December 13, 2012
One billion dollars of the city’s teacher pension fund will be used to finance construction and repair projects for city roads, bridges, and homes, President Bill Clinton and other officials announced Thursday.
Clinton joined UFT President Michael Mulgrew, AFT President Randi Weingarten, City Comptroller John Liu, and U.S. Secretary of Housing and Urban Development Shaun Donovan to announce the pledge, which Clinton called “a remarkable commitment” to “properly rebuild in the aftermath of Sandy.”
“This storm exposed weaknesses in our infrastructure that must not only be repaired, but we must rebuild in a different way,” said Donovan, who is now in charge of federal Sandy recovery efforts.
This will be the first time the city’s teacher pension funds are used for infrastructure projects, Liu said, even though the idea has been around for years.
“There’s always been apprehension about, is it going to work, is it potentially a vicious circle? So what I’ve seen is everybody is waiting for somebody else to do it, and therefore nobody does it. I’m very proud that, in this case, New York City is taking the lead,” Liu said after the announcement.
Until now, funds in the Teachers’ Retirement System have all been invested more traditionally, in stocks and bonds and other financial products. Under the new arrangement, the pension fund’s investment will support the construction of projects such as bridges or housing complexes that generate revenue, through tolls and rent or mortgage in those cases. Those revenue streams will return funds to the pension system over time.
Liu wouldn’t predict the rate of return, but he said he was confident that the investments would “earn good returns” and said that each project would be evaluated individually. The California State Teachers’ Retirement System has done something similar in the past two years, pledging to invest $750 million in infrastructure projects — though that’s less than one half of 1 percent of its total $152.5 billion. Weingarten said today that California is starting to see “real returns” from those investments.
Liu said no decisions have been made about which projects would be funded. But Clinton pointed to his foundation’s work to rebuild storm-safe and eco-friendly buildings in New Orleans after Hurricane Katrina as an example of the possibilities.
The improvements likely will not include the construction of new schools, since the focus so far has been on projects that will generate revenue, Liu added. All but six of the dozens of school buildings that were damaged by the storm have since reopened.
The pledge, which the city Teachers Retirement System agreed to last week, is part of a larger project of the Clinton Global Initiative to encourage the use of pension funds for infrastructure investments, which began in 2011. The $1 billion amounts to just over 2 percent of the $46 billion Teacher Pension Fund.
Clinton clearly shared the enthusiasm of the other officials, who were effusive in their praise for each other’s work. After everyone else had spoken, he could not resist going up to the microphone one last time.
“I think it’s great that teachers are leading the way here,” Clinton said.