 National Association of Counties * Washington, D.C. Vol. 31, No. 15 * August 9, 1999 Previous story | Table of Contents | Next story
Invest In Our Cities, Not Timbuktu? By Neal R. Peirce
(Neal Peirce is a syndicated columnist who writes about local government issues. His columns do not reflect the opinion of County News or NACo.) Why should America’s public pension funds – the life savings of America’s state and local government workers – be invested overseas, when better returns are often available from investments in our own cities? That’s the kind of disturbing question that Philip Angelides, California state treasurer since last January, has been asking. It turns out that CALPERS – the California Public Retirement System in which Angelides plays a key role – has $35 billion invested in 48 countries worldwide. Altogether, U.S. public pension funds now hold $242 billion worth of foreign stocks. Yet Angelides, monitoring reports for the massive pension funds (value $240 billion) his office manages noticed a big flow in depressed Indonesian and Japanese securities. In some cases, CALPERS’ 2-, 3-, and 5-year returns from so-called "emerging markets" have even been negative. "It’s amazing to me," says Angelides, "how American investment in volatile overseas areas is a ‘given’ of our capital markets, even while our own emerging markets – inner cities, minority small businesses – are so often written off as risky and troublesome." Yet there are ripe opportunities, he notes, for "infill" development in cities. The federal Community Reinvestment Act, he adds, proves that lower-income minority residents, given a chance to borrow for a home, "will work their hearts out to pay it off." Yet when Angelides asked a group of investment bankers why they hadn’t set up a secondary market in loans to small and minority firms, paralleling the "Wall Street-ization" of today’s large real estate investment packages, their answer was the idea never occurred to them. It’s not the first time we’ve seen such anomalies. In the ’60s and ’70s, as American capital rushed into questionable (and later disastrous) Latin American investments, our inner cities were effectively "redlined" to exclude home mortgage loans. Later, the multibillion dollar savings and loan scandals were perpetrated by institutions that pumped money into fast-expansion suburbs while ignoring older cities. But past may not be prologue, if Angelides has his way. A 46-year-old former developer and state Democratic chairman elected treasurer last fall, Angelides has decided California faces a grim future unless it starts to rebuild its decaying older cities and curb wasteful and environmentally risky sprawl development at the urban fringe. In June, Angelides went on the road across California selling his newly issued "Smart Investments" report. He argues California should set clear, strategic goals for investing its billions of public infrastructure funds and pension monies. His own offices administer $450 million in yearly tax credits to construct affordable housing, and Angelides has abandoned his predecessor’s lottery system of allocation. Instead, he’s instituted smart growth incentives – extra points for projects within a quarter mile of transit, or walking distance of an elementary school, or in a depressed area with a holistic community redevelopment process under way. Angelides’ central thrust is to avoid a "two Californias" future of estranged economic classes and races. It’s the closest thing to a true vision for California, observes veteran Sacramento Bee columnist Peter Schrag, that any statewide official has articulated since Gov. Pat Brown left office in 1967. Angelides is getting welcome signals partly because the old growth assumptions – that it’s OK to build on greenfields and ignore the cities – are falling apart under the pressure of growth boundaries, hostile voter initiatives, traffic bottlenecks and land shortage. Will officials in other states pick up on the smart growth investment strategies? An early signal may come from last week’s (July 29–31) annual conference of state treasurers, meeting in Portland, Ore. Custodians collectively of trillions of public funds, the treasurers traditionally focus on fiscal prudence and caution. Some may be startled by Angelides’ idea – that intelligent, strategic investing for states’ futures means curbing sprawl and reinforcing cities. And investing more at home and less in Timbuktu. But coming from the state treasurer of California, and with growing smart growth constituencies in their own states, it’s an idea they’ll have to take seriously. ( c ) 1999, Washington Post Writers Group |
