Should Ohio Issuers Keep Bond Proceeds in STAR Ohio?

Whether bond proceeds should stay in STAR Ohio for the life of a project is a pricing question: the pool offers same-day access at a moving published yield, and a competitively bid investment offers a rate fixed in advance for a term.

This page covers what STAR Ohio is, how its yield is set, what a pool means for arbitrage records, how its liquidity compares with a draw-matched agreement, and where a bid fits.

What is STAR Ohio, and who can invest?

STAR Ohio is a short-term investment pool offered by the Ohio Treasurer of State under Ohio Revised Code §135.45, with the Treasurer as its administrator and investment advisor, solely responsible for decisions to buy and sell.

Its rules sit at Ohio Administrative Code 113-10-01; Public Funds Administrators, Inc. is co-administrator and transfer agent; Fifth Third Bank is custodian.

The booklet dated August 31, 2026 puts participation at more than 2,100 subdivisions and 3,200-plus accounts.

Eligibility runs through the subdivision definition in ORC §135.45(G)(2)(a), which the booklet lists as counties, municipal corporations, school districts, townships and municipal or school district sinking funds, with libraries, port authorities, community hospitals, housing authorities and state higher-education institutions added in the booklet's own list.

STAR Ohio is Ohio's state-run member of the local government investment pools family.

Under Ohio statute, ORC §135.14(B)(6) lists "the Ohio subdivision's fund as provided in section 135.45" among the investments a subdivision treasurer or governing board may hold in interim moneys, and STAR Ohio is that fund.

Scope matters here: §135.14 governs interim moneys, so whether a particular issue's proceeds fall under it or under other Ohio authority is a reading for bond counsel.

The statute's wider eligible list also carries a procedure: under §135.14(O), a subdivision may not invest under the section unless a written investment policy is on file with the Auditor of State; brokers, dealers and institutions doing investment business with the subdivision must sign the policy; and a subdivision without a filed policy is limited to interim deposits, no-load money market funds and STAR Ohio.

The full statutory list read against the bond documents is the work of the Ohio permitted investments page.

Within the pool, STAR Ohio permits multiple accounts "for segregation of specific funds," though the booklet does not describe them as bond-proceeds accounts.

How is STAR Ohio's yield set, and how has it moved?

STAR Ohio's yield is a published, moving figure rather than a locked rate: the program reports current yields, quoted net of expenses, at tos.ohio.gov/star-ohio.

The yield is what the Treasurer's portfolio produces: the portfolio is valued at amortized cost against a constant $1.00 net asset value target, and its weighted average maturity, WAM(F), is limited to 90 days or less.

A 90-day WAM(F) cap means the book reprices quickly as instruments mature and are replaced, so the published yield is a moving figure.

On credit, the booklet dated August 31, 2026 states that S&P Global has assigned STAR Ohio its AAAm principal stability rating, its highest, and the program's website says the rating has been held since 1995.

How the yield has moved is a question for the program's own numbers, which this page does not quote: the program reports current yields, so the up-to-date figure belongs to the program's site and to today's reinvestment rates.

What matters for the keep-or-bid decision is structural: a pool yield reports what a short portfolio earned, while a bid fixes a rate before the money moves, so the two diverge when short-term rates move.

How do arbitrage and rebate work for proceeds held in a pool?

A STAR Ohio deposit brings no arbitrage reporting with it: the booklet does not mention bond proceeds, yield restriction or rebate, and it describes no reporting service for the arbitrage records.

Classification is where the analysis starts: under 26 CFR 1.148-1(b), an open-end regulated investment company, such as a mutual fund, is not a commingled fund, while a commingled fund otherwise means a fund holding gross proceeds plus more than $25,000 of other amounts invested collectively.

Where a state pool sits against that definition, and what follows for an issue's yield and rebate computations, is a determination for tax counsel rather than something a deposit settles.

The rules an issue must satisfy are the arbitrage rebate and yield restriction regimes in the arbitrage guides, and the pool permits multiple accounts "for segregation of specific funds."

How does same-day pool access compare with a draw-matched agreement?

STAR Ohio's access terms are published and uniform: same-day processing for requests received by the 2:00 pm Eastern close, 24 hours' notice requested for purchases or redemptions of $100 million or more, no minimum or maximum investment, and no transaction fees.

The booklet also reserves the right to limit a participant's transactions to $250 million per day across all of the participant's accounts, and "reserves the right" makes that limit discretionary rather than automatic.

Rule 2a-7 is a rule for money market funds: it bars a registered money market fund from buying a non-daily-liquid asset if that would leave less than 25% of total assets in daily liquid form, or a non-weekly-liquid asset if that would leave less than 50% in weekly liquid form (the daily minimum does not apply to tax-exempt funds), under 17 CFR 270.2a-7(d)(4)(ii) and (iii).

The booklet's 90-day WAM(F) limit is STAR Ohio's own rule, not a number Rule 2a-7 imposes.

A draw-matched agreement writes access the other way: for arbitrage purposes, a guaranteed investment contract includes any nonpurpose investment with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate.

The practical difference: the pool's access terms are written for all participants alike, while a bid agreement's access is negotiated around one fund's needs, which is why the draw schedule is the input to both.

When does a GIC, flex repo or Treasury portfolio earn more than STAR Ohio?

Nothing on paper decides which side earns more; what puts proceeds on the bid side for pricing is a draw schedule firmed into dates and amounts, and a reason to want a rate fixed for a stated term.

A guaranteed investment contract is, in the MSRB glossary's general definition, an investment secured by a contract with a financial institution that guarantees a fixed rate of return and a fixed maturity, and for arbitrage purposes the term includes any nonpurpose investment with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate.

A full-flex repurchase agreement is, as Federal Reserve Bank of New York research describes a repo, a sale of securities combined with an agreement to repurchase them on a specified future date at a prearranged price, with the withdrawal provisions negotiated to the spend-down.

A structured Treasury portfolio matches Treasury securities to anticipated cash needs, with a money market allocation behind the ladder for a faster-than-expected spend-down.

Which position produces more depends on the path short-term rates take, which is not knowable in advance, so the comparison is settled by pricing: run a bid and set the result against the pool's reported yield.

If the balance is already in the pool, compare your pool yield with real bids to measure the gap on your own numbers.

For a guaranteed investment contract, the fair-market-value safe harbor treats the purchase price as fair market value on the purchase date when its requirements are met, among them a bona fide solicitation, qualifying bids, winning-bid rules, a provider certification and record retention, and the LGIP vs GIC comparison works through pool versus bid in general.

Ohio's statute shapes the term side: an investment made under §135.14 must generally mature within five years from settlement unless it is matched to a specific obligation or debt of the subdivision, under §135.14(D), so a multi-year agreement is read against that limit and its exception by bond counsel.

Can an issuer use both: the pool for near-term draws, a bid for the rest?

Yes: draws that are still estimates sit in the pool, where same-day access absorbs uncertainty, and the portion whose timing has firmed is what a bid prices.

When a bid runs, the Bidding Agent develops the bid specifications, solicits qualified providers, manages questions and compares bids on rate and non-rate terms, then coordinates documentation and settlement and delivers the certifications to bond counsel.

mGIC is an independent, SEC-registered municipal advisor and Bidding Agent that sells none of the products it evaluates and does not act as principal, and its fee is paid by the winning provider rather than the issuer, at or below the safe-harbor maximum in the Treasury arbitrage regulations and disclosed.

To ask for a free, no-obligation reinvestment review of a STAR Ohio balance, or to talk through bidding part of one, contact mGIC.

The determinations that frame any of it, what the fund's documents permit, how the arbitrage rules treat a structure, and what Ohio law requires, belong to bond counsel and tax counsel.

Last updated 2026-10-06.

This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.