Lucas County's investment in Israel bonds draws misleading claims

James Trumm

The Blade

jtrumm@PROTECTED

Sep 15, 2024

10:22 AM

1

Claims being circulated by a local pro-Palestine organization about Lucas County’s purchase and ownership of bonds issued by the government of Israel are misleading.

On Sept. 6, American Muslims for Palestine-Toledo issued a news release titled “Pro-Palestine Groups Hail End of Lucas County Investments in Israel Bonds.” The statement also claimed that the purported end of such investments was “driven by grassroots efforts of the Ohio Coalition for Peace and American Muslims for Palestine-Toledo.”

In fact, the county now has $2.5 million more invested in Israel bonds than it did when the Israel-Hamas war broke out.

While two Israel bonds that the county once held have now matured, that maturation was in no way influenced by political or popular pressure. What’s more, the funds realized from the bonds’ maturation were not used to purchase additional Israel bonds so that the county’s total Israel bond investments would remain under 1 percent of the county’s investable assets. 

Terry Lodge, an attorney who works with American Muslims for Palestine-Toledo, called the organization’s statement “an over-optimistic headline.”

Ohio law permits state entities such as Lucas County to invest public funds in Israel bonds but forbids the county from holding more than 2 percent of its investable assets in them. According to Lucas County Treasurer Lindsay Webb, the county has historically aimed to keep its investments in Israel bonds at around 1 percent of the county’s investment portfolio.

A timeline of investments in Israel bonds shows that the county purchased a $1 million Israel bond on Feb. 1, 2019. On July 1, 2019, the county bought another bond in the amount of $1.5 million.

On Oct. 7, Hamas, the party that rules the Gaza Strip, attacked Israel, killing 1,139 people, including 815 civilians, and abducting 251 people as hostages. At that time, Lucas County’s investments in Israel bonds totaled $2.5 million.

Since then, Israel has brutally retaliated against Hamas, resulting in a death toll in Gaza that some authorities place as high as 41,000. Hamas continues to hold an undetermined number of Israeli hostages; others have been killed in captivity.

On Dec. 1, the county invested in another Israel bond, this one in the amount of $5 million. Its interest rate is 5.39 percent, which is notably higher than the current 4.93 percent being paid on U.S. Treasury bills and the 3.71 percent being paid on five-year U.S. Treasury notes. The bond will mature on December 1, 2026, after paying the county $809,000 in interest.

The $1 million bond, which had been purchased three years earlier, matured on Feb. 1 after earning the county $184,000 in interest. The funds reverted to the county’s coffers.

The $1.5 million bond matured on July 1. That bond paid the county a total of $208,000 in interest.

“My intention was always to let the two smaller bonds mature and not to reinvest the funds in Israel bonds, because at the time, we had recently purchased the $5 million bond,” said Ms. Webb.

She added that reinvesting the $2.5 million in funds realized from the maturity of the two smaller bonds would have taken the total of the county’s investment in Israel bonds well above the county’s historical 1 percent norm, but would not have exceeded the state mandate that forbids holding more than 2 percent of investable assets in Israel bonds.

The county’s current investment in Israel bonds totals $5 million, which is very close to being 1 percent of the county’s investment portfolio.

Ms. Webb defended her decision to invest in Israel bonds on legal and fiduciary grounds.

“My responsibilities are first, the preservation of principal; second, meeting the liquidity needs of the county; and third, getting a good rate of return on our investments, in that order,” she said. “In 2019, when I bought Israel bonds, they were at the top of many investors’ lists. They have consistently been one of the highest interest-earning investments in our portfolio.”

Jasmin Hummos, a member of the executive board of American Muslims for Palestine-Toledo, said her organization’s No. 1 goal is to ensure that the county’s investments are ethical. 

“Some people look at things only from the perspective of how they will affect their finances,” she said. 

Ms. Hummos insisted that her organization’s advocacy campaign was not just targeting Israel but was aimed at all unethical investments. However, when pressed to name another county investment she would deem unethical, she was unable to do so.

The official Lucas County Investment Policy, which was last revised in August, 2022, states that the county’s investment objectives, in order of priority, are compliance with the law, preservation of capital, liquidity, and yield. The policy is silent on the question of whether the county should weigh ethical considerations in determining its investment strategy.

Ms. Hummos also argued that in her view, Israel bonds are a fiscally irresponsible investment. She cited the fact that the three primary bond-rating firms — Fitch, Moody’s, and Standard & Poor’s — have downgraded their ratings of those investments. 

On Feb. 9, Moody’s lowered its rating of debt instruments issued by the government of Israel from A1 to A2. Standard & Poor’s followed suit on April 18, downgrading its rating from AA- to A+. Fitch dropped its rating from A+ to A on Aug. 12. All three evaluations noted a negative outlook for the near future, citing Israel’s increasing defense budget, its accelerating national debt, and the risks of a wider war in the Middle East.

Despite the one-step downgrades, however, Israel bonds are still considered “investment grade,” a term denoting a security that poses minimal risk to investors.

Pete Gerken, president of the Lucas County Board of Commissioners, stated that the county treasurer makes the determination of how to invest the county’s funds. She presents her plans to an advisory board, which Mr. Gerken serves on, but she makes the final decisions. 

Mr. Gerken is very clear about his opposition to the purchase of Israel bonds.

“My position is that investment with the current Israeli government is not appropriate,” he said. “It has perpetrated 40,000 deaths. It refuses to talk about a two-state solution and in fact has rejected it. I am not opposed to the existence of Israel, but I am opposed to the Netanyahu government. This is not a worthy investment.”

Mr. Gerken also stated his belief that Israel bonds offer a poor interest rate. This is a debatable assertion, since the current interest rate being paid on the county’s $5 million Israel bond is earning a better yield than that of U.S. Treasury securities.

Mr. Gerken will stand for re-election in November and is opposed by former Toledo City Councilman Tom Waniewski, who doesn’t believe that refusing to invest in Israel bonds for political reasons makes sense.

“I’m giving the county the benefit of the doubt here,” he said. “If we start to wade into the ethical character of the dozens and dozens of investments the county makes, we’d never invest in anything. This is not territory we should be in. The criteria for me are what the return on the investment is and what the seller’s financial standing is.”

Ms. Webb is also up for re-election in November but is running unopposed.