New Haven Officials Push Retired City Workers to Invest Pension Funds Locally

Investment capital from the pension funds of New Haven government workers doesn’t flow back to the city. Some say that should change. Photo credit: Andrew Miller

New Haven government’s retirees’ pension funds helped build a Walgreens in Nevada, the New York Times newsroom in the Big Apple, and an Agrokor grocery store in the nation of Croatia. Doug Hausladen would like to some of that money to build up New Haven, too.

Hausladen, a downtown alderman who used to manage downtown commercial real estate investments, has pitched the idea to heads of both the Police & Fire Retirement Fund (P&F) and the City Employees Retirement Fund (CERF), which manages other government workers’ retirement money.

In response to Hausladen’s inquiries, officials revealed that 6 percent of CERF’s money, or about $10.2 million, is invested in commercial real estate. (The examples above are part of the P.C. Carey CPA17-Global Fund, in which CERF has invested money.) For P&F, the amount invested in commercial real estate is $19.7 million, or 6.6 percent of the overall fund.

Not a penny of that is invested in real estate here in the city, according to Chief Fiscal Officer Mike O’Neil.

Managers of pension funds have to think first and foremost about the returns they get on their investments; their responsibility is to protect employees’ retirements. As it is, the funds are both underfunded, to the tune of about 50 percent.

Hausladen said he recognizes that returns come first. He argued that it could be possible to invest in New Haven without sacrificing returns.

He got the idea from researching the barriers to finding people to invest in underdeveloped parts of downtown New Haven and a nearby stretch of the Hill that’s blanketed with surface lots.

“Where are some other pots of money that might have interest in New Haven?” he asked himself. Pension funds are often a main source of capital for development projects; for instance, an out-of-state union pension fund financed the construction of the 32-story 360 State tower. Given the dispute between the city and 360 State over a tax assessment, Hausladen said, national pension funds “are a little intimidated” about following in investing in New Haven.

“Right now we have a lot of developable land around downtown. If we don’t have financing for people, that will sit vacant. Undeveloped land is what’s holding us back” in building the tax base and creating jobs, he argued.

CERF’s top ten real-estate investments

Hausladen has visited CERF and P&F board meetings to raise the idea, which includes investing in not just buildings, but a streetcar project through tax-increment financing.

The pension funds set an 8.2 percent goal for returns on investment, a goal they have generally been meeting, according to O’Neil.

Nationally, boards of both pension funds and other investment funds are occasionally pushed to incorporate social goals in their decisions. Officials hadn’t known of any previous requests like Hausladen’s.

“I think you can be socially responsible and realize” good returns in theory, O’Neil said.

Jimmy Kottage, the fire union president and the head of P&F’s board, welcomed Hausladen’s suggestion. Kottage said he had raised the idea of possibly investing in a development on vacant city-owned land at 10 Wall St., for instance. (The city sought bids for the property earlier this year, then canceled a sale because the bids came in too low.)

“There’s nothing wrong with investing in New Haven real estate,” he said. “I will consider it. I give [Hausladen] credit for for putting it on the map.” He said he had also been interested in the now-dead idea of a long-term city sale of future parking-meter revenue to solve a short-term city budget problem.

“I never like to summarily reject anything out of hand,” said Jerome Sagnella, who chairs the CERF board and is the plan administrator for both CERF and P&F.

CERF doesn’t buy properties outright. It lends money to builders for their own projects, and holds liens on the properties for collateral; it hires a money manager to do due diligence and handle all those arrangements. Following up on Hausladen’s idea would mean engaging a different money manager for a different kind of investment from the ones CERF has been accustomed to.

“I’m open to that,” Sagnella said. “Geography means nothing to me. We have an investment in Croatia. I don’t care about that. I just care about the return on that. If it’s New Haven, i have no problem with that. It’s got to go through the same protocols and the same analytics.”

CERF would be hesitant to become actual landlords on a project because of all the “onerous” administrative and management requirements, Sagnella said. “If people don’t pay rent and you have to go through evictions, you’ve got to be geared up for that.” He also noted that CERF’s board, not he, would make any final decisions.

In a “worst-case scenario”—“New Haven implodes”— a New Haven real estate investment could “double down on risk” for the pension funds, Hausladen acknowledged.

At the same time, Hausladen argued, “simple math” also shows how New Haven real estate investments could work in the pension funds’ interests: By helping build the city’s tax base, the investments could help “guarantee” the city government’s annual financial contributions to the funds by helping provide more tax revenue. “It might help some of the [city’s] problems. A lot of groups are thinking this way: We can collectively come together to solve this problem.”

“We won’t know until we debate and discuss” the idea, Hausladen added. That discussion may now come to pass.

Tags: economic developmentpensions