School board will invest in locally issued CDs

Tuesday, October 14, 2008 | 10:01 p.m. CDT; updated 12:10 a.m. CDT, Wednesday, October 15, 2008

COLUMBIA — The Columbia School Board unanimously approved a plan to change its investment strategy during its Monday meeting. The decision is a result of the recent downturn  in the financial markets, said Linda Quinley, business director for Columbia Public Schools.

Typically, the school district invests in bonds issued by the U.S. Treasury and agencies. But with falling interest rates, the district is not earning as much as it had originally projected.

In September, for example, the district expected to make $27,000, but ended up seeing only $6,000, said Assistant Superintendent Lynn Barnett.

The investments make up only about 1 percent to 2 percent of the total school district budget, Quinley said, which is equivalent to about $2.5 million to $3 million.

School district officials speculate that short-term certificates of deposit, or CDs, will yield a higher interest rate than the bonds in which the school district usually invests.

During the Monday board meeting, Quinley said the current interest rate on the district's federal investments is 1.75 percent. This time last year, it was around 4.75 percent. She said the district's current interest-bearing checking accounts with First National Bank of Columbia yield a higher interest rate than its federal investments.

The board's decision reflects a growing trend among consumers to invest in more secure accounts with their community banks, according to Mid-Missouri bankers. Mary Wilkerson, a spokeswoman for Boone County National Bank, said she has noticed more of her bank's customers putting their cash into savings accounts and CDs, rather than investing in publicly traded stock.

"There is definitely a trend toward safety and soundness," she said. She added that, while consumers are starting to invest locally, businesses haven't been quick to change over investments.

CDs are usually a secure investment because they guarantee a certain percentage of  growth over time and investors do not lose their principal investment, said Gary Meyerpeter, Callaway Bank-Boone County Market President. He said CDs might offer a better rate than investing in bonds. Callaway Bank currently offers a fixed 2 percent annual yield for a three-month short-term CD — a higher percentage than what the district receives from federal investments.

During public comment at the board meeting, parent Robin Hubbard expressed concern at the board's decision. She asked how the district knows which local banks are fiscally strong or weak. Quinley said that the board is not allowed to invest in banks that do not insure deposits.

"We have limited things we can invest in because we don't want to put taxpayers' money at risk," she said. "Their money is safe. There have been no losses. We are just not earning a good enough interest rate."

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Jenny Rogers October 15, 2008 | 6:58 p.m.

good story

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