Cumberland Times-News


November 18, 2013

Better return

State should ease restrictions on library system investments

Maryland legislators need to take a look at easing the over-restrictive policy county library systems face in trying to get a better return on fund investments.

At its meeting last week, the Allegany Country Library System’s board of trustees lamented the state’s restrictions on how library accounts, primarily from bequests, can be invested.

Although the local system’s investments were returning more than 8 percent a few years ago, the return lately has been about 2 percent. The library system would like to put its money into something more lucrative, but state law only allows investment in bonds backed by 100 percent collateral, primarily mortgage-backed securities. The library cannot invest money even in relatively conservative investments like preferred stocks or corporate bonds.

“A big concern is that interest rates have been on a 20-year decline and are heading upwards,” said Mirjhana Boggs-Buck, a vice president with Wells Fargo Advisors LLC in Cumberland. Wells Fargo manages some of the library system’s investments. That upward trend means the principal value of the bonds will drop. The only remedy is to try to buy short-term bonds, Boggs-Buck said. “It’s unfortunate the rates are coming down, but it is what it is,” Boggs-Buck said. “The shorter you go, the lower the rates.”

The only flexibility is if the library receives a gift specifying that the gift has to remain in stocks or other securities. If not, the library cashes the stocks and places them in state-approved investments, said John Taube, the director of the Allegany County Library System.

The lower return on investments comes at a time when the library faces financial constraints brought on by tighter state and county budgets.

We’re not advocating allowing library systems to go unchecked on how they invest money from bequests. But limiting investments to only super-conservative options seems to us to be leaving money on the table.


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