CMM Investments Recommendation

To:     Meeting for Business, Concord Friends Meeting

From: Budget Committee

Date:  February 1, 2018

Re:     Investments

We have two loans coming to maturity with the New Hampshire Community Loan Fund (NHCLF) [1] and additional funds the Committee feels should be invested to better serve both the Meeting and the community.  This is our recommendation for action relative to those maturities and additional investing.

Background.

After building the meetinghouse and setting aside approximately $5,400 a year for a repair and replacement reserve, the Meeting decided to invest funds as loans to the NHCLF.  The Meeting has also asked the Committee to look into investing with the NEYM pooled funds [2].  That request from some years ago fell between the cracks; thus, to date we have not done so.  Presently the Meeting’s de facto investment policy is to make loans to the NH Community Loan Fund.

The NHCLF uses our loaned funds to make loans to small businesses, and more importantly, chiefly to mobile home parks so they can create cooperative parks that control their own destiny.  The NHCLF is a pioneer in community reinvestment in general and in low income housing in particular.  The Meeting is especially mindful that its savings are being used to meet an important local community need.  The NHCLF is not federally insured and our loans to it are all “at risk.”  The Meeting has determined that the risk is low.  Since the NHCLF was established in 1983 it has never missed a payment to its lenders.  People tend to pay their housing cost first, even when times are tough.  The loan fund’s highest return is only 5%, and that is for a 10-year loan. But the principal is as safe as principal gets without federal insurance.  When the stock market plummets, the NHCLF just chugs along.  The same is true when the stock market soars.  They review their interest rates annually and make small adjustments taking their short and long term forecasts into consideration.  They offer rates presently ranging from 1% to 5% for loans ranging from 1 to 10 years.

Currrent Status of Loans and Recommendation. (The underlined language could be used for a minute.)

The Meeting has eight laddered loans with maturities spread from this March through March of 2022.  The total is $10,485.  The two loans that are maturing this March total $3,103 and interest will be applied at maturity.  The Committee asks the Meeting to authorize the Treasurer to reinvest the loans coming due in March 2018 in order to extend the ladder through Mach 2023 to achieve $2,000 plus interest coming due each year.  The Committee further asks the Meeting to approve and additional $10,000 to extend this ladder out through March 2028.  With a 10-year ladder, we are able to achieve the maximum interest rate available.  As loans come due each year at lower rates of interest they can be renewed for 10 years at the maximum rate if we so choose.

What of the Meeting’s Funds Should be Invested?

A review of the current Balance Sheet [3] (attached) indicates the Meeting has $22,889 in excess funds that should be invested for the good of the Meeting and to help satisfy significant social needs.  The amount is determined by taking all of the Current Liabilities and the Net Income for the year to date (because we will be spending it shortly), and subtracting these from the current assets, that is to say, our cash on hand plus prepaid insurance.  The math is as follows:

If the Meeting approves further loans with the NHCLF, the balance available for further investment will be $12,889.  At present the Committee has no further investment recommendations.

Consideration of Funds Availability and Diversification.

This last portion of our memo is presented to let the Meeting know of our thoughts and plans.  With this information we hope members will offer advice to inform our work.

Budget Committees of the past have asserted that two thousand dollars coming due each year is sufficient for some time into the future.  The replacement of flooring or septic repairs or new roof or replacement windows can generally be anticipated for some time.  During any year the amount we have budgeted for the reserve could be used for an emergency, that is to say $5,400 from current donations in the budget, plus the amount that comes due from maturing loans each March.

But it is possible that we may need to have more immediate access to funds than is allowed through our laddered loans plan.  Additionally, and very importantly, diversification is a fundamental principle of investing.  The Budget Committee feels we can accept a higher degree of risk with some of our savings to achieve a higher return on investment as well as ready access to those funds.  Such investment opportunities could include the NEYM pooled funds or other socially responsible investment instruments.  The Meeting has indicated an intention make a $10,000 loan to assist the group net metering solar project planned for our roof.  If that project does come to fruition, the Meeting may take longer to achieve some of the goals the Committee is planning toward.

The Committee is beginning this research and expects to bring forward a recommendation for an “Investment Policy” as well as specific recommendations for implementation of such a policy in the form of further investments outside the NHCLF.