Financial Planning Subcommittee Meeting - July 24, 2009

BACKGROUND

In November, 2007, WCPCA received a donation of $22,542 to establish the Beryl Brinkman Memorial Fund. The earnings from the fund (but none of the original donation) may be used to fund projects overseas or in the United States, but not for administrative purposes. In the event that WCPCA is dissolved, the fund will be transferred to the National Peace Corps Association. Since 2007 the Beryl Brinkman Memorial Fund has been increased, through additional donations and fundraising, by approximately $5,000.

In April, 2008, WCPCA invested $20,000 from the Beryl Brinkman Memorial Fund in a Principal Life bond (through Edward Jones). This bond pays 6.05 percent interest (about $1200 a year with a $20,000 investment) through May, 2020. This is a good long-term investment (although it should be noted that the bond is callable on July 15, 2011 at 100 percent). The remaining cash in the Beryl Brinkman Memorial Fund is in a money market fund (through Edward Jones).

Around September, 2008, WCPCA became interested in placing the Beryl Brinkman funds with Oregon Community Foundation. Oregon Community Foundation expects to earn about 9 percent a year, from which about 1 percent is deducted as a management fee, about 3.5 percent is reinvested to provide for growth of the principal and thus protect against inflation, and about 4.5 percent would be returned to WCPCA each year (about $1125 a year with a $25,000 investment, or about $900 if comparing against the $20,000 Principal Life bond). Although there have been some down years, in most years Oregon Community Foundation has been able to return more than 4.5 percent. The Oregon Community Foundation sets the payout rate for each year, after looking at fund performance over the preceding years. If reinvestment is successful in leading to growth of the principal (for example, to $40,000), then the actual return to WCPCA can be expected to increase over the long term (even if the payout rate remains at 4.5 percent). As with most investments, however, there is no guarantee that the principal will grow and it can also decrease. An advantage of a long-term commitment with Oregon Community Foundation is that WCPCA would have professional management of a diversified portfolio with a long-term investment strategy. The WCPCA board would no longer have to be concerned with investment strategies and could focus instead on additional fundraising, donations to projects, and social gatherings. A $25,000 minimum investment is required.

Considering a commitment to Oregon Community Foundation, however, meant that purchasing the bond was no longer a long-term investment but had become a short-term investment. And, unfortunately, in the fall of 2008 the resale value of the bond dropped from $20,000 to around $16,000. Adding the roughly $6,000 cash remaining in the Beryl Brinkman Memorial Fund at this time, WCPCA had only about $22,000 and not the full $25,000 needed to make a commitment to Oregon Community Foundation. So the WCPCA boardŐs decision in fall, 2008, to enter into an arrangement with Oregon Community Foundation was put on hold.

CURRENT SITUATION

Now (July, 2009), however, the value of the bond has increased to about $19,000. If the bond can be sold for approximately this amount and with the availability of approximately $7,000 now in the money market fund, WCPCA would have at least the minimum $25,000 needed to make a commitment to Oregon Community Foundation. Yes, Oregon Community FoundationŐs funds lost a lot of value in the market downturn in 2008. However, so far in 2009 the funds are earning about 6.5 percent and the payout rate for organizations such as WCPCA remains at 4.5 percent (phone conversation with Oregon Community Foundation, July 10, 2009).

RECOMMENDATION

Assuming that the Principal Life bond can be sold for at least $18,750, we recommend selling the bond and investing at least $25,000 with Oregon Community Foundation.

Members of the Financial Committee: Jim Beyer, Rob Dwan, Deb McLaughlin, Jack Meacham, Dorothy Soper, Evangelina Sundgrenz