Tough stretch for Putnam Fund reveals management error

For decades, the Perley and Ellen M. Putnam Free Lecture Fund has provided city residents with free cultural events, most recently six or more musical performances per year. However, the fund hasn't sponsored any performances since September 2008, due to an unfortunate technical misinterpretation of how the funds should be managed.

In 1917, Nellie P. Chamberlin, of Concord, wrote her will and final testament. She described which of her family and friends should enjoy her estate, which included jewelry, furs and laces, homes in New Hampshire and Oregon and a notable amount of wealth. Once she had bequeathed gifts to all in her life, she left the remainder of her estate to the City of Laconia, "in perpetual trust, to be called 'The Perley and Ellen M. Putnam Free Lecture Fund' in memory of my father and mother, the income of which shall be devoted to the procurement of free courses of lectures on history, literature, art or science, to be given in the City of Laconia at such times and places as the said City of Laconia shall appoint. The principal shall be kept separate and intact and only the income shall be devoted to the uses of the trust. If at any time, the principal should be impaired from any cause, the income shall be at once applied to its restoration and continue to be so applied until the fund is restored to its original amount."

Bob Holbrook is a champion of the fund, as well as a trustee of the trust funds for the city and a member of the Putnam Fund's trustees, who serve as an advisory board for the trustees of the trust funds. In 1966, he said it had $186,000 in it. After 43 years and countless events, the principal balance stands at nearly $1-million. "I would say we did a pretty good job," Holbrook said.

The fund has grown to the point where it's easily the largest one managed by the city, but last year the city realized that the fund hadn't been technically managed properly.

Holbrook, who has been involved in the management of the fund since it started, had been operating under the assumption that the "principal" that Chamberlin referred to in her will was the $186,000 she bequeathed to the city upon her death. With the fund at a million dollars, he and the other trustees of the Putnam Fund felt that they had plenty of money to work with. They did so prudently, spending around $60,000 in recent years, which allowed them to put on several events each year while still protecting the growth of the fund.

However, last year, a new trustee of the trust fund, John Nivus, was brought in. Nivus looked at the Putnam Fund's operations with a fresh eye and felt that something wasn't quite right. His suspicions were affirmed by the N.H. Attorney General office.

The error was in the interpretation of "principal" and "income." The fund had been invested into a portfolio that generated interest and dividends. Those gains could be spent on programs. However, the fund's holdings were also increasing in value but those gains were considered part of the principal and therefore not to be spent.

Minutes of the Putnam Fund's trustees meetings show that Nivus met with trustees in August of 2008. The last event, in September of that year, was a contractual obligation for the city so it was allowed to go on, but that was it.

Acting in accordance to the will, income generated by the will is being used currently to repair the deficit, which stood at about $25,000 as of July 30 of this year.

Nivus and City Manager Eileen Cabanel said the Attorney General office allowed the trustees of the fund to pay the deficit back either immediately or over the course of a few years.

Holbrook and Betty Ballantyne, who has been a trustee in the fund for nearly 20 years, said they were waiting to hear from Cabanel and Nivus as to when funds would be available again. "We are anticipating monies could be available at the first of the year," Ballantyne said.

The error in management technique, for many years, went without consequence for the Putnam Fund. Spending at the rate of $50,000 to $60,000 each year, the trustees were spending less than the income generated by the fund. However, in the fiscal year ending in June, 2009, the fund only generated only about half what it usually did.

The suspension of activities came at an unfortunate tim, said Ballantyne. When city residents would have appreciated free enrichment programs more than ever, there were none offered. She noted that the fund, over the course of its history, has been used to benefit the community in many ways, such as contributing to events downtown and at the Belknap Mill, helping to fund Fourth of July activities, programs at the library and even paying for the commencement speaker at high school graduations.

"It goes a lot of different places," she said. "I think we have done very well with the programs that we have had."

"My general opinion is the city had a lot of great programs we never would have had if not for the Putnam Fund," said Holbrook. "In 2010 sometime we'll be back on schedule."