Investment plans change

A $37.3 million loss to San Mateo County schools has education leaders considering investment policies with options currently unavailable to districts.

School districts, unlike cities, are required by California law to put most investments in the county treasury unless a different investment policy is adopted. A number of local districts are considering just such a policy in light of the recent losses in the San Mateo County Investment fund due to its holdings in Lehman Brothers Holdings, Inc. The fund lost 4.77 percent of the $2.6 billion portfolio’s principal. Of those losses, $37.3 million will come from school districts, according to the County Office of Education.

New policies would not allow all funds to be invested in other places.

The Sequoia Union High School District, for example, had $107 million invested before the Lehman Brothers loss, which will be $6.5 million dollars. Tonight, the Sequoia Board of Trustees will discuss changing its investment policy to allow a small percentage of those investments to be invested elsewhere, said Jim Lianides, associate superintendent of administrative services.

At this point the district is not talking about moving funds, but simply having the possibility, he explained.

Under state law, school districts must invest most money with the county, according to an Oct. 2 analysis by County Counsel Mike Murphy.

A school district does, however, have the ability to invest surplus funds not needed for its immediate needs, he wrote.

A district would need to pass an investment policy to take over the investment of such money. Murphy suggested reviewing the policy annually to evaluate both the county pool performance and management and, potentially, that of its other investment.

If a district decided to invest the money elsewhere, it would need to hire investment advisors, Murphy wrote.

Taking money out for other investments could be challenging, however, as the county investment policy gives the county treasurer’s office the authority to consider each withdrawal request’s effect on the fund and other depositors.

Such requests are rare, said Assistant County Treasurer Charles Tovstein. But, if a request to take money were to occur, it would shrink the pool size, he said.

Past that, Tovstein was not sure of either the effects on the fund or details considered before allowing or disallowing removal of funds.

On Monday, the San Carlos Elementary School District voted to change its investment policy calling for safe investments, said Superintendent Steve Mitrovich.

San Carlos faces a $583,000 loss due to the Lehman Brothers investment. At this time, the district is not considering pulling funds from the county pool but wants to keep its options open to ensure the safety of public funds, Mitrovich said.

Similar discussions are happening at the San Mateo Union High School District, which took a $5.76 million hit.

The County Investment Fund is a pool of money from school districts, special districts and cities, managed by County Treasurer Lee Buffington. As first reported in the Daily Journal Sept. 23, the fund lost 4.77 percent of the $2.6 billion portfolio’s principal due in part to its holdings in Lehman Brothers Securities. Of those losses, $37.3 million will come from school districts, according to the County Office of Education. A majority of the money came from bonds. Until now the losses were estimates. Here are the actual losses:

Bayshore $90,665.06

Belmont-Redwood Shores $1,639,312.33

Brisbane $201,645.26

Burlingame $1,225,977.52

Cabrillo Unified $1,350,486.60

Hillsborough City $903,626.02

Jefferson Elementary $981.255.61

Jefferson Union $2,455,593.67

La Honda-Pescadero $101,852.89

Las Lomitas $396,737.75

Menlo Park City $3,895,640.16

Millbrae $1,202,853.21

Pacifica $723,508.22

Portola Valley $172,777.73

Ravenswood City $854,536.01

Redwood City $1,472,891.50

San Bruno Park $728,647.77

San Carlos $583,876.73

San Mateo-Foster City $2,049,487.32

San Mateo County Office of Education $2,294,627.15

San Mateo Union $5,760,745.15

Sequoia Union $6,592,748.21

South San Francisco Unified $1,518,300

Woodside $99,667.93

Source: San Mateo County Office of Education

Heather Murtagh can be reached by e-mail: heather@smdailyjournal.com or by phone: (650) 344-5200 ext. 105.