BILL NUMBER: AB 2337 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 28, 2010
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 boards of 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 the boards of these retirement
systems to sell or transfer any investments in a company with
business operations in Sudan. Existing law requires the boards
of 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 annually to the Legislature regarding
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) (A) "Predatory investment practices" means private real
estate investments 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. "Predatory
investment practices" shall not include investment in strategies that
create new, or redevelop existing, rent-regulated housing units,
including strategies that include demolition of existing
rent-regulated housing units, provided that the following minimum
criteria are met:
(i) Any rent-regulated housing units that are demolished as part
of the investment or project are replaced with new rent-regulated
housing units.
(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.
(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.
(C) For purposes of this paragraph "private real estate
investments" shall not include real estate investment trusts or other
similar securities that are publicly traded.
(b) The board shall 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. The policy shall include, but not be limited to, the
following requirements:
(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.
investment manager that enters into an investment
agreement with the board, or its agents, that involves the
acquisition of occupied rent-regulated housing to agree, in writing,
to abide by the board's policy on real estate investment strategies
impacting rent-regulated housing units.
(5) If, after the effective date of this
the policy, an investment manager makes investments that are
materially inconsistent with this section, the pension fund
board 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.
(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.
(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.