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A Tale of Two Cities (and Two Americas): San Francisco and Flint, Michigan

By: Tom Croft, Managing Director

In the forthcoming Responsible Investor Handbook, we have documented how Labor visionaries have, for over a century, organized strategic investments to build affordable and workforce housing and to help rebuild cities. In early 1900s, labor leaders were building social housing for their members and local residents in various cities in the US. In the 1960s, working with the Civil Rights movement, the AFL-CIO formed new housing investment institutions as a new thrust in the movement for social and economic justice. With the leadership of the construction trades pension funds, these new institutions created affordable and livable workforce housing in dozens of cities. The new book also recounts the more recent work of union and pension fund leaders in developing responsible new infrastructure investment strategies and vehicles, in collaboration with cities and businesses.

Our latest stories this week focus on the problems of a city undergoing a new economic boom and a city in the Rustbelt that has been crippled by a politically-imposed austerity program.

  • San Francisco:   In San Francisco and Rooting for a Tech Comeuppance.   The City of San Francisco has experienced skyrocketing housing prices and rental rates.  These out of control costs have pushed teachers and other working residents out of the city.   This recent article in the New York Times describes the conflicts and tensions that have exploded around this problem.  While many cities are growing rapidly around the country, suffering similar problems, San Francisco has been rocked by the boom in the tech sector in nearby Silicon Valley, which has metamorphosed into the City by the Bay (and adjoining communities).

One of the reports referenced in this article warns of the consequences:   “Teachers help form the foundation for strong, local communities, yet just 17 percent of homes for sale in California are affordable on a teacher’s salary. That percentage drops to zero in pricey San Francisco, where the average teacher can’t afford a single home.”1

  • Flint, Michigan: ULLICO, the Union Labor Life Insurance Company, and the American federation of Teachers are investing $25 million in union pension funds to provide low-interest loans to replace some of Flint's lead pipes. In terms of assistance from the AFT and ULLICO, Flint Mayor Karen Weaver says it means the city can move forward to remove more lead water lines, and she says she's very grateful to ULLICO and the AFT for the investment.   Several unions have stepped up to help the people of Flint Michigan as they deal with lead water pipes.

You’ve probably heard about the Flint water disaster, especially given the attention paid to this topic leading up to the Tuesday Michigan political primary.  After Michigan Governor Rick Snyder appointed a fiscal manager of the City of Flint during the City’s bankruptcy, the city disconnected its water supply from the City of Detroit’s system, which worked fine and provided clean Lake Huron water, and reconnected to the Flint River, sending it through the city’s antiquated and lead-contaminated water system. Outside investigators from Virginia Tech and the Northeast-Midwest Institute discovered that the water was poisoning the people of Flint. The Governor’s office and other public authorities covered up the scandal until it came to light. The Governor has now declared state of emergency and is switching the city back to Detroit.

While San Francisco has a unique problem due to the dominance of a single industry, other cities like New York, Boston, Chicago and elsewhere are facing similar affordability predicaments. And unfortunately, the water crisis in Flint, which has its roots in a political takeover, is not just happening in Flint.  Towns in Ohio and elsewhere have been struggling with an infrastructure deficit for decades now, and economic recovery has bypassed many of these communities. 

Responsible investors are working on a range of strategies to address the housing affordability crisis, and, as the article points out, the water crisis in Flint.  We’ll be reporting on more of these innovative solutions in future posts.  In the meantime, our hats off to champions like ULLICO and the Teachers!

1Redfin Blog: “83 Percent of California Homes Unaffordable on a Teacher’s Salary”  Tommy Unger on February 25, 2014

Flint Mayor: Union fund commits to bring $25 million in loans

By: Dana Ford, CNN

(CNN) -- A union fund has said it will bring $25 million in low-cost loans to help replace lead-contaminated pipes in the city's water system, Flint Mayor Karen Weaver announced late Sunday.

The funding would go a long way toward boosting the Michigan mayor's $55 million "Fast Start" program.

The initiative aims to remove and replace Flint's residential lead pipes, starting with residences for at-risk groups, such as pregnant women, children 5 and younger, seniors, people with compromised immune systems and homes where testing shows high lead levels.

"The people of Flint have been waiting for action to remove lead tainted lines," Weaver said in a statement. "On March 4, I was pleased that we pulled and replaced the first lead line. This investment from union pension funds means that we can move forward to remove more lead lines and renew Flint's infrastructure. I am very grateful to ULLICO (Union Labor Life Insurance Company) and AFT (American Federation of Teachers) for putting this idea crafted at the Clinton Global Initiative into action in our community."

Last year, researchers and medical personnel discovered high levels of lead in Flint residents, especially children. Lead has been tied to a host of medical problems.

The problem occurred after the city switched its water source about two years ago to cut costs. Flint used to buy Lake Huron water through the city of Detroit but the state ordered the source changed to water from Flint River.

In January, the governor declared a state of emergency, and the city switched water suppliers again. Now the mayor is leading the way to replace the water pipes.

Weaver's announcement on funding was made as the water crisis in Flint was being debated on the national stage at CNN's Democratic debate.

CNN's Ralph Ellis contributed to this report.

Original article found at:  http://www.kpax.com/story/31400098/flint-mayor-union-fund-commits-to-bring-25-million-in-loans

In San Francisco and Rooting for a Tech Comeuppance

By:  David Streitfeld

SAN FRANCISCO — These are anxious days in the land of start-ups. Another few months of tight money and the entrepreneurs and venture capitalists will be feeling real pain.

The sooner the better, some people here say.

Cities do not usually cheer the downfall or even the diminishment of the hometown industry, but the relationship between San Francisco and the tech community has grown increasingly tense.

Two years ago, radicals began delaying and harassing Google and other tech companies’ shuttles as they threaded San Francisco’s narrow streets. Now — after the city officially gave the shuttles free rein to use public bus stops; after the tech elite were accused of trying to buy a crucial local election; after the home-rental company Airbnb spent a fortune to defeat a proposition that would have restricted its business — the discontent is mainstream.

San Francisco Duboce Park

In December, 39 percent of Bay Area adults said they thought things in California were headed in the wrong direction, up from 29 percent a year earlier, according to surveys by the Public Policy Institute of California. In Los Angeles, by contrast, the percentage expressing general disapproval fell from 37 percent in 2014 to 33 percent in 2015.

“It’s practically a ubiquitous sentiment here: People would like a little of the air to come out of the tech economy,” said Aaron Peskin, perhaps the most prominent leader of the opposition. “They’re like people in a heat wave waiting for the monsoon.”

Mr. Peskin, a combative presence on the city’s board of supervisors a decade ago, was the underdog when he sought to reclaim his seat last fall against an incumbent backed by both Mayor Edwin M. Lee and the tech establishment. But he drew volunteers from all over the city and won by a 9-point margin with the slogan “Let’s take a stand to make San Francisco more affordable and livable.”

“These billion-dollar companies should help ameliorate the impact they’re having,” Mr. Peskin said. “They can afford to do a lot more. So far, it’s only window-dressing. They can volunteer to be decent.”

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Ullico Helps Union Members Prepare for Retirement

Ullico Investment Advisors, Inc. and Acropolis Investment Management, LLC have partnered to form Ullico Retirement Services (URS), a new investment service to help American workers prepare for their golden years.

Ullico is already known for its management of defined benefit plans, but unions are looking more and more to defined contribution plans. URS responded by launching a turnkey solution for Taft-Hartley plans. "We've been a trusted partner working on unions' defined benefit programs for 37 years. Now we'll be a trusted partner working on unions' defined contribution plans as well," says Joe Linehan, president, Ullico Investment Advisors, Inc.

Unions and Defined Contribution Plans

In traditional defined contribution plans, employees can choose to contribute to a 401(k) and employers will typically match the contribution up to a certain amount. In the union world, the employee contribution may be determined by a collective bargaining agreement mandating an hourly contribution by the employer. In some plans, employees have control over how the money is invested. In others, the funds are managed by trustees.

Taking a Passive Approach

Whether the plan is trustee-directed or participant-directed, URS advocates a passive approach to investing. "With every paycheck, money is added to the plan, which allows for dollar cost averaging as the money is invested. Passive investors will purchase investments with the intention of long-term appreciation. If the asset allocation is appropriate given the member's age and retirement horizon, they shouldn't need to try to guess when to get in or out of the market. The key is for them to have a strategic asset allocation," says Chris Lissner, president, Acropolis Investment Management.

 

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