Trustees of the Trust Funds Meeting
Friday, July 31, 2015
Jackson Town Offices
9:30 A. M.
Attending: Martha Benesh, Helene Matsky, Joan Davies
Christopher Eddy representing Northway Bank
1. Review and approve minutes from prior meeting of July 22, 2015. Helene motioned to accept, Joan second, all in favor.
2. Motion made to withdraw $68,542.22 from the Road Construction Capital Reserve account #0064 for two invoices from F.R.Carroll totaling $197,488.01. The amount of $128,945.88 coming from the Town Highway Maintenance Account, the remainder from the #0064 account as mentioned above. This particular amount is for the paving of Adams Road, Tin Mine Road, Jackson Ridge Road, Eagle Mountain Road. The Balance in account 0064 as of June 30, 2015, was 72,035.27. The letter from Selectmen and invoices reviewed. Joan made the motion to accept, Helene second, all in favor.
3. Motion made to withdraw $29,985.90 from the State Aid Expendable Trust #0058 to F. R. Carroll Invoice for paving 16B. The letter from Selectmen and invoices reviewed. Joan made the motion to accept, Helene second, all in favor.
4. Other business:
Background, When Helene was working with the town auditor, Helene mentioned that Trustees were researching ways to get better income for the funds. The auditor thought from her experience other towns, that we could do better with our funds and recommended ICS funds. The Trustees decided to continue exploring our options.
Today is the first of what we hope to be many exploratory discussions with Banks and Investment firms to scope our options for the diverse funds we hold. Helene invited Christopher Eddy who represents Northway Bank Investments Division. He gave us his background as previously working at TD Wealth Management and Trusts, he is a broker and bank employee. Northway uses Infinex Financial Group as their broker dealer. His office is in Portsmouth.
He (his bank) can act on non bank related investments, as a broker or as investment advisors. They charge a fee for the latter, but for purchasing CD’s, they receive their payment for placement.
Helene reviewed some of our experiences over the years, speaking to banks-municipal and government department, asking for services and not getting any comfortable responses. Part of the problem was with CD renewals and making the income available on a monthly basis for the Library. Also Chris Eddy mentioned that banks really want the whole town cash flow involved, not just the Trusts.
Our first question was the difference between bank CD’s which we are familiar with and Broker CD’s. Bank CD’s are issued by a bank for a period of time with a $250,000 FDIC insured limit. Penalties for early withdrawal are stated as a percentage of the return. Broker CD’s are sold by the bank’s investment department The bank acts as broker. Each broker CD, has a CUSIP number, is nationally traded, on a vetted list published each Monday. All are FDIC insured. NONE ARE STRUCTURED CD’s, each is plain vanilla. Rather than the TOTF going to 5 different banks, we buy them all in one place and the bank can buy all over the country with some assurance that, for example, Visa, or Goldman Sachs or American Express are not going out of business tomorrow.
The difference is that unlike a bank CD, where the penalty for early withdrawal is a percentage of the interest earned, early withdrawal of a Brokerage CD reflects the market value similar to a bond. So in choosing the length of the CD, we would have to be concerned with the need for the funds since it is possible to lose principal at time of sale.
Broker CD’s pay interest semi-annually so the income would be available. Short term CD’s pay at maturity. There is a timing issue. If we bought in October, the interest would accrue, to be paid 6 months later.
In all of this, Chris proposed a money market fund, is assumed for transactions and for holding money that the town will be paying out.
Chris suggested that we initially structure a ladder of 20 percent of the money (to be invested) for 5 years, 20% for 4 years, 20% for 3 years, etc. The idea being that we decrease our interest rate risk by buying CD's over different maturities.
Broker CD’s are bought in $1,000 lots with a fixed $35 dollar charge per CD.
Helene went on to explain to all that the TOTF are responsible for a number of different funds that have different restrictions.
Some Cemetery and Library Funds where principal can never be spent so there is no problem with liquidity. Then there is the town expendable trusts which need to be available to meet town expenses on a short term or long term basis. The School Board trusts and the Jackson Water Precinct trusts also have separate issues regarding the liquidity of the funds.
Bookkeeping is a big problem since the state requires that funds be segregated for reporting purposes. We have to meet all the state expectations of accounting practice. We need interest accrued for December 31. The MS 9 and MS 10 have to be prepared. We need interest paid to the Library and Cemetery Trustees at least once a year. The school has a different fiscal year, July 1 to June 30 and we have to be able to make deposits and withdrawals as needed for the town.
Helene mentioned that because of liquidity issues, it only makes sense to use this approach for funds where we do not need access to the principal such as Library and Cemetery funds. She does not think it makes sense for the Expendable Trusts and the Capital Reserve funds that are needed by the town since it may be possible that funds would be locked in a CD when they were needed.
Chris Eddy will get back to us so we can continue discussions about possibly investing only the funds where the principal is restricted as a first step. The Trustees do not want to risk losing principal or the other funds which may happen if the CDs are sold prior to their Maturity Date.
Chris offered suggestions and was going to go back to the Bank and talk with his people who prepare spread sheets to see what they can do to prepare documents similar to what we have been receiving, hopefully better.
No decisions were made. We hope to have further discussions with Chris Eddy.
The meeting closed at 11 A.M.
Respectfully submitted
Martha Benesh, Secretary
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