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Nashville pension fund leads U.S. in risky investments

Posted on 07 April 2018 (0)

pensionsNashville’s public pension system invested city workers’ retirement funds in the nation’s largest share of risky, high-priced investments among its peers. After eight years, the aggressive strategy shows promise, but it’s not clear if it’s worth the risk to retirees, or the millions paid to Wall Street managers.

Since the 2008 financial crisis, Nashville’s pension managers have been shifting taxpayer money into junk bonds, hedge funds, troubled mortgages, private equity funds and other alternatives to conservative stocks and bonds. If successful, these “alternative investments” can earn greater profits, but they also demand high fees and carry the risk of heavy losses.

Nashville’s investments have shown mixed results. After taking out fees, the city’s fund grew by 4.7 percent a year since 2008, on average, while the Standard & Poors 500 gained 6.6 percent.

Pension systems across the country, looking to improve their balance sheets, have moved into this once-rarefied realm of Wall Street financiers. But Nashville stands out for its large share of so-called alternatives.

The city has placed 57 percent of its $2.8 billion fund into alternative investments, including real estate. Among its peers, Nashville had the highest share in fiscal year 2015, according a Tennessean analysis of National Association of State Retirement Administrators data for funds with $1 billion to $5 billion in assets. The national average among all public funds, by contrast, is 17 percent.

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This is an ongoing series into Nashville’s pension fund. Here are two other stories:

How much does Wall Street make from Nashville’s pension fund? Nobody knows.

Nashville pension fund paying Wall Street 40% more than previously disclosed

LA charter school under review after principal charges $100K

Posted on 07 April 2018 (0)
Photo by Dean Musgrove/Los Angeles Daily News

Photo by Dean Musgrove/Los Angeles Daily News

Just a 10-minute drive from the school, the waiter brought the table a $95 bottle of fine Syrah wine. Dimly-lit Monty’s Prime Steaks & Seafood, with its red booths and white linen, doubled as a high school meeting room that Wednesday night, Principal David Fehte says. And on many other nights.

In 2014 and 2015, Fehte, who leads El Camino Real Charter High School in Woodland Hills, charged more than $15,500 at Monty’s to his school-issued American Express card.

“When we’re doing business, we’re doing business,” Fehte said recently as he walked to his BMW in the San Fernando Valley campus parking lot.

He also paid for first-class airfare and luxury hotel rooms with his school-funded credit card.

Fehte acknowledged charging El Camino for personal travel and, after the Daily News inquired, said he reimbursed the public school.

Over the two years, Fehte charged more than $100,000 to the card, according to a Los Angeles Daily News analysis. El Camino receives about $32 million in government funds annually, accounting for 94 percent of its revenue.
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This investigation prompted investigations by the district and led to the resignation of Fehte and other members of the school’s board of directors.

Here’s the other main story from the investigation:
El Camino High principal moonlighted as NBA scout, billed travel to school

And here’s some of the aftermath:
El Camino Real’s principal to resign under agreement with LAUSD

Which Nashville neighborhoods are doubling up after demolition?

Posted on 06 April 2018 (0)
Wade Payne / For The Tennessean

Wade Payne / For The Tennessean

From his office above a Whole Foods store in upscale Green Hills, John Brittle Jr. and his team of agents target the next affordable Nashville neighborhood for redevelopment.

Brittle, a broker with Parks Realty, is called the “Infill King.” His developer clients rely on him to spot bargain older homes, which they tear down and replace with bigger, more expensive properties.

“For 30 years, real estate agents have been talking about the TSU and Fisk areas,” Brittle said, referring to the neighborhoods surrounding Tennessee State University and Fisk University, two of Nashville’s historically black institutions. “We’re going to see some beautiful stuff there.”

Investors and builders have transformed entire neighborhoods in recent years as Nashville’s appetite for homes soared. Countywide, nearly half of all properties with single structures demolished and new construction approved had two or more residential buildings planned for the lot, according to a Tennessean analysis of Metro Nashville permit data.

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The Cost of Jobs: What do taxpayers get for Tennessee business subsidies?

Posted on 06 April 2018 (0)

amazonClarksville, a military hub north of Nashville with 150,000 residents, has awarded multimillion-dollar property tax breaks to large corporations, including Google, without publicly disclosing the value of the subsidies or tracking hiring at those companies.

“It’s a verbal check,” said Mike Evans, executive director of the Clarksville-Montgomery County Industrial Development Board. “Do we have a piece of paper or a form filled out? We don’t. But it’s a system.”

More than $2.5 billion in subsidies such as grants, tax breaks and tax credits are given to businesses in the state each year, according to an analysis by the W.E. Upjohn Institute for Employment Research.

An investigation by the largest four media organizations in Tennessee — The Tennessean, The Commercial Appeal, Knoxville News Sentinel and (Chattanooga) Times Free Press — found statewide that many officials and agencies do not track or disclose the number of jobs created by subsidy deals.

That lack of accountability means taxpayers and leaders can’t effectively decide whether individual subsidy deals are a good investment or if the money would be better spent on education, infrastructure or another jobs program.

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Water enforcement dropped in business-friendly Haslam administration

Posted on 06 April 2018 (0)
Mike Brown / USAT Network

Mike Brown / USAT Network

Year after year, the inspectors found the same violations. Norfolk Southern Railway, they noted, allowed construction dirt to wash into tributaries of the Wolf River, a hunting source for bald eagles that flows from northern Mississippi to Memphis.

The railroad had graded much of 380 acres of farmland, exposing tan earth before paving the way for the Memphis Regional Intermodal Facility. With state-of-the-art cranes, the terminal would allow Norfolk Southern to rapidly transfer cargo containers from trains to trucks. Tennessee Gov. Bill Haslam, shovel in hand, posed at the 2011 groundbreaking and hailed the potential transportation jobs.

That same year — Haslam’s first in office — his administration began reshaping the state Department of Environment and Conservation to be more “customer focused.” Haslam’s hand-picked commissioner merged the three water protection divisions into one, shed a quarter of their positions, and nearly stopped penalizing polluters. The agency prided itself on helping companies comply with the law before resorting to fines.

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Supervisor had 2 take-home cars, but denied it

Posted on 25 November 2015 (0)
Mike Reicher, L.A. Daily News

Mike Reicher, L.A. Daily News

On the Los Angeles County government’s official list of employee take-home vehicles, Supervisor Mark Ridley-Thomas looks very frugal. His assigned car, a 9-year-old Chrysler 300 Limited sedan, cost the county about half as much as the next supervisor’s. But newly released vehicle maintenance records show that Ridley-Thomas, for most of last year, actually had two cars at his disposal. He mainly drove a 2012 version of the same model, a $39,000 taxpayer-owned car, that was essentially off the books.

The documents reveal that Ridley-Thomas, chairman of the Metropolitan Transportation Authority, was stretching the county’s vehicle resources more than other supervisors, and that he misrepresented his situation when challenged. Workers maintained, cleaned and fueled his two working cars for seven months, according to the records. They washed one of the sedans nearly three times a week.

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Why the DWP owns an empty, $150K/year lodge

Posted on 31 March 2014 (0)
Mike Baker, Los Angeles Daily News

Mike Baker, Los Angeles Daily News

A seven-bedroom historic lodge crowns the highest hill of Boulder City, Nev. Under a clay tile roof, its sunroom commands sweeping views of Lake Mead. A live-in caretaker stands by, ready to serve five-course gourmet meals on fine china.

But he’s usually dining alone. The house’s owners, the customers of the Los Angeles Department of Water and Power, live 300 miles away. “No Trespassing. Private Road,” warns a sign.

In the eastern Mojave Desert, this guest lodge is rarely used by the department. Instead, the DWP pays nearby hotels more than $500,000 each year to house workers, and it reserves the lodge for high-level meetings, despite owning an office building minutes away. Ratepayers, meanwhile, spent more than $153,000 last fiscal year to run the 1931 Spanish Colonial Revival house.

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Should deputies be paid for changing clothes?

Posted on 31 March 2014 (0)
Orange County Register

Orange County Register

Orange County Register

Most agree that taxpayers should pay police well for risking their lives in the line of duty.

But should they be paid for the time they spend strapping on their gun belt and bulletproof vest? Or tying their boot laces? What if the department insists they dress in the stationhouse, instead of at home?

Hundreds of Orange County Sheriff’s deputies sued the department between 2005 and 2012, saying they spent up to 30 minutes getting dressed before work, and up to 28 minutes undressing – and they weren’t getting compensated.

Donning and doffing, the legal term for putting on or taking off work clothes, made headlines last month when the U.S. Supreme Court ruled that a steel company couldn’t be forced to compensate its workers for the time it takes them to put on safety gear such as flame-retardant jackets and pants.

In the case of Sandifer v. United States Steel Corporation, the high court ruled most of that safety gear was a form of clothing. Under the Fair Labor Standards Act, the court said, employers cannot be required to pay workers for donning work clothes unless both sides agree to that as part of a union contract.

While attorneys say that case applies directly to the issues raised by Orange County deputies, it won’t help county officials.

That’s because the county spent millions fighting the donning and doffing issue in federal court – won a victory – and then settled in 2012 rather than litigate an appeal.

The court battle, which has cost the county $3.7 million in legal fees, cash settlements and time off for deputies, has received little public attention.

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Pension board takes $450 million risk

Posted on 31 March 2014 (0)

orangecountyOrange County Register

In the past year, the Orange County Public Employees Retirement System board has agreed to loan $450 million to companies in the U.S., Europe and the Asia-Pacific region, mostly little-known companies with poor credit ratings that need cash.

Officials are hoping the loans, made through investment managers, will supercharge earnings. But they acknowledge some of the investments are risky and each loan’s principal could be lost.

Retirement boards across the U.S. are exploring more exotic investments – well beyond stocks and bonds – to keep pace with promised pension benefits and large unfunded liabilities. Experts vary on the wisdom of chasing high-return investments, but most agree they should be limited in a public pension fund.

OCERS has invested more and sooner in direct lending than most other large public pension funds. Direct lending accounts for slightly more than 4 percent of the assets in the $10.9 billion OCERS fund.

“There’s no such thing as a 15 percent safe investment … There are reasons banks aren’t doing these loans,” said John Shoven, director of the Stanford Institute for Economic Policy Research. “It would be risky in the extreme if this became a large part of the portfolio. But at the 5 percent level, I (would be) willing to take the risk.”

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Mesa Water’s $500,000 rebranding

Posted on 31 March 2014 (0)
Jebb Harris, Orange County Register

Jebb Harris, Orange County Register

Orange County Register

Native American musicians blessed the “ancestral waters,” valets parked cars for 150 “VIP” guests and $50,000 event planners passed out catered custom cookies shaped like water drops and redwood trees – $1,500 worth of cookies.

Last month’s unveiling of a revamped water filtration facility is just a small example of Mesa Water District’s lavish spending on marketing and communications.

While raising rates, the public provider of Costa Mesa’s drinking water has increased its communications spending by 300 percent in four years. It now wields a $1.25 million annual budget that dwarfs those at similar water districts. The district serves just 110,000 customers.

People don’t have a choice in their water provider, yet district officials want to pump up their reputation. They say not enough ratepayers know their name, which could be a problem during natural disasters, or when officials need to pass a bond measure. But an underlying motivation, board meeting minutes show, may be their desire to remain an independent agency in the face of criticism. To raise their profile, Mesa officials have paid six figures to public relations consultants and staff.

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