BILL NUMBER: AB 2337 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 6, 2010
AMENDED IN ASSEMBLY APRIL 22, 2010
INTRODUCED BY Assembly Member Ammiano
FEBRUARY 19, 2010
An act to add Section 7513.75 to the Government Code, relating to
investments.
LEGISLATIVE COUNSEL'S DIGEST
AB 2337, as amended, Ammiano. Public retirement system:
investments: predatory investment practices.
The California Constitution provides that the Legislature may by
statute prohibit retirement board investments if it is in the public
interest to do so, and providing that the prohibition satisfies
specified fiduciary standards.
Existing law prohibits the Public Employees' Retirement System and
the State Teachers' Retirement System from investing public employee
retirement funds in a company with active business operations in
Sudan and Iran, as specified. Existing law also requires these
retirement systems to sell or transfer any investments in a company
with business operations in Sudan. Existing law requires these
retirement systems to submit an annual report to the Legislature
regarding any investments in a company with business operations in
Sudan and the sale or transfer of those investments. Existing law
requires the state to indemnify, from the General Fund, and hold
harmless the present, former, and future board members, officers, and
employees of, and investment managers under contract with, these
retirement systems by reason of any decision to restrict, reduce, or
eliminate investments in Sudan, as specified.
This bill would additionally prohibit the boards of public pension
or retirement systems, as defined, from investing public employee
retirement funds in a company with business operations engaged in
predatory investment practices , as defined, that rely on,
or result in, the displacement of persons residing in rent-regulated
housing , converting rent-regulated housing units to market
rate units, or raising rents above regulated levels as determined by
the appropriate governing authority, in order to generate
profits to investors and would require the boards to establish a
policy in regard to investing in rent-regulated housing, as
specified. This bill would make related legislative findings and
declarations.
Existing law provides that a statute that imposes a requirement
that a state agency submit a periodic report to the Legislature is
inoperative on a date 4 years after the date the first report is due.
This bill would , notwithstanding that requirement,
require these boards to report to the Legislature regarding
real estate investments in rent-regulated housing
implementation and compliance of the above-described
provisions and regarding compliance with the
provisions of the rent-regulated housing investment policy by January
1, 2012, and by January 1 of every year thereafter. The bill
would also require these boards to develop and implement, on or
before June 30, 2011, and thereafter maintain, a policy that
prohibits the investment of public employee retirement funds in
predatory investment practices, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares that investments
by public retirement boards in companies that engage in predatory
investment practices, which rely on, or result in, the displacement
of persons residing in rent-regulated housing in order to generate
profits to investors, are not only harmful to the persons displaced
by these practices but also to the entire community in which those
persons reside.
(b) The Legislature further finds and declares that it is in the
public's interest to enact legislation to prohibit the investment of
retirement funds in companies engaged in, or investing in companies
engaged in, predatory investment practices that result in excessive
rent increases imposed upon, or the eviction or displacement of,
persons residing in rent-regulated housing.
SEC. 2. Section 7513.75 is added to the Government Code, to read:
7513.75. (a) As used in this section, the following definitions
shall apply:
(1) "Board" means the retirement board of a public pension or
retirement system, as defined in subdivision (h) of Section 17 of
Article XVI of the California Constitution.
(2) "Company" means a sole proprietorship, organization,
association, corporation, partnership, venture, or other entity, its
subsidiary or affiliate that exists for profitmaking purposes or to
otherwise secure economic advantage.
(3) "Invest" or "investment" means the purchase, ownership, or
control of stock of a company, association, or corporation, the
capital stock of a mutual water company or corporation, corporate
bonds or other debt instruments issued by a company, or the
commitment of funds or other assets to a company, including a loan or
extension of credit to that company.
(4)
(2) (A) "Predatory investment
practices" means investments that rely on, or result in, the
displacement of persons residing in rent-regulated housing
housing, converting rent-regulated housing units to
market rate units, or raising rents above regulated levels as
determined by the appropriate governing authority, in order to
generate profits to investors. "Predatory investment practices" shall
not include investment in strategies that create new, or redevelop
existing, rent-regulated housing units units,
including strategies that include d emolition of existing
rent-regulated housing units, provided that the following
minimum criteria are met:
(A)
(i) Any rent-regulated housing units that are
demolished as part of the investment or project are replaced with new
rent-regulated housing units.
(B)
(ii) Any person lawfully residing in rent-regulated
units who is displaced as a result of such strategies receives
relocation benefits in accordance with relocation requirements as
mandated by the local housing authority or by state or federal laws,
if applicable. However, in all cases, relocation benefits
shall, at a minimum, be equal to benefits required under the federal
Uniform Relocation Assistance and Real Property Acquisition Act.
(C) Displaced tenants shall have the right to return to the
replaced, rent-regulated housing at rents not to exceed their rents
prior to displacement.
(iii) The strategy is undertaken pursuant to an agreement with a
local government entity.
(B) "Predatory investment practices" shall not include the
exercise of the power of sale granted under Section 2924 of the Civil
Code.
(b) The board shall develop and implement, on or before June 30,
2011, and thereafter maintain, a policy containing
that prohibits the investment of public employee retirement
funds in predatory investment practices. The policy shall include,
but not be limited to, the following requirements:
(1) The board shall not invest public employee retirement funds
in a company that engages in predatory investment practices or meets
any of the following criteria:
(A) The company invested in, or is engaged in business operations
with, entities engaged in investment or lending practices that
resulted in excessive rent increases imposed on, or the eviction or
displacement of, persons residing in rent-regulated housing.
(B) The company has demonstrated complicity with business
operations that are engaged in investment or lending practices that
resulted in excessive rent increases imposed on, or the eviction or
displacement of, persons residing in rent-regulated housing.
(2) The board shall make a good faith effort to identify any
private equity investments that involve companies described in
paragraph (1).
(3) The board shall direct staff to review investments made before
the effective date of the policy to determine appropriate
implementation of the policy relating to existing investments. Staff
shall make a report to the board regarding existing investments that
appear inconsistent with the objectives of this policy. The report
shall describe the impacts, and anticipated impacts, of those
investments on tenants living in rent-regulated housing, and set
forth a recommended strategy to address and mitigate these impacts
consistent with the board's fiduciary duties. Thereafter, staff shall
prepare an annual report to the board regarding real estate
investments in rent-regulated housing and compliance with this
policy. The annual report shall be provided to the Legislature on or
before January 1, 2012, and on or before January 1 of every year
thereafter. Any report filed pursuant to this paragraph shall comply
with Section 9795 of the Government Code.
(4) Any investment proposal submitted to the pension fund, or its
agents, that involves the acquisition of occupied, rent-regulated
housing shall include a statement from the applicant stating that the
applicant has reviewed the pension fund's policy on real estate
investment strategies impacting rent-regulated housing units, and
either the proposed investment strategy does not rely on or result in
eliminating rent-regulated housing units, converting those units to
market rate units, or raising rents above regulated levels as
determined by the appropriate governing authority, or the proposed
investment does not meet the criteria set forth in subparagraph (A)
of paragraph (1).
(1) A prohibition on the investment of public employee retirement
funds in predatory investment practices.
(2) Principles that are consistent with the Principles for
Responsible Investment, as set forth by the United Nations, to the
extent those principles relate to responsible real property
investing.
(3) A statement that requires an annual report to the board if a
private real estate investment is materially inconsistent with the
objectives of the policy, regardless of whether the investment was
made prior to or after the effective date of the policy. The report
shall describe the investment, including the impacts and anticipated
impacts of those investments on tenants living in rent-regulated
housing units, as well as any impacts on investment performance.
(4) A statement that requires any person or entity seeking pension
fund investments for a strategy that involves the acquisition of
occupied, rent-regulated housing (A) to agree in writing that the
proposed investment strategy complies with this policy and does not
involve predatory investment practices as defined in subparagraph (A)
of paragraph (2) of Subdivision (a), and (B) to describe the
anticipated tenant impacts of the project, if any.
(5) If, after the effective date of this policy, an investment
manager makes investments that are materially inconsistent with this
section, the pension fund shall not use that manager for any new
investments.
(6) The pension fund shall adopt a complaint procedure for
alleged violations of this policy that can be used by tenants
occupying rent-regulated properties that are acquired with an
investment from the pension fund. Nonprofit organizations
may also utilize the complaint procedure for alleged violations of
this policy.
(7) The pension fund shall require that any investment partner
acquiring rent-regulated property notify tenants living in the
property of the existence of this policy and the complaint procedure
regarding alleged violations of this policy.
(c) Notwithstanding Section 10231.5, the board shall provide an
annual report regarding implementation and compliance with this
section, and any policy adopted pursuant to this section, to the
Legislature on or before January 1, 2012, and on or before January 1
of every year thereafter. Any report filed pursuant to this
subdivision shall comply with Section 9795.
(c)
(d) Nothing in this section shall require the board to
take action as described in this section unless the board determines,
in good faith, that the action described in this section is
consistent with the fiduciary responsibilities of the board as
described in Section 17 of Article XVI of the California
Constitution.