR account. Note, that in some cases, the 1/4 cent less was on millions of dollars.
Next up is a series of e-mail exchanges between Stark County treasurer Alex Zumbar and The Report regarding the county's treasury factor on the list:
SCPR INQUIRY #1
From: Martin Olson [mailto:email@example.com]
Sent: Monday, October 17, 2016 1:21 PM
To: Alex A. Zumbar <firstname.lastname@example.org>
Please read this Plain Dealer article (on today's Cleveland.com) regarding investment of taxpayer funds and tell me how Stark County is doing on the matter presented.
ZUMBAR RESPONSE #1
Alex A. Zumbar <email@example.com> Oct 18 at 9:58 AM
The majority of the County Investments are in Federal Agency Coupons (callable and non-callable), Treasury Securities, Commercial Paper & Foreign Government Bonds.
This accounts for a slightly over $128 million of the Stark County Portfolio.
We also have interim investments with JP Morgan Chase Bank, First Merit Bank and Star Ohio and Star Plus.
Investments are in accordance and full compliance with Ohio Revised Code 135.35 and the Stark County Investment Policy.
The investments are based on a policy of Safety, Liquidity and Yield.
Balances deposited with Star Ohio and Star Plus may fluctuate throughout the year based on the interim amount available and the needs of the County Auditor for paying warrants/bills.
For example, in July of this year Stark County invested just over $93 million of interim funds with Star Ohio until the monies were to be distributed to the subdivisions on whose behalf we collected the funds.
This occurs in late August or early September once settlement with the Auditor office has concluded. The funds are distributed to the School Districts and the County Municipalities, Townships, Villages and special districts, etc.
As of October, the amounts invested with Star Plus were moved into Star Ohio.
YTD Investment Income:
September 2016 - YTD $ 1,236,284 (88.31% of Budget estimate $1,400,000)
September 2015 – YTD $ 958,820
SCPR INQUIRY #2
ZUMBAR RESPONSE #2
Alex A. Zumbar <firstname.lastname@example.org> Oct 19 at 12:24 PM
To: Martin Olson
Below are my responses to your questions.
Thank you for your interest in how the funds are being invested by your Stark County Treasurer and as the Chief Investment Officer for Stark County.
Do not hesitate to contact me If I can be of assistance in explaining any further question you may have.
1. What is the grand total amount of the Stark County Portfolio as of today?
[Rest of Investment Accounts]
2. Of that residual amount, as of today, what are the amounts on deposit with: Chase, First Merit, Star and Star Plus?
Ans. See Above
3. For Chase and Merit what are the equivalent rates?
First Merit Earnings Credit – .51%
Earnings credit is used to offset the bank charges for services.
First Merit Interest Sweep .20%
Chase Savings Account . 08%
Chase ELockbox Account .20%
4. On the investments in Federal Agency Coupons (callable and non-callable), Treasury Securities, Commercial Paper & Foreign Government Bonds, what are the equivalent rates?
The rates vary from .63 to 3.17 as due the type of investment and the length of maturity.
5. Did you learn of the higher rates to be gained in switching from Star Plus to Star on your own initiative or did you learn through an alternative source?
After discussion and review with the Chief Deputy and the Head Cashier about the need for these interim funds it was determined that the Auditor did not require them forpayment of warrants/bills and that they could be moved to the First Merit Earnings Credit account to offset potential bank service charges or to a higher interest bearing account
6. Star began to exceed Star Plus (as I read the PD chart) in November/December, 2016, why did it take you 10/11 months to react?
A review of the period in time shows that the rates began to change beginning in December 2015. The basis point rate change differences between Star Ohio and Star Plus
2015 Dec . 03 2016 Apr .11 2016 Aug .15
2016 Jan . 02 2016 May .13 2016 Sept .19
2016 Feb . 05 2016 June .15
2016 Mar .08 2016 July .13
The invested funds are reviewed on a monthly basis by myself, the Chief Deputy and Head Cashier.
The decision to move the amounts available for investing rests soley on the Treasurer as Chief Investment Officer for the County. Many factors are taken into consideration before investing the funds.
Among these factors are Ohio Revised Code Section 135.35 and the Stark County Investment Policy. I follow the principle of Safety, Liquidity and Yield.
Another factor that is considered involves the County Auditor office and the need for interim funds to pay warrants/bills.
The Treasurer office works closely with the County Auditor office to determine if interim funds are required in order pay warrants/bills. If the funds are not needed they may be invested or used for earnings credit with the main operating account currently held by First Merit/Huntington Bank.
The Treasurer office currently does not budget to pay First Merit/Huntington bank service charges/fees. Nor have the County Commissioners appropriated a budget item to
pay these main operating First Merit/Huntington bank service charges/fees. The Treasurer office offsets these bank service charges/fees by utilizing the earnings credit offset on deposits held by the bank.
In February and July of each year the real estate and mobile manufactured home tax bills
This period of time allows for an excess of interim funds to become available for the Treasurer office to either invest or earn credit to offset bank service fees.
Available interim funds may also be invested in short term our Star Ohio or Star Plusaccounts. Amounts were invested in both Star Plus and Star Ohio.
By late March/early April and late August/early September of each tax cycle the Treasurer and Auditor office settle the real estate tax collection and distribute the funds collected to the subdivisions on whose behalf we are collecting these levies and real estate taxes.
7. How much less in interest did Stark receive as a consequence of county money remaining in Star Plus over the period cited above?
The amount of interest earned in Stark Plus during that time period was $106,354.
The estimated amount of additional interest that could have been earned with Star Ohio
was potentially $32,000
8. Some treasurers in the PD article are saying that FDIC coverage in and of itself is worth the difference of 24 basis points in their staying with Stark Plus.
As earlier stated Stark County Investments are based on the principles of
Safety, Liquidity and Yield.
All investments are in accordance and full compliance withOhio Revised Code Section 135.35 and the Stark County Investment Policy.
All investments are reviewed and approved on a quarterly basis by the Investment Advisory Committee.
So there you have it folks from Stark County treasurer Alex Zumbar "in his own words."
Over a period of time, the SCPR will be going through the entire list of Stark County political subdivision to determine the status of dormant (but needed to be at the ready for "on call" use) taxpayer funds in terms of their being invested to the best benefit of local government units having been entrusted with revenues by Stark County taxpayers.
Notwithstanding Zumbar's candor in revealing that his office missed out on approximately $32,000, the SCPR thinks county taxpayers should be highly pleased with the manner in which Treasurer Zumbar manages the Stark County treasury.