Pension360

New York City’s five pension funds on Wednesday sent a letter to many of their external investment managers, requesting “full transparency” on fees – both historical and current – or risk being shut out of future pension investments.

The letter was sent to about 200 managers, according to the Wall Street Journal, which reviewed the letter.

Managers who don’t comply could get the cold shoulder from the city’s pension funds in the future, according to the letter.

More from the WSJ:

In what is one of the most aggressive moves yet, the New York City Retirement Systems, the nation’s fourth-largest pension fund by assets, is demanding certain external money managers divulge all of their associated fees and expenses—or risk being axed.

In a letter sent Wednesday to about 200 firms and reviewed by the Journal, Scott C. Evans, the chief investment officer of the city’s five pensions, wants “full transparency” on a range of fees, both on a historical basis and on a quarterly basis going forward.

Mr. Evans wants the historical analysis provided by the end of the year.

Pension funds like New York City’s say they only have a partial view on the total costs associated with non-traditional asset classes like hedge funds, private equity and real estate. These types of investments have drawn scrutiny from pension officials across the U.S., because the fee structures aren’t broadly known.

“Business as usual is not going to cut it for fund managers who want to do business with the New York City Pension Funds,” said Scott M. Stringer, the New York City comptroller, whose office oversees pensions, in a statement.

[…]

Mr. Evans said he will recommend the pensions’ trustees adopt a policy where external managers refusing to provide such cost-related information will be denied “new or increased” investments with the New York City funds.

The city’s five pension funds collectively manage around $163 billion in assets.

 

Photo by Thomas Hawk via Flickr CC License

South Korea’s National Pension Service (NPS) is the third-largest pension fund in the world, but the work culture is very different from other large funds, according to a report from Reuters.

Insiders who spoke to Reuters paint a picture of a workplace where portfolio managers walk on eggshells, and staffers are sometimes paralyzed by fear of criticism from auditors and politicians.

The tension stems partially from the fact that the fund’s CIO is annually brought in front of numerous government panels that dissect his decision-making process.

More from Reuters:

Last year investment managers at South Korea’s National Pension Service (NPS), which oversees $430 billion in assets, were looking to buy a portfolio of blue-chip stocks from emerging markets including Southeast Asia.

The investment was to have been part of a push to diversify a heavily domestic portfolio, but ultimately the world’s third-largest pension fund took a pass.

Fear of second-guessing and criticism by auditors and politicians if the investment turned sour outweighed the promise of upside, said an NPS investment manager familiar with what happened.

“It’s always: ‘is there a possibility this could go bad?’,” said the investment manager, declining to be identified as he was not authorized to speak to the media.

“Because some investment managers might have been previously criticized (by government auditors) and now avoid investments that could be controversial.”

Heavy scrutiny distracts NPS managers from generating higher returns on retirement money earmarked for the fastest-ageing population among advanced economies, insiders say.

Since last month, the chief investment officer of NPS has been brought before four parliamentary panels to explain and justify investment decisions – an increasingly onerous annual process that has “cut into” the work of investment managers below him, said another NPS manager.

It is also relatively understaffed.

NPS had 261 people in its investment office as of September, managing on average about 1.9 trillion won ($1.68 billion) in assets each. By comparison, CalPERs, the largest U.S. pension fund, has about 370 people in its investment office overseeing $288 billion in assets, a CalPERS spokesman said, or $779 million each.

NPS manages about $430 billion in assets.

 

Photo by Anton via Flickr CC License

A plan to overhaul the New Jersey pension system – first proposed in February by the Pension and Health Benefit Study Commission, and later endorsed by Gov. Christie – could put undue burden on the state’s school districts, according to a new report from Moody’s.

Details on the reform proposal, from NJ.com:

[The reform] proposal […] would freeze the existing pension plan and shift workers onto less generous retirement and health care plans. While the state, which pays for school employees pension and health benefits, would continue to pay for the current system’s existing debts, school districts would have to assume the costs of the new system and retirees’ health care.

Under that proposal, the districts’ new costs would be offset by the billions of dollars saved from reducing public employee health benefits paid by school districts and municipalities from “Cadillac” plans to plans on par with the private sector.

And here’s what Moody’s had to say, from NJ.com:

If the savings doesn’t pan out, the proposal could burden school districts that have few options but to raise taxes, cut costs, borrow money or spend their reserves to pay the tab for teacher pensions, Moody’s said.

“According to the proposal, districts would not be financially affected because any tax increases necessary on their side would be more than offset by tax reductions at the local government level, thus making it at least cost neutral,” the report said. “There is, however, no mechanism currently in place or proposed to compel municipalities and counties to either share the savings or reduce their budgets in step with the savings.”

Moody’s said it’s also unclear “how the various local government entities would rebalance these shared savings over time as health care and pension costs rise.”

Read the Moody’s press release here.

 

Photo By Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

Last week, Keith Leslie of the Globe and Mail reported, Wynne says Ontario may drop pension plan if Liberals win election:

Ontario Premier Kathleen Wynne suggested Tuesday that her government would drop the idea of a provincial pension plan if Liberal Leader Justin Trudeau becomes the next prime minister.

Wynne couldn’t convince the Harper government to enhance the Canada Pension Plan, so her Liberal government introduced an Ontario Retirement Pension Plan that would mirror the CPP, essentially doubling deductions and benefits.

If Trudeau wins the Oct. 19 election and is willing to improve the CPP, that would address her concerns about people without a workplace pension plan not having enough money to live on when they retire, said Wynne.

“If we have a partner in Justin Trudeau to sit down and work out what they’re looking at as an enhancement to CPP, that was always my starting point, that was the solution,” she said.

Trudeau is campaigning on a promise to expand the CPP and to return the age of eligibility for old age security to 65 from 67, and said he’d begin talks with the provinces on improving the CPP within three months of taking office.

New Democrat Leader Tom Mulcair also promises to enhance the CPP, and says he’d convene a First Ministers’ meeting on improving the pension plan within six months of forming government. Like the Liberals, the NDP would also return the age for OAS eligibility to 65.

Ontario’s pension plan, scheduled to begin Jan. 1, 2017, will require mandatory contributions of 1.9 per cent of pay from employers and a matching amount from workers — up to $1,643 a year — at any company that does not offer a pension.

As Wynne campaigned with federal Liberal candidates in the Toronto area Tuesday, she insisted she was not worried her attacks on Stephen Harper’s Conservatives will make it hard to work with them if they’re re-elected.

“Well, you know, it seems to me that before the federal election campaign started there was a little bit of a challenge working with Stephen Harper, but obviously I will continue to try to do that if Stephen Harper is the prime minister,” she said to cheers and laughter from Liberal supporters.

Wynne, who has been the most vocal premier in the federal campaign and has clashed repeatedly with Harper over the Ontario pension plan, said the provinces need a government in Ottawa that will work with them on retirement security, climate change, infrastructure and the Syrian refugee crisis.

“I will work with whomever is the prime minister, but I really believe that in this country, at this moment, we have an opportunity to elect a prime minister who understands that working with the provinces and territories is in the best interests of the country,” she said.

Ontario voters historically have supported different parties in government at the federal and provincial levels, but Wynne isn’t worried about campaigning herself out of a job in the next provincial election.

“I think the opportunity we have right now is to have a federal government and a provincial government that are on the same page, that are actually pulling in the same direction, and that’s exactly what I’m looking forward to,” she said.

Wynne also defended her decision to campaign heavily for her Liberal cousins in the federal election as “standing up for the people of Ontario,” and said she didn’t need to take a vacation day from her duties as premier to do it.

“I work seven days a week, so this is part of the work that I do.”

Well, Ontario Premier Kathleen Wynne can breathe a lot easier now that the Liberals have swept into power. After winning a decisive majority in a stunning comeback, Liberal Leader Justin Trudeau will turn his attention Tuesday to forming a cabinet and grappling with the host of urgent challenges that await him.

One of the biggest challenges that awaits Mr. Trudeau is the lackluster Canadian economy. Norman Mogil wrote a guest post for Sober Look on Canada and the oil price shock. In his excellent comment, Canada’s Recession Debate Misses the Point, Ted Carmichael notes the following:

The problem for politicians and policymakers is that the negative terms of trade shock comes from outside Canada, not from changes in the behaviour of domestic consumers, corporations or governments. The current terms of trade shock has many causes, including the development of new technologies that have lowered the cost of producing oil; the decision by Saudi Arabia and other OPEC countries to continue to pump oil at a high rate rather than cut production to support the oil price; and the slowdown in China’s economy which has lowered demand and prices for a broad range of commodities.

Whether or not the downturn in the global commodity super-cycle causes a business-cycle recession measured by GDP and employment is not the most important issue. The most important point to grasp is that Canada is facing a period in which the combined real income of households, corporations and governments are declining and are unlikely to rebound quickly. Even if real GDP resumes growing in the second half of 2015 and employment continues to rise, we will be producing and working more but receiving less real income for our efforts.

What the Economic Debate Should be About

The real economic issue that politicians should be facing is not whether Canada has slipped into a modest business cycle recession, but rather what is the appropriate economic policy response to a lasting negative shock to our national income caused by the fall in the prices of the commodities that we produce.

The Conservative Party wants to stay the course, keeping taxes low, encouraging home-ownership, and pursuing a balanced budget. That is a reasonable start, but does not go far enough in providing incentives to boost growth outside the resource industries.

The Liberal Party wants to raise taxes on high income earners including high-income small business owners, reshuffle child benefits to favour the “middle class”, and incur deficits to fund infrastructure projects. The difficulty in this approach will be to maintain business confidence and to control deficit spending in an environment of weak GDP growth.

The New Democratic Party (NDP) wants to raise corporate taxes, impose carbon taxes, expand government’s role in child care, and pursue a balanced budget. This is a difficult if not impossible set of promises to deliver on during a period of weak commodity prices.

The worst election outcome, but perhaps the most likely according to current polls, would be a coalition government of the NDP and Liberals. Coalition economic policies would likely result in higher taxes on high income earners, small businesses and corporations, increased spending on government provided child-care and infrastructure, and an early loss of control of budget deficits.

All three political parties and all Canadian voters would be well advised start thinking about what kind of pro-investment, pro-growth policies Canada needs to pursue in a period when the main economic engine and source of national prosperity has stalled and shifted into reverse.

Luckily, there is no coalition government of the NDP and Liberals. With a clear majority victory pretty much from coast to coast, the Liberals can implement the policies they have been arguing for.

This also means that the buck now stops with the Liberals their leader Justin Trudeau who will be under pressure to perform. And they better heed Ted Carmichael’s advice and really think hard about about what kind of pro-investment, pro-growth policies Canada needs to pursue in a very difficult global economic environment where deflationary headwinds are picking up steam.

My regular readers know my thoughts on the Canadian economy. I’ve been short Canada and the loonie for almost two years and I’ve steered clear of energy and commodity shares despite the fact that some investors are now betting big on a global recovery. I think the crisis is just beginning and our country is going to experience a deep and protracted recession. No matter what policies the Liberals implement, it will be tough fighting the global deflationary headwinds which will continue wreaking havoc on our energy and commodity sectors and also hurt our fragile real estate market. When the Canadian housing bubble bursts, it will be the final death knell that plunges us into a deep recession.

Having said this, I don’t want to be all doom and gloom, after all, this blog is called Pension Pulse not Greater Fool or Zero Hedge. I’d like to take some time to discuss why I think the new Liberal government will be implementing some very important changes to our retirement system, ones that will hopefully benefit us all over the very long run regardless of whether the economy experiences a very rough patch ahead.

Unlike the Conservatives led by Stephen Harper who was constantly pandering to Canada’s financial services industry, ignoring the brutal truth on DC plans, both the Liberals and the NDP were clear that they want to enhance the CPP for all Canadians, a retirement policy which will curb pension poverty and enhance our economy providing it with solid long-term benefits.

Of course, as always, the devil is in the details. Even though I agree with the thrust of this retirement policy, I don’t agree with the Liberals and NDP that the retirement age needs to be scaled back to 65 from 67. Why? Because Canadians are living longer and this will introduce more longevity risk to Canada’s pension plan.

But longevity risk isn’t my main concern with the Liberals’ retirement plan. What concerns me more is this notion of voluntary CPP enhancement. I’ve gotten into some heavy exchanges on this topic with Jean-Pierre Laporte, a lawyer who founded Integris, a firm that helps Canadians invest for their future using a smarter approach.

Jean-Pierre is a smart guy and one of the main architects of the Liberals’ retirement policy, but we fundamentally disagree on one point. As far as I’m concerned, in order for a retirement policy to be effective, it has to be mandatory. For me, any retirement policy which is voluntary is doomed to fail. Jean-Pierre feels otherwise and has even written on what forms of voluntary CPP enhancement he’s in favor of.

There are other problems with the Liberals’ retirement policy. I disagree with their stance on limiting the amount in tax-free savings accounts (TFSAs) because while most Canadians aren’t saving enough, TFSAs help a lot of professionals and others with no pensions who do manage to save for retirement (of course, TFSAs are no substitute to enhancing the CPP!).

More importantly, Bernard Dussault, Canada’s former Chief Actuary shared this with me:

“Unfortunately, there is a major flaw in the Liberal Party of Canada’s resolution regarding an expansion of the Canada Pension Plan, which is that their proposal would exclude from coverage the first $30,000 of employment earnings.

Indeed, although the LPC’s proposal would well address the second more important goal of a pension plan, which is to optimize the maintenance into retirement of the pre-retirement standard of living, it would completely fail to address the first most important goal of a pension plan, which is to alleviate poverty among Canadian seniors.”

I thank Bernard for sharing his thoughts with my readers and take his criticism very seriously.

Let me be crystal clear here. I don’t think the Liberals can afford to squander a golden opportunity and not introduce mandatory CPP enhancement for all Canadians. Anything short of this would be a historical travesty and it would dishonor Pierre-Elliott Trudeau’s legacy and set us back decades in terms of retirement and economic policy. 

Why am I so passionate on this topic? Because I’ve worked at the National Bank, Caisse, PSP Investments, the Business Development Bank of Canada, Industry Canada and consulted the Treasury Board of Canada on the governance of the public service pension  plan. I’ve seen first-hand the good, the bad and ugly across the private, public and quasi-public sector. I know what makes sense and what doesn’t when it comes to retirement policy which is why I was invited to speak on pensions at Parliament Hill and why the New York Times asked me to provide my thoughts on the U.S. public pension problem.

I’ve also put my neck on the line with this blog and have criticized and praised our largest public pension funds but one thing I know is that we need more defined-benefit plans covering all Canadians and we’ve got some of the very best public pensions in the world. Our top ten pensions are global trendsetters and they provide huge benefits to our economy. That’s why you’ll find a few pension fund heroes here in Canada.

Are the top ten Canadian pensions perfect? Of course not, far from it. I can recommend many changes to improve on their “world class governance” and make sure they’re not taking excessive and stupid risks like they did in the past. The media covers this up; I don’t and couldn’t care less if it pisses off the pension powers.

But when thinking of ‘real change’ to our retirement policy and economy, we can’t focus on past mistakes. We need to focus on what works and why building on the success of our defined-benefit plans makes sense for bolstering our retirement system, providing Canadians with a safe, secure pension they can count on for the rest of their life regardless of what happens to the company they work for.

In my ideal world, we wouldn’t have company pension plans. That’s right, no more Bell, Bombardier, CN or other company defined-benefit plans which are disappearing fast as companies look to offload retirement risk. The CPP would cover all Canadians regardless of where they work, we would enhance it and bolster its governance. The pension contributions can be managed by the CPPIB or we can follow the Swedish model and create several large “CPPIBs”. We would save huge on administrative costs and make sure everyone has a safe, secure pension they can count on for life.

But I understand why some people are concerned about enhancing the CPP now that the economy is weak. In fact, Ted Carmichael shared this with me after reading my comment:

“I agree with you on TFSAs. My concern is that in the lower commodity price environment that we find ourselves, the new government should be focused on creating a business environment that generates stronger private sector real income growth. The election campaign really saw none of the parties addressing this issue, but rather they focused how they would divide up the existing stagnant or shrinking pie. Increasing payroll taxes to fund future retirement benefits is a good long-term policy idea, but perhaps not the most important priority at the present point in the cycle.“

Ted is right, increasing payroll contributions is not the most important priority at the present point in the cycle but my fear is that the longer the federal government puts this off, the worse it will be down the road. And if the Liberals squander their majority and don’t implement major reforms to our retirement system, who will do it in the future?

Let me end this comment by congratulating our next prime minister, Justin Trudeau. Justin went to high school with my younger brother at Brébeuf. He wasn’t a top student but he worked hard and managed to do well in a brutal academic environment. He’s a very nice guy, a family man, and even though he’s relatively young and inexperienced, he’s smart and has a very experienced team backing him up.

I will also praise Stephen Harper and Tom Mulcair who lost but remained gracious. Politics is a thankless and tough job. I know, I saw my stepfather go through many ups and downs as he fought and won a few elections in the riding of Laurier-Dorion. Anyone who tells you politics is easy doesn’t have a clue of what they’re talking about, especially in the age of social media where public officials are scrutinized 24/7.

But now the tough work begins and I will do my part and help the Liberals introduce ‘real change’ to our retirement system, one that bolsters our economy. The challenges that lie ahead are huge but if they implement the right policies, they will hopefully mitigate the fallout from continued global economic weakness and meaningfully bolster our retirement system once and for all.

 

Photo credit: “Canada blank map” by Lokal_Profil image cut to remove USA by Paul Robinson – Vector map BlankMap-USA-states-Canada-provinces.svg.Modified by Lokal_Profil. Licensed under CC BY-SA 2.5 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Canada_blank_map.svg#mediaviewer/File:Canada_blank_map.svg

CalPERS on Monday began the process of divesting from its thermal coal holdings, as required by a law signed this month by California Gov. Jerry Brown.

There is much debate over whether divestment is effective – both in terms of the battle against climate change, and the maximization of investment returns.

When it comes to the latter, one of CalPERS’ consultants says divestment has hurt the fund over the years.

From Reuters:

A consultant warned on Monday that past efforts to divert CalPERS’ money away from investments deemed unethical have cost the largest U.S. public pension fund between $4 billion and $8 billion.

In the past, CalPERS has pulled cash out of tobacco and firearm-related companies as well as from investments in South Africa, Iran, Sudan and some emerging markets on political grounds.

Five of the six divestments campaigns undertaken by CalPers so far have hurt its returns, Andrew Junkin president of Wilshire Consulting, told a meeting of the CalPERS Investment Committee in Sacramento.

Junkin said that while divestment does not necessarily have to weigh down returns, it does require financial transaction costs that can add up.

He also expressed doubts about the effectiveness of divestment, seen by environmentalists as an important front in the battle against climate change.

“By divesting you are really giving up your voice, your ability to influence change,” Junkin said. “And you’ve just sold it to somebody else. Those shares are going to get voted by somebody else now instead of by you, and you don’t get to advance your goals.”

Divestment proponents also hope the California law will send a message that the United States is serious about combating climate change, ahead of international climate change talks in Paris later this year.

A document by CalPERS staff said coal companies have “significantly underperformed” a benchmark over the last year but have slightly outperformed over the last 10 years.

Coal represents only a small fraction – $83 million – of the fund’s $300 billion portfolio.

 

Photo by  Paul Falardeau via Flickr CC License

Fitch downgraded Illinois’ bond rating this week to BBB-, and the state’s recent decision to delay its November pension payment is a credit negative and could contribute to further downgrades, according to the ratings agency.

The state’s “exceptionally high” unfunded pension liabilities played a role in the downgrade, but the primary catalyst was the state budget crisis.

Still, Fitch noted that the state’s decision to delay November’s $560 million pension payment could contribute to future credit downgrades.

From Crain’s Chicago Business:

Fitch Ratings on Monday downgraded Illinois’ rating on $26 billion in outstanding bonds because of the [budget] crisis, and Moody’s Investors Service warned that the state’s inability to make its November pension payment could further hurt its already dismal credit rating.

[…]

Fitch cited lawmakers’ budget failure, Illinois’ above-average debt and “exceptionally high” unfunded pension liabilities in lowering the rating on general obligation bonds to BBB-, a few levels above what’s considered “junk” status.

Last week, Munger said Illinois won’t be able to make a scheduled $560 million payment to its pension funds because of cash flow problems. While Moody’s statement doesn’t indicate a change in Illinois’ rating, the agency said the missed payment could be a factor in future action.

Illinois currently has the worst-funded pension systems and lowest credit rating of any state.

Illinois has the lowest credit rating in the country.

Last week, California Gov. Jerry Brown signed a law requiring the state’s two pension funds to divest from their thermal coal holdings by mid-2017.

That process begins today at a CalPERS board meeting. From the LA Times:

The CalPERS Investment Committee will have a new task at its regular meeting Monday along with its main job of trying to boost flagging investment returns: dumping its coal holdings.

The immediate financial effect of the bill on the funds is negligible. The total CalPERS fund, $293.4 billion as of last week, holds stakes in 24 thermal-coal related companies representing a mere 0.03% of the fund, or about $83 million. CalSTRS said its coal-related holdings are even smaller, about $6.7 million in 11 firms across its $184-billion fund.

[…]

Divestiture will be one of the items on the agenda when Ted Eliopoulos, CalPERS chief investment officer, testifies before the board’s investment committee Monday.

In a statement, CalPERS said it was prepared to implement the law, including a provision that requires that it “constructively engage” with thermal-coal companies to determine whether they are “transitioning their business models to adapt to clean energy generation.”

Finance experts are skeptical of the benefits of using investment policy to advance social goals.

There’s a heated debate over whether divestment actually accomplishes its desired social and economic goals – and, even if it does, if the process is worth the ensuing cost.

One CalPERS consultant, Wilshire Associates, says divestment has cost CalPERS at least $3.8 billion to date.

 

Photo by  rocor via Flickr CC License

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Calpensions.com.

Pension cost cuts seemed unlikely after bankrupt San Bernardino agreed to repay CalPERS for skipped payments and adopted a recovery plan that only cuts bond and retiree health care debt, as in the previous Vallejo and Stockton bankruptcies.

Then this month U.S. Bankruptcy Judge Meredith Jury asked for more information showing that if she approves the San Bernardino recovery plan, rising payments to CalPERS will not push the city into a second bankruptcy.

“I don’t really think it’s in anybody’s objection, but the public perception — the media perception — of the two cities with confirmed (bankruptcy exit) plans, that being Vallejo and Stockton, is that they’re already in trouble because they didn’t impair CalPERS,” Jury said at a hearing on Oct. 8, as reported in the San Bernardino Sun.

“ . . . I don’t think there is adequate discussion of how much those raises are going to be. I have heard other things, I think in this court, that it is an exponentially increasing number that will have to be paid in order to keep retirement plans intact. There comes a point where no matter what I confirm it will fail.”

Actuaries hired by the city project that payments to the California Public Employees Retirement System will more than double from the current level by fiscal 2023-24, reaching $29 million a year, the Sun reported.

In the latest CalPERS report for the San Bernardino plans (June 30, 2013), the police and firefighters rate is forecast to rise from 38.8 percent of pay this fiscal year to 49.3 percent in fiscal 2020-21, the miscellaneous rate from 24.2 to 32 percent of pay.

Last week an editorial in the Riverside Press-Enterprise, noting the judge’s remarks on Oct. 8, urged Jury to “put pensions on the table” and “insist that San Bernardino renegotiate its unsustainable contract with CalPERS.”

Pension cuts have not been proposed by the bankrupt cities. Vallejo said CalPERS threatened a costly legal battle. Stockton said pensions are needed to compete in the job market. San Bernardino mentioned a “fresh start” to stretch out CalPERS payments.

But in a landmark ruling in the Stockton bankruptcy last year, Judge Christopher Klein said California pensions can be cut in federal bankruptcy court, despite CalPERS-sponsored state laws to the contrary.

San Bernardino may have a deeper problem than the two cities that have already exited bankruptcy, putting more focus on pension savings. The city filed an emergency bankruptcy in August 2012, saying it was in danger of not being able to meet its payroll.

During the rest of the fiscal year, San Bernardino did not make any of the required payments to CalPERS totaling $13.5 million. After a legal battle and mediation, the city agreed last year to repay CalPERS with interest and penalties, a total of $18 million.

The recovery plan issued last May said San Bernardino “evolved from a city that was the epitome of middle-class living into one of the poorest communities in the United States” with a median household income of $38,000.

Political and financial turmoil continues. Two former city officials made allegations of falsified budgets and possible illegal wrongdoing after the bankruptcy filing. In a recall in November 2013, voters ousted a city attorney and a councilwoman.

An unusual San Bernardino city charter linking pay to the average in 10 similar cities has given police two $1 million pay raises during the bankruptcy. A proposal to end the pay link was rejected by 55 percent of voters last November.

Mayor Carey Davis unsuccessfully asked City Manager Alan Parker to resign last December, blaming him for slow bankruptcy progress. Last month Davis vetoed renewal of a contract for the son of a former mayor, a consultant supported by Parker and others.

At a stormy city council meeting this month, there were public protests and heated exchanges between council members over the failure to complete audits of city finances during the first two years of the bankruptcy.

Davis said in hindsight he should have used his gavel to end the council argument. “I have a gavel, but I don’t want to wear it out,” the mayor told the Sun. “Bring in the FBI/Complete the audits!” said a sign carried by one resident.

The San Bernardino recovery plan does not ask voters to approve a sales tax increase, unlike the 1-cent tax approved in Vallejo and ¾-cent tax approved in Stockton. The plan does expect some indirect savings in pension costs.

Payment for a $50 million bond issued to pay pension costs would be cut to $500,000, a deep debt reduction contested in court by bondholders. Contracting with the county for firefighter services is expected to save $2.7 million a year in pension costs.

Actuaries have told the city that shifting firefighters from CalPERS to the San Bernardino County Employees Retirement System would immediately reduce annual pension costs because the county has more quickly paid down pension debt.

Few details of the $2.7 million reduction were given to the council at a meeting in August. A Calpensions Public Records Act request for the actuarial report was denied by the city attorney‘s office, which cited several exemption laws and rulings.

Last week Vallejo and Stockton officials sharply disagreed with the view that the failure to cut their biggest debt, CalPERS pensions, is pushing them toward a second bankruptcy. But they said service levels have not been restored.

“We are not at risk of a second bankruptcy,” said Daniel Keen, the Vallejo city manager. “We would emphatically deny there is a possibility of a second bankruptcy.”

In a budget message last June, Keen said his “cautious optimism” is tempered by large long-term cost increases for CalPERS pensions, workers compensation, and health benefits.

“These fiscal challenges will continue to severely constrain our ability to rebuild services and infrastructure and deliver the service levels that our residents deserve,” Keen said in the budget message.

In the latest CalPERS report for the Vallejo plans (June 30, 2013), the police and firefighter rate is forecast to rise from 57.6 percent of pay this fiscal year to 72 percent of pay in fiscal 2020-21, the miscellaneous rate from 32.7 to 41.2 percent of pay.

The Stockton city manager, Kurt Wilson, said the city continues to follow the long-range financial plan developed in bankruptcy and has had a series of favorable financial developments.

“As a result we currently have a 20 percent ($40 million) general fund reserve which not only places us in possibly the strongest financial position in recent memory, but combined with our forecasting, gives us one of the strongest fiscal foundations in the state,” Wilson said via email last week.

“While our service level will remain below what it was several years ago, we are meeting our current needs in a fiscally responsible way and are in no way near the financial condition that necessitated the bankruptcy,” he said.

In the latest CalPERS report for the Stockton plans (June 30, 2013), the police and firefighter rate is forecast to rise from 45.5 percent of pay this fiscal year to 58.1 percent in fiscal 2020-21, the miscellaneous rate from 22.4 to 29.5 percent of pay.

 

Photo by  Pete Zarria via Flickr CC License

The Canada Pension Plan Investment Board (CPPIB) was very active in India in 2015. Now, other large Canadian pension funds are joining the party.

Caisse de depot et placement du Quebec (CDPQ) and the Public Sector Pension Investment Board (PSP Investments) are looking to invest in Indian infrastructure, according to a report.

From Deal Street Asia:

Two of Canada’s largest pension funds—Caisse de depot et placement du Quebec (CDPQ) and the Public Sector Pension Investment Board (PSP Investments)—are looking to invest in the Indian infrastructure sector and have started scouting for assets, according to two people familiar with the discussions.

[Neither] of them have any significant exposure to the Indian infrastructure sector so far, said the two people quoted above, requesting anonymity as negotiations are confidential.

As Indian infrastructure assets start to mature and companies look to divest cash-generating assets, these funds are starting to evaluate possible investments here, said the first person quoted above.

One Indian company, which the two Montreal, Quebec-based pension funds CDPQ and PSP Investments are in talks with is Tata Realty and Infrastructure Ltd (TRIL), confirmed both the people quoted above, adding that the discussions have not finalized anything due to a mismatch between valuations.

PSP Investments, CPDQ and TRIL did not respond to email queries sent on 12 October and subsequent follow-ups over phone and email.

TRIL, a subsidiary of Tata Sons, builds and operates real estate assets such as commercial office buildings, shopping malls, hotels and serviced apartments. It is also involved in infrastructure projects across highways and bridges and urban transport.

Caisse manages about $185 billion (USD) in assets; PSP manages a portfolio of about $86 billion.

 

Photo by sandeepachetan.com travel photography via Flickr CC License