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Canada Pension Plan’s Quarterly Returns Come Up Short; New $500 Million Investment On Horizon

The numbers are in for the Canada Pension Plan’s investment performance over the first quarter of fiscal year 2015, and the country’s largest pension fund probably isn’t thrilled with the results.

The CPP returned 1.6 percent over the three month period ended June 30. Far from disastrous, the performance still falls short of its peers: the median return of Canadian pension funds over the same period was 3 percent.

In a statement, Canada Pension Chief Executive Mark Wiseman said: “All of our programs reported positive investment returns during the quarter and we continued to further diversify the portfolio globally across various asset classes.”

To that end, the Canada Pension Plan’s Investment Board also announced today that it will be allocating an additional $500 million to investments in the U.S. industrial sector.

Specifically, the investments are in warehouse facilities in high-demand areas of California that will subsequently be leased out. From a CPP press release:

The six logistics and warehouse developments GNAP has committed to are:

GLC Oakland – 375,000-square-foot Class-A warehouse distribution facility recently completed in Oakland, California, adjacent to the Oakland International Airport.

GLC Rancho Cucamonga – two warehouse distribution facilities totaling up to 1.6 million square feet in Rancho Cucamonga, California, 40 miles west of Los Angeles, in the Inland Empire West submarket.

Commerce Center Eastvale – three logistics warehouses providing in excess of 2.5 million square feet located in Eastvale, California, 50 miles west of Los Angeles, in the Inland Empire West submarket.

GLC Fontana – 640,000-square-foot warehouse distribution facility located in Fontana, California, 50 miles west of Los Angeles, in the Inland Empire West submarket.

GLC Compton – 100,000-square-foot distribution facility in Compton, California, a prime infill location within the South Bay submarket of Los Angeles.

GLC Santa Fe Springs – three warehouse distribution facilities totalling up to 1.2 million square feet located in Santa Fe Springs, California, a prime infill location within the Mid-Counties submarket in Los Angeles.

The CPP already had allocated $400 million to the Goodman North American Partnership (GNAP), a joint venture formed between the CPP Investment Board and Goodman Group.

Photo: “Canada blank map” by Lokal_Profil. Licensed under Creative Commons Attribution-Share Alike 2.5 via Wikimedia Commons

Judge: Florida Violated Open Records Laws When It Stonewalled Pension Record Requests, Sent Investigators To Man’s Home In “Chilling” Incident

Over the last few years, Curtis Lee—Jacksonville resident and retired pension attorney—has filed dozens upon dozens of public record requests relating to the Jacksonville Police and Fire Pension Fund.

But Lee claims that instead of getting access to the public records he requested, he was stonewalled by the State Attorney’s Office for the Fourth Judicial District.

In one instance, says Lee, the Office waited a full year to provide an initial response to his requests. In another, the Office sent investigators to Lee’s home to tell him to stop contacting the Office and to question him as to his purpose for requesting the documents.

So Lee filed a lawsuit against the Office alleging they violated public records laws with their actions.

And the law gave Lee some solace this week when a judge sharply criticized the Office and ruled that they will have to pay for all of Lee’s legal fees. The judge, however, did not rule that the Office intentionally broke public records laws, which would have carried more serious penalties. More from the Florida Times-Union:

A judge ruled State Attorney Angela Corey’s office broke Florida’s public-records law, scolding the prosecutor’s office for sending investigators to question the citizen in his home and never demonstrating why the unusual visit was “necessary and appropriate.”

…

Judge Karen Cole also criticized Corey’s office for refusing to accept Lee’s cash for records and in some cases taking more than a year to provide even an initial response.
The State Attorney’s Office will have to pay Lee’s legal fees for his lawsuit against it. Cole will need to figure out exactly how much that is. Lee’s attorney, Brooks Rathet, said it should be somewhere around $20,000.

The State Attorney’s Office also violated public records laws by requiring the public to pay for records with business checks, cashier’s checks or money orders. Cash and debit cards were not accepted.

To get a money order, Lee and others had to pay a third-party service a fee. That, Cole said, “unlawfully burdens” citizens. From now on, the State Attorney’s Office has to accept cash for records. If the office wants to, the judge said, it can also allow other types of payment.

Cole also described how the State Attorney’s Office violated the law by taking too long with its response to requests.

As one example described, Lee sent Corey’s office six letters with 27 categories of public records requests in February 2011.

About five days later, two State Attorney’s Office investigators came to Lee’s door, according to Judge Karen Cole’s final judgment.

Sending investigators to tell someone to stop calling the State Attorney’s Office “would have a chilling effect,” Cole wrote, for most people. Most people might not have continued requesting records after a visit like that, she wrote.

After the judgment, the Office told Lee that they would produce the records he had requested by Thursday, August 14.

Lee filed a similar lawsuit against the Jacksonville Police and Fire Pension Fund. Lee won certain aspects of that case, but the case is now being appealed to the Supreme Court by the fund.

New Jersey Voters Weigh In On Pension Reform Policy Options In New Poll

Unlike most states, New Jersey’s pension system gets ample press in state news programs and publications. And with airtime comes debate—meaning that every New Jersey voter, by now, has an idea of whether they approve of Chris Christie’s string of pension-related decisions stretching back to May.

A recent poll, conducted by Quinnipiac University, gave voters a chance to voice those views.

From the results, one thing is clear: when it comes to Gov. Christie’s “no pain, no gain” approach to pension reform, voters want the “gain”. But they aren’t too keen on the “pain” part of that equation.

Note: the poll asked voters their opinions on various policy options to fix the state’s pension funding situation. Sharp-eyed readers will notice there were no questions regarding the state making larger payments to the fund. That’s because it’s unlikely that particular policy option will even be proposed; Christie has said this new round of pension reforms will focus on cuts to worker benefits and/or tax increases elsewhere. Hence the “no pain, no gain” slogan assigned to Christie’s push for reform.

To start, most voters agree that pensions for New Jersey’s public employees are too high (47 percent). Surprisingly, that number increases along with age: just 42 percent of voters in the 18-34 age bracket think pension are too high. But 49 percent of voters over 55 years old think that public pension benefits are excessive.

But the same voters didn’t think pensioners should be made to accept lower benefits. Overall, 55 percent of respondents disapproved of the idea of making workers accept lower pensions in exchange for higher taxes, which would be used to shore up the pension system’s funding issues. Only 33 percent agreed with that proposal.

When it comes to making voters choose between raising retirement age or increasing contribution rates for public employees, the consensus was clear: raising the retirement age was unpopular (only 31 percent approval) while increasing contributions was much more acceptable (52 percent approval).

Finally, voters were asked which policy options they preferred to help fund the pension system. The options: increase taxes or reduce pension benefits.

As it turns out, neither policy option is particularly popular. Only 12 percent support increasing taxes, and only 26 percent think worker benefits should be decreased. A combination of the two policies was more popular amongst voters (52 percent would approve of a combination of tax hikes and benefit cuts).

The poll was conducted with 1,148 New Jersey voters contacted between July 31 and Aug. 4.The margin of error for the poll was plus or minus 2.9 percent.

You can read a summary of the poll results here.

Providence Mayor Tries to Stall Deposition Until After Election in Lawsuit Over Pension Actuarial Errors

Early in 2013, Providence filed a lawsuit against the actuarial firm, Buck Consultants, that had served as the city’s actuary for the previous 90 years.

It takes a pretty serious falling out to break off such a long-standing relationship, but Providence is alleging that Buck made a serious mistake when crunching the numbers behind the city’s recent set of pension reforms.

When the city was designing its pension reforms, it asked Buck to calculate how much the city would save from various policies, namely the suspension of cost-of-living increases. So that’s what Buck did.

But the city alleges that Buck made serious mathematical errors in its estimations, overstating the city’s savings by $700,000 a year and in turn boosting its pension liabilities by $10.8 million over the next 28 years.

The court case is now underway, and the time has come for Mayor Taveras to be deposed. But Taveras says he needs to wait until after the Sep. 9^thgubernatorial primary to answer questions under oath. Buck says “no way.” From the Providence Journal:

The city last week filed an emergency motion for a protective order seeking to postpone until after the primary election Taveras’ questioning under oath about his decisions regarding changes to the city’s retirement system. It asked, too, that U.S. District Chief Judge William E. Smith limit his deposition to three hours, given the “press of city business.”

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Buck Consultants LLC — which performed financial analyses for the city since 1920 — argues that Taveras’ deposition is imperative to its defense against the city’s lawsuit.

Buck looks to question Taveras, who it identifies as the central witness in the case, not only about his decision-making in pushing for an ordinance suspending cost-of-living increases for retirees but also statements he has made in the course of his campaign for governor. Buck asserts that its lawyers should be allowed to depose Taveras “while the campaign is ongoing” based on his comments.

“Mayor Taveras is not a mere bystander to this dispute,” Buck writes. “As the City’s highest elected official, he is a critically important witness.”

What could Taveras be worried about? For one, Taveras is saying the he wouldn’t have passed the reforms if he’d known about the math errors.

But Buck accuses Taveras of signing off on the series of reforms after he was aware of the errors.

According to Buck, Taveras is using the actuarial mistakes as a campaign ploy to save face on a policy that took money out of the pockets of many voters.

Taveras and his challenger, Gina Raimondo, have been see-sawing back on forth in the polls since last year.

Screen shot 2014-08-13 at 10.48.29 AM — Credit: Wikipedia

Photo: “Angel Taveras headshot” by City of Providence, Office of the Mayor – City of Providence, Office of the Mayor. Licensed under Public domain via Wikimedia Commons

Director of South Carolina Pension Investment Commission Abruptly Resigns Two Months Into Tenure

The executive director of the South Carolina Retirement System Investment Commission has abruptly resigned after just two months on the job.

Sarah Corbett, who was named executive director on June 3, reportedly submitted her resignation earlier this month. News didn’t break of the resignation until Wednesday afternoon.

The Investment Commission invests and manages all assets for the South Carolina Retirement System. In all, the Commission manages nearly $30 billion worth of assets.

New Transparency Requirements For Colorado Schools Will Shed Light On Pension Costs

Colorado is known for its Rocky Mountains. But the state’s rocky pension funding situation is well known, too, and lawmakers spent a chunk of the last legislative session trying to smooth out that area.

Colorado recently passed House Bill 14-1292, also called the “Student Success Act.” Most of the law deals with increasing state funding for public schools.

But a small portion of the law imposes stringent, all-encompassing financial reporting and transparency requirements on all public schools. Schools will have to report salary schedules, financial audits, and investment performance reports, among other things.

(The suggested template for all schools to follow can be seen at the bottom of this post.)

Many lawmakers are hoping that new transparency standards help shed light on the state’s pensions funding and cost issues.

Colorado’s largest pension system, the Public Employees’ Retirement Association, was only 63.25 percent funded as of 2013.

There are five sub-sets in the system; of all the sub-sets, the “school division”—the division that caters to almost all the state’s public school employees—is by far the largest. It’s also one of the unhealthiest parts of the system, as it only has enough assets to cover 62 percent of its liabilities.

Screen shot 2014-08-12 at 1.02.30 PM — Credit: Ballotpedia

Critics of the state say that part of the reason for the underfunding issues is that Colorado has been paying less and less of its Actuarially Required Contribution (ARC).

Screen shot 2014-08-12 at 1.52.35 PM — Credit: Ballotpedia

But others say that school districts themselves could be to blame for some of the underfunding, as teacher pensions are too high. Transparency standards, they say, would shed light on those issues and make them available to remedy.

Colorado public school officials are not keen on the new reporting standards. From ChalkBeat:

A wide variety of district officials interviewed by Chalkbeat raised four main concerns about the law:

Implementation – District officials generally agree that compliance will be relatively painless for large districts but presents a greater challenge to some medium-sized and small districts. “It is going to be a lot of work for a lot of people. It depends on how big you are and how many people you have working for you,” Gustafson said.

Comparability – Even with the requirement for greater uniformity, some district officials wonder if district and school data will be fully comparable. They raise the question of likely district differences in how they account for costs borne by multiple schools – things like the salaries of special education teachers, psychologists and other staff who split their time among buildings.

Use & Misuse – District officials say they support transparency as an ideal but are openly skeptical that new financial data will see much use by the public.

“Who’s going to actually look at this website?” asked Tracy John, business manager of the 606-student Peyton School District northeast of Colorado Springs.

Anecdotally, districts say there’s little public use of financial information currently available online. “I don’t receive very many calls about transparency,” said Guy Bellville, chief financial official of the Cherry Creek Schools.

And districts are nervous that advocacy groups will use school-level financial data for their own ends, ignoring the context and nuances of why districts spend money as they do.

“Rather than build confidence in school budgeting decisions, it is more likely to provide ammunition to public education detractors who have no interest in learning the deeper context or complexity that comes with school budgeting,” argues Jason Glass, superintendent of the Eagle County Schools.

Impact on student achievement – “Tell me how this is going to impact student achievement,” Gustafson said. “This is a distraction that takes away from student achievement.” Said Boulder’s Sutter, “I’m fairly certain there are no studies about how one more accountant in the district office is going to affect outcomes.”

Below, you can see the template school districts are being asked to use to comply with the new reporting standards.

[iframe src=”<p style=” margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block;”> <a title=”View Colorado Schools Transparency Template on Scribd” href=”http://www.scribd.com/doc/236632574/Colorado-Schools-Transparency-Template” style=”text-decoration: underline;” >Colorado Schools Transparency Template</a></p><iframe class=”scribd_iframe_embed” src=”//www.scribd.com/embeds/236632574/content?start_page=1&view_mode=scroll&show_recommendations=true” data-auto-height=”false” data-aspect-ratio=”undefined” scrolling=”no” id=”doc_62987″ width=”100%” height=”600″ frameborder=”0″></iframe>”]

Photo by TaxRebate.org.uk

Detroit Creditor Accuses “Agenda-Driven” Bankruptcy Mediators Of Favoring Pensioners

Another chapter has been written in the bitter fight between Detroit and one of its largest creditors, Syncora. The bond insurer has the city’s bankruptcy mediators of blatantly favoring pensioners while pushing most of the pain of the bankruptcy onto the city’s creditors.

Syncora said in a court filing today that Detroit’s grand bargain deal was “the product of agenda-driven, conflicted mediators who colluded with certain interested parties to benefit select favored creditors to the gross detriment of disfavored creditors and, remarkably, the City itself.”

Syncora feel they are being treated unfairly in Detroit’s bankruptcy. As part of the grand bargain, public pensioners had to accept significant cuts to their benefits. But the cuts weren’t as significant as they could have been.

But much steeper cuts are being enforced elsewhere, including on Detroit’s bondholders, of which Syncora is one.

In addition to being a bondholder, Syncora insures hundreds of millions of dollars worth of pension obligation certificates of participation (COPs) issued by Detroit. Those instruments became worthless when the city declared bankruptcy.

As part of the city’s bankruptcy proceedings, Syncora stands to lose between 90 percent and 100 percent of its investment—all told, around $250 million, including the money they’ll have to pay to clients for whom Syncora had guaranteed payment from Detroit bonds. More from the Detroit Free-Press:

Bond insurer Syncora — which could lose hundreds of millions in the bankruptcy — argued that Judge Steven Rhodes must reject the city’s sweeping restructuring plan because of the “naked favoritism” of lead bankruptcy mediator Gerald Rosen and mediator Eugene Driker.

The accusations thrust the mediators into the middle of a fight between the city and Syncora that has become so bitter that Rhodes ordered the city to stop using war analogies to describe the insurer’s actions.

Rosen and Driker negotiated terms of the grand bargain, which allows the city to reduce pension cuts and transfers the DIA to a charitable trust. They helped solicit donations from nonprofit foundations, which pledged $366 million over 20 years, and convinced the DIA to contribute $100 million over 20 years from its own donors. The state of Michigan then agreed to contribute $195 million in upfront cash to the deal, which must be approved by Rhodes.

In its filing, Syncora cited several public statements by Rosen, including his statement at a press conference that the grand bargain is “about Detroit’s retirees who have given decades and decades of their lives devoted to Detroit.”

Syncora argued that Driker should have disqualified himself from mediating the grand bargain since his wife is a former member of the DIA’s board of directors.

Rosen and Driker did not immediately respond to requests seeking comment.

For a breakdown of Detroit’s plans to repay various creditors, see Pension360’s coverage here.

Arizona Fund Gives CIO Retention Bonus, Contract Extension In Midst Of Federal Investigation

An Arizona pension fund, already embroiled in controversy, voted yesterday to sign its Chief Investment Officer to a two-year contract extension and gave him a $50,000 retention bonus. That bonus is in addition to a $75,000 bonus the CIO was already scheduled to receive later this year, on top of his $268,000 annual salary.

The move is controversial because the fund—the Public Safety Personnel Retirement System (PSPRS)—is in the midst of a federal criminal investigation over actions that happened under the CIO’s watch.

The fund’s Chief Investment Officer is Ryan Parham.

In January, the FBI began investigating the fund over suspicions that investment staff were inflating the value of real estate investments to trigger performance bonuses.

A federal subpoena, reluctantly released by the fund this week after a court order, indicates the inflated assets had to do with investments made with Desert Troon Companies.

According to the Arizona Republic, Ryan Parham was directly involved with Desert Troon Companies investments.

The Arizona Department of Administration, which approves state contracts, has already voiced its apprehension about Parham’s contract, especially in light on illegal raises given earlier this year by the fund. From the Arizona Republic:

The Arizona Department of Administration, prior to Monday’s vote, formally raised concerns about the contract. However, the state does not have the power to reject it outright. All employment contracts, however, need formal review from ADOA.

Administration Department Director Brian McNeil in a July 31 letter to the trust said he was not giving any “formal consultation” on the contract until the board clarifies its intention to extend Parham’s contract.

The board by a 3-2 vote (with two members absent) on Jan. 15, authorized Hacking to negotiate a contract extension with Parham, but Hacking did not do so. Hacking was forced out on July 16.

The trust submitted Parham’s amended contract to the state two days later.

McNeil said in the letter his department has concerns about the “significant gap” of time between the board’s action and contract submittal. In addition, McNeil said, he’s concerned about “the circumstances surrounding the days/weeks prior” to receiving the contract.

Phoenix City Councilman Sal DiCiccio is calling for the Attorney General’s Office to investigate the raises given by PSPRS over recent months.

“This is insane. They have the worst financial record of any of the (state) funds, and they are giving him a bonus?” said DiCiccio.

VP of CalPERS Board Faces Repeated Discipline from State Ethics Panel

Priya Mathur is the Vice President of the CalPERS Board of Administration, and she is currently seeking re-election to serve a fourth term on the Board. Her tenure requires her to submit semi-annual campaign financial statements and statements of economic interest.

But the Fair Political Practices Commission (FPPC), California’s political watchdog agency, says Mathur failed to submit her campaign financial statements in a timely manner four separate times in 2012 and 2013.

And it’s not the first time Mathur has failed to turn in required documentation in a timely manner—the FPPC has fined Mathur three times in the past for similar offenses after she failed to submit statements on time in 2002, 2007, 2008 and 2010. From the LA Times:

This is not Mathur’s first run-in with the ethics panel. The commission has taken enforcement actions against Mathur three other times in the last nine years, fining her a total of $13,000.

The fines could become an issue in her current reelection campaign, with mail-in balloting running from Aug. 29 to September 29.

“I find it interesting that she feels she doesn’t have to comply with these standards,” said Mathur’s opponent, Leyne Milstein, the finance director of the city of Sacramento. “We all need to be held accountable if we want to represent the public.”

The fine and settlement agreement follow a series of filing lapses by Mathur that were investigated and prosecuted. The commission fined her $3,000 in April 2010, and $4,000 in May of that year for failing to file on time legally required statements of economic interest for 2007 and 2008.

As a result, Mathur’s board colleagues punished her by stripping her of a chairmanship of the health committee and temporarily suspending her travel privileges. However, they subsequently voted to make her vice president of the board.

In 2006, Mathur paid a $6,000 fine for not properly filing financial documents after her initial 2002 election to the CalPERS board.

The FPPC is expected to formally approve the charges against Mathur at its next meeting on August 21. Mathur is not disputing the charges.

Gary Winuk, the FPPC’s chief of enforcement, had this to say:

“Failing to file a campaign statement is a serious violation of the Act because it deprives the public of important information about a candidate’s financial activities,” he told the LA Times.

Photo by Blake O’Brien via Flickr CC License

SEC Charges Kansas With Fraud For Misleading Investors About Health of Pension System

Back in 2009, Kansas was preparing to issue $127 million worth of bonds to investors who probably knew that the state’s pension system wasn’t the healthiest in the country.

What investors didn’t know, however, was just how bad the system really was—it was the 2^nd most underfunded in the nation at the time.

But don’t blame the investors for their ignorance. They didn’t know because Kansas didn’t tell them.

That lack of disclosure is the reason the SEC today announced they are charging Kansas with fraud for misleading investors about the health of the state’s finance and, by extension, the risk associated with buying its bonds.

From Bloomberg:

The U.S. Securities and Exchange Commission charged Kansas with failing to disclose a “multibillion-dollar” pension liability to bond investors.

“Kansas failed to adequately disclose its multibillion-dollar pension liability in bond offering documents, leaving investors with an incomplete picture of the state’s finances and its ability to repay the bonds amid competing strains on the state budget,” LeeAnn Ghazil Gaunt, chief of the SEC Enforcement Division’s Securities and Public Pension Unit, said in a statement from Washington.

A draft actuarial report provided to Kansas’s public pension found that the gap between its liabilities and assets had grown to $8.3 billion in 2008, from $5.6 billion the previous year, lowering the pension’s funding level to 59 percent, the SEC said.

The gap was the result of years of insufficient contributions by the state and school districts to cover the cost of benefits earned by public employees and their accumulated liabilities, the SEC said.

Only Illinois had a lower pension funding status than Kansas, according to a 2010 report by the Pew Center on the States.

Neither the finance authority nor the Kansas Department of Administration, which advised the authority of material changes to state finances, determined that additional disclosure regarding the pension fund in the bond offering statement was necessary, the SEC said.

The SEC has been investigating this charge for four years.

The SEC also announced today that Kansas has agreed to settle the case without admitting or denying the allegations.

No financial sanctions were imposed on Kansas as a result of the charges.

It’s likely the SEC was content with the settlement due to recent efforts by Kansas to increase the state’s compliance with federal regulations.

In addition, the state has attempted to increase the sustainability of its retirement system—the state boosted contribution rates for workers and employers in 2012, and new hires are now entered into a “cash balance” plan.

Photo by CatDancing via Flickr CC License

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