HomeMy WebLinkAboutMINUTES - 01112000 - SD9 TO: BOARD OF SUPERVISORS
Contra
FROM: Supervisors Mark DeSaulnier&John Gioia
V Costa
DATE: January 11,2000 County
SUBJECT: Socially Responsible Investing for Contra Costa County
SPECIFIC REQUEST(S)OR RECOMMENDATIONS)&BACKGROUND AND JUSTIFICATION
RECOMMENDATION:
APPROVE in concept the development of a policy of socially responsible investment.
DIRECT Supervisors DeSaulnier and Gioia to meet with the County Chief Administrative
Officer,Auditor-Controller, and Treasurer,to develop a program of socially responsible
investment policies and criteria to be used by Contra Costa County. They shall report back to the
Board of Supervisors within 90 days. This report shall include a review of the potential for the
County's investment in publicly held local companies .
Further, invite input from the Contra Costa County Retirement Board where appropriate.
CONTINUED ON ATTACHMENT: z YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COWffr TEE
APPROVE OTHER
ACTION OF BOARD ON =3 APPROVED AS RECOMMENDED K OTHER K
APPROVED the above recommendations and DIRECTED the County Administrator to
prepare a report for the Board's consideration on this matter.
9
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A TRUE
UNANIMOUS(ABSENT__/ 4J� 1 AND CORRECT COPY OF AN ACTION TAKEN
AYES: NOES: AND ENTERED ON MTNCITEs OF THE BOARD
ABSENT: ABSTAIN: OF S'UPERVISo N THE DA OWN.
ATTESTED
BATCHELOR,CLERK OF THE O F
UPERVISORS AND COUNTY ADMINISTRATOR
Contact:
cc: BOS
Phil Batchelor CAO
w1111am Pollaeek,Treasurer
Kenneth Corcoran,Auditor-Controller
Patricia wiegert,Retirement Administrator
'I j�;
BACKGROUND
Government's primary role in our society is to protect its people and promote the general
welfare. It is significant that each year our county spends millions of dollars,through its health
care system, dealing with the ravages of tobacco. Therefore, it is only logical and consistent that
we make sure no government fiands are invested in any company which produces tobacco
products. By divesting our financial and retirement interests in these businesses we are sending a
clear message to our people that as a county we are committed to better health.
We would not be the first to move in this direction. California State Treasurer Phil Angelides last
month indicated that he would not be investing any of the $33 billion in state money he manages
in tobacco stocks this year, continuing a practice begun.in 1995. He has urged the state teachers'
pension fimd to consider divesting itself of all tobacco stocks.
The development of a socially responsible investment strategy shall not be limited to any one
product nor should it be a politicized effort. We believe the timing is appropriate given the
current economy and the great body of material available to guide the Board in producing an
investment screening process of which we can be proud, both fiscally and socially.
It is in the interest of our County to make the wisest possible fiscal decisions. There is wide
array of investment possibilities available in today's market. Many with better long range
potential that are not burdened with severe regulatory pressures, lawsuits and declining stock
prices. Some of these companies are locally based, employee Contra Costa citizens and generate
tax revenue for our county.
C<
COUNTY OF SACRAMENTO ' 6 3
CALIFORNIA
APPROVED
BY RESOLUTION#96-1515; #86.1516
BOARD OF SUPERVISORS
April 14, 1999 DEC 15 1998Agenda of December 15, 1998
10:30 a.m.
To: Board of Supervisors
B4e(—Cte of the hoard
From: John Dark
Director of Finance
Subject: DELEGATION OF INVESTMENT AUTHORITY TO THE COUNTY TREASURER
(DIRECTOR OF FINANCE); AND
APPROVAL OF 1999 ANNUAL INVESTMENT POLICY FOR THE POOLED
INVESTMENT FUND
Contact: Deborah Kanner, Chief Investment Officer, 874-7320
RECOMMENDATION
I recommend that your Board:
1) Approve the attached resolution that approves the renewal of annual delegation of authority
to invest funds to the County Treasurer (Director of Finance); and
2) Approve the attached resolution that approves the 1999 Sacramento County Annual
Investment Policy for the Pooled Investment Fund.
BACKGROUND
On September 26, 1996, Senate Bill 109 was chaptered into law and became effective January 1, 1997.
This legislation allows the Board of Supervisors to make an annual delegation of authority to invest County
funds to the County Treasurer (Director of Finance). Your Board is considered the agent of the County's
funds, serving as fiduciary and subject to prudent investment standards, unless your Board annually
delegates this role to the County Treasurer (Director of Finance). In addition, this legislation requires your
Board to consider and adopt the annual investment policy. I have brought an annual investment policy to
your Board for consideration and adoption since 1987. However, since 1997 your Board's annual review
and adoption of the investment policy is required by statute.
At last year's Board meeting, the topic of investments in tobacco companies was discussed. Under
Investment Options - Tobacco Companies, the topic is d)r,cussed as well as alternative language for your
consideration.
DISCUSSION
In order to comply with the requirements established in Senate Bill 109, Section 3.43.100, DELEGATION
OF AUTHORITY TO THE COUNTY TREASURER (DIRECTOR OF FINANCE) TO INVEST FUNDS
IN THE COUNTY TREASURY, the Board of Supervisors is required to annually review and renew,
pursuant to Government Code §53607, the authority of the County Treasurer (Director of Finance) to
Payr 1
Delegation of Investment Authority to County Treasurer(Director of Finance);and
Approval of 1999 Annual investment Policy for the Pooled Investment Fund Agenda of Dacember 15,1999
invest and reinvest funds of the County and funds of other depositors in the County Treasury, or to sell or
exchange securities so purchased, pursuant to Chapter 4 (commencing with Government Code §53600) of
Part I of Division 2 of Title 5.
Additionally, SB 109 requires that your Board annually review and approve the Investment Policy of the
Pooled Investment Fund, rather than merely receive and file it. The 1999 Sacramento County Annual
Investment Policy for the Pooled Investment Fund is attached for your review and approval. SB 1973,
effective January 1, 1999, and sponsored by Sacramento County, provides clarifying language on how
compliance issues will be applied. These changes have been incorporated into the County's Investment
Policy.
Modifications to the policy this year include:
Y Addition to Section IX. F. Maximum Concentrations. A sentence was added to clarify that where
there is a maximum percentage for a particular category of investment, that percentage is applied at the,
date of purchase, when determining compliance with state code and the investment policy.
➢ Addition to Section IX, G. Repurchase Agreements. A sentence was added to address the fluctuating
nature of.market prices. If the.market value of repurchase.agreement collateral falls below 102%, so
long as the market-value is adjusted by the next business day, the security is not considered to be out of
compliance.
➢ Other minor editorial changes were made to clarify language in, but not the content of, the policy.
INVESTMENT OPTION - TOBACCO COMPANIES
The Annual Investment Policy for the Pooled Investment Fund has no social investment standards relating
to the purchase of tobacco company commercial paper or medium-term note issues. However, the County
has not had investments in tobacco company commercial paper or medium-term note issues because their
credit ratings do not meet the high credit standards required by the Pooled Investment Fund. See examples
below;
CREDIT EVALUATION S & P's Ratings Moody's Ratings
(Short/Long-Term) (Short/Long-Term)
RJR Nabisco A-3/13SS- P-3/13aa3
Philip Morris Cos., Inc. A-1/A P-1/A2
Investment Policy minimum A-1 P-1
Investment Guidelines minimum A-1/AA P-1/AA-
The Investment Policy minimum short-term credit requirements are found on page 5, Section IX D. Also
noted above is the Investment Guideline minimum credit requirements, which have been in place for many
years. The credit rating of RJR Nabisco falls significantly short of the County's credit criteria on both a
short-term and long-term basis. While Philip Morris falls within the short-term credit criteria, their long-
term credit ratings fall short of the minimum guidelines. Philip Morris would have to move from a strong
to a very strong capacity to meet its financial commitments before it would even be considered.
Pape 2
jP --�,/-V/e
Delegation of Investment Authority to County Treasurer(Director of Finance);and
Approval of 1999 Annual investment Policy for the Pooled Investment Fund Agenda of December 15,1986
If your Board wishes to take a social position regarding tobacco company commercial paper and medium-
term note issuers, the following alternative language is offered;
Investments in commercial paper or medium-term notes of a company
offering tobacco-related products will only be purchased at a price that
achieves the highest rate of return, If an investment product is offered by
a tobacco company at a rate of return equal to or lower than those
available from non-tobacco related firms, then the product will be
purchased from the non-tobacco related company.
This language could be inserted into the Investment Policy on page 6, under section D, if your Board
chooses to implement this provision,
CONCLUSION
I respectfully request that your Board approve the attached resolution that will renew your delegation of
investment authority to me. I further request that your Board approve the next resolution that adopts the
1994 Annual Investment Policy for the Pooled Investment Fund.
'Respectfully submitted, Approval recommended:
n ark Robert P. Thomas
Director of Finance County Executive
Attachments
cc: County Counsel
Pago 9
'X
RESOLUTION NO. 98-1516
RESOLUTION OF THE BOARD OF SUPERVISORS
OF THE COUNTY OF SACRAMENTO
TO REVIEW AND ANNUALLY APPROVE
THE ANNUAL INVESTMENT POLICY
OF THE POOLED INVESTMENT FUND
WHEREAS, Government Code section 53646 requires that the Board of Supervisors
annually review and approve the Annual Investment Policy of the Pooled Investment Fund at a
public meeting; and
WHEREAS, Government Code section 27000.3 places the Board of Supervisors as a
fiduciary and subject to the prudent investor standard of the county funds deposited in the
County`Treasury, unless delegated to the County Treasurer(Director of Finance); and
WHEREAS, the Board of Supervisors have renewed and delegated to the Treasurer
(Director of Finance) the authority to invest funds; and
WHEREAS, the Board of Supervisors has reviewed the Annual Investment Policy for
1999 and finds the Policy to be reasonable and prudent;
NOW, THEREFORE, BE IT RESOLVED that the Board of Supervisors hereby
approves the Annual Investment Policy of the Pooled Investment Fund pursuant to Chapter 4
(commencing with Government Code section 53646) of Part I of Division 2 of Title 5 of the
California Code.
On a motion by Supervisor Nottoli, seconded by Supervisor Johnson, the foregoing
Resolution was passed and adopted by the Board of Supervisors of the County of Sacramento
this 15th day of December, 1998, by the following vote, to wit:
AYES: Supervisors Dickinson, Johnson, Nottoli, Collin
NOES: Supervisors none
ABSENT: Supervisors none
00
Chalk'of the Board of Supervisors of
Sacramento County, California
Jerk of the
Board of Supervisors FILED
DEC 15 1998
BOARD OF SUPERVISORS
BY
GLERII&F THE BOARD
In accordance with Sactlon 25108 of the Government
Code of the State of California,a copy of this
document has boon delivered to the Chalnnan of the
Board of Supervisors,County of Sacramento,on
DEC 15 1998
By tliI4 Lf
Deputy illork,Board of Sapervison
1
COUNTY OF SACRAMENTO 70
CALIFORNIA
APPROVED
BY RESOLUTION#99-4629
BOARD OF SUPERVISORS
April 14, 1999 MAY 11 1999 Agenda of May 11, 1999
at 10:45 a.m.
To: Board of Supervisors
s �
From: John Dark 4'tleofard
Director of Finance
Subject:. Amendment to Further Restrict Investment Purchases in Tobacco Companies
in 1999 Annual Investment Policy
Contact: Deborah Kanner, Chief Investment Officer, 874-7320
RECOMMENDATION
I recommend that your Board approve the attached resolution that approves an amendment to the 1999
Annual Investment Policy that would further restrict investment purchases in tobacco companies.
BACKGROUND
On December 15, 1998, your Board received and approved the 1999 Annual Investment Policy that was
amended to include language regarding the investment in tobacco companies. Following a discussion on
this issue, you requested that more restrictive language be brought back to the Board upon the filling of the
vacant fourth district Board Member seat. Below is the information that you were provided in December
regarding the credit of certain tobacco companies, the current Investment Policy language relating to
tobacco companies and the proposed amendment to further restrict investment in tobacco companies.
Credit Information - Tobacco Companies
Until January 1999, the Annual Investment Policy for the Pooled Investment Fund had no social investment
standards relating to the purchase of tobacco company commercial paper or medium-term note issues.
However, the County has A9 made any investments in tobacco company commercial paper or medium-
term note issues because their credit ratings do not meet the high credit standards required by the
Investment Policy for the Pooled Fund. See examples below:
CREDIT EVALUATION S & P's Ratings Moody's Ratings
(Short/Long-Term) (Short/Long-Term)
RJR Nabisco A-3/131313- P-3/Baa3
Philip Morris Cos., Inc. A-1/A P-1/A2
Investment Policy minimum A-1 P-1
Investment Guidelines minimum IA-1/AA3 P-i/AA-
Noted above is the Investment Guideline minimum credit requirements which have been in place for many
years. The credit rating of RJR Nabisco falls significantly short of the County's credit criteria on both a
short-term and long-term basis. While Philip Morris falls within the short-term credit criteria, their long-
Page i
02
Amendment to Further Restrict investment Purchases In
Tobacco Companies In the 1999 Annual Investment Policy Agenda of May 11,5999
term credit ratings fall short of the minimum guidelines. Philip Morris would have to move from a strong
to a very strong capacity to meet its financial commitments before it would even be considered.
DISCUSSION
Current Policy Regarding Tobacco Investment
At the request of your Board, the following language was inserted into the 1999 Investment Policy on page
6, under section D, paragraph 4, on December 15, 1998:
Investments in commercial paper or medium-term notes of a company
offering tobacco-related products will only be purchased at a price that
achieves the highest rate of return. If an investment product is offered by
a tobacco company at a rate of return equal to or lower than those
available from non-tobacco related firms, then the product will be
purchased from the non-tobacco related company.
Proposed Amendment estrict Investment ib o CoInganies
It is proposed that the language above be deleted and replaced with the language below. Additionally, an
Appendix listing those-companies that meet this definition would b-e attached.
The County 'will not invest in commercial paper and medium-term notes issued by a
tobacco related company. A tobacco-related company is defined as an entity that
makes smoking products from tobacco used in cigarettes, cigars, or snuff or for
smoking in pipes. A list of tobacco-related commercial paper and medium-term
note issuers is attached. Annually, the Director of Finance andlor his designee will
update this addendum to the investment policy,
CONCLUSION
I respectfully request that your Board approve the attached resolution that will amend the 1999 Annual
Investment Policy for the Pooled Investment Fund to further restrict the investment in tobacco companies.
Respectfully submitted, APPROVED:
01.100 Robert A. Ryan, Jr.
0
0 Acting County Executive
n ark
Director of Finance By:
Geoffrey B. Davey
Chief Financial Officer
Attachment lists tobacco-related companies.
Pape P
The foregoing is a correct copy of a resolution
adopted by the Board of Supervisors, Sacramento
County,California
on May 11, 1999
Dated July 23, 1999
Clerk of said Board of
RESOLUTION NO. 99.0528 Sup ors
By
RESOLUTION OF THE BOARD OF SUPERVISORS e7 Deputy
OF THE COUNTY OF SACRAMENTO
TO AMEND THE 1999 ANNUAL INVESTMENT POLICY
OF THE POOLED INVESTMENT FUND
WHEREAS, Government Code section 53646 requires that the Board of Supervisors
annually review and approve the Annual Investment Policy of the Pooled Investment Fund at a
public meeting; and
WHEREAS, Government Code section 27000.3 places the Board of Supervisors as a
fiduciary and subject to the prudent investor standard of the county funds deposited in the
County Treasury, unless delegated to the County Treasurer (Director of Finance); and
WHEREAS, the Board of Supervisors have renewed and delegated to the Treasurer
(Director of Finance) the authority to invest funds; and
WHEREAS, the Board of Supervisors has reviewed the Annual Investment Policy for
1999 and has chosen,to amend the policy to exclude investment purchases in tobacco
companies;
NOW, THEREFORE, BE IT RESOLVED that the Board of Supervisors hereby
approves the Amended 1999 Annual Investment Policy of the Pooled Investment Fund
(Amendment attached hereto as Exhibit 1) pursuant to Chapter 4 (commencing with
Government Code section 53646) of Part I of Division 2 of Title 5 of the California Code
On a motion by Supervisor Collin, seconded by Supervisor Dickinson, the foregoing
Resolution was passed and adopted by the Board of Supervisors of the County of Sacramento
this 11th day of May, 1999, by the following vote, to wit:
AYES: Supervisors Collin, Dickinson, Niello, Nottoli, Johnson
NOES: Supervisors none
ABSENT: Supervisors none
s
hair of the Board Utipervisors of
Sacramento County, California
clerk of the
,ry Board of Supervisors
FILED
MAY 11, 1999
BOARD OF SUPERVISORS
BY
CLER OF THE BOARD
In accordance with Section 25108 of the Government
Code of the State of California,a copy of this
document has been delivered to the Chairman of the
Board of Supervleors.County of Sacramento,an
MAY 119 1999
t
By `" 4e
Deputyliters,Board of Supervisors
v
5
COUNTY OF SAN M.ATEO
BOARD OF SUPERVISORS
INTEROFFICE MEMORANDUM
Date: October 28, 1999
To: Members of the Board of Supervisors
From: Supervisor Mike Nevin .
Subject: Retirement Association Investment Practices.
Recommendation:Approve a resolution to urge the Sint Mateo County Employees'
Retirement Association assure investment funds are not made with Ra.Reynolds&Co.,
Philip Morris or any other tobacco industry.
Background
The Sari Mateo County Tobago Education Coalition has called to ray attentimi that monies arc
being invested the San Mateo County Employees'Retirement nt Association(SamCERA)in
companies that have tobacco products.
SaniCERA claims to be most concerned for the financial stability and welfare of our retirees.
'Stet,their money is invested in It.I.Reynolds Company,Philip Morris Company,and others,
who supply substance known to cause;cancer and disease,shorten,the lengM ofhuman,life,and
sometimes kills.
Discussion
I believe that them is au in,hemt conflict. It is SamCERA's fiduciary responsibility to assew
this situation and demand those tobacco companies we moved for consideration of Interest by
. thou investment authority.. It is inconsistent for this County to treat people at rte General
Hospital suffering from cancer and at the sante time,have its retirement system Invest m the
companies that cause cancer.
I'm aware that our Retirement Board contracts with Boston Partners as their large cap investment
authority,who in turn is duuVe d with making the bent investment possible. However,I believe
the Board of Dirwtors bas a fiduciary responsibility to ensure that large:cap investments are:not
made with tobacco companies. There is further the"tion of prudence hi investing in the
tobacco industry,which ultimately causes suffering ana disease,that has proved,much more
volatile as a result of the urtcertaintics facing the industry due to the numerous lawsuits and local
and federal legislation to regulate the tobacco companies.
1
f'�
There is no excuse for this investment of dollars, and I urge the Board of Director$of S=CERA
to find ether industries other than tobacco to profit on investment. No return,no percentage of
profit,no realization of financial stability is worthy of simultaneously threatening human life.
Recommendation
I urge.SamCERA.to divest from tobacco stocks and offer the attached Resolution,co-sponsored
by San Mateo County Supervisor lose Jacobs Gibson,scheduled for the Board of Supervisors
meeting of November 2, 1999.
f
j
There are four compelling reasons why SamCERA should divest its public investments from
tobacco stocks:
1. The rre is a moral imperative to divest from tobacco stocks;
i
-2. Investing in tobacco is inconsistent with the County's tobacco control efforts;
3. Tobacco divestment would not breach the fiduciary responsibility of SamCBRA;
and
d. Legally,Retirements Boards may dived from tobacco stocks.
As the;County considers ordinances dealing with smoking and the protection of victims of
secondhand smoke,regulate the sale of tobacco,in assuring as humanly possible that adolescents
don't have the opportunity to purchase cigarettes;as government,including this County,works
toward better air quality and does everything possible to combat lung disease,it seems
contradictory that our retirement dollars are invested in tobacco companies.
Attachment
}
2
S' i
ed
RESOLUTION NO, 63157
BOARD OF SUPERVISORS, COUNTY OF SAN MATEO, STATE OF CALIFORNIA
RESOLUTION URGING THE SAN MATESO COUNTY
EMPLOYEES' TIREMENI`ASSOCIATION TO ASSURE THAT THE
INVESTMENT OF FUNDS ARE NOT MADE WITH R.J.RE'Y'NOLDS &CO.,
PHILIP MOMS,OR ANY OTHER.TOBACCO INDUSTRY
RESOL'VEDt by the Board of Supervisors of the County of San Mateo,State of
California,that
WHEREAS,smoking kilts three million people,worldwide tach yea4 including 450,000
in the United States and accounts for one in five deaths in San Mateo County; and
WHEREAS,investors in the top 15 U.S.mutual fends own+69,908,570 shares of tobacco
stocks,which are included among the top 10 holdings in the IS ingest mutual funds,with a
value of$3 billion;and
WHEREAS,the San Mateo C4umy Employees'Retirement Association is a Municipal
pension fund which,as of June 30, 1998,has holdings of approximately$1.1 billion in asset,of.
which approximately.021 percent in investments in securities of tobacco companies;and
WHEREAS,many investors may not know that such investments are part of the fiend's
portfolio;and
WHEREAS,it is believed that state and municipal pension Amds collectively have
sufficient shares to influence the investment market of the tobacco industry;and
WHEREAS.the American Medical Association House of Delegates bass stated that all
physicians,health professionals,medical 1%hospitals,public heft advocates and oftizons
interested in health and we Wuv of our children should review their personal and institutional
investments and divest of any tobacco holdings(including mutual funds that include tobacco
holdings);-and
WHEREAS,the County of San Matto joined with other counties and states in the Bing
of a lawsuit to recover medical and health costs incurred because of the use of tobacco products
by its residents,as a result of such a lawsuit,received tobacco settlement funds as pXU-relief
for such costs; and
WHEREAS,due to recent governmental steps to tighten the regulation of tobacco,and to
sue the tobacco industry to collect reimbursement for payments made:for the health cams
Provided to smokers,it is believed that there arc serious reasons to doubt the safety and tong term
profitability of tobacco investments;and
WHEREAS,the Minnesota lawsuit against the tobacco industry gained public access to
tobacco industry documents proving tobacco industry managers engaged in a deliberate process
to hide and obfuscate scientific facts and marketing strategies from the government,the courts
and the public; and
WHEREAS, the Engle class action case gained preliminary approval for all smokers,and
heirs of smokers,in the State of Florida to sue the tobacco industry for injuries sustained due to
smoking which would increase the vulnerability of the tobacco industry to individual lawsuits;
and
WHEREAS, while tobacco has historically provided good returns,over the past few years
it has proved much more volatile that the S&P 500 as a whole, as a result of the uncertainties
facing the industry due to the numerous lawsuits and local and federal legislation to regulate the
industry;and
WHEREAS,these actions create an environment where the"prudent fiduciary"has to be
concerned about tobacco's stability and profitability;and
WHEREAS,the following California cities have passed resolutions calling for the Public
Employees Retirement System to divest from tobacco stocks: Berkeley,E1 Cerrito,Oakland,
Richmond,and San Francisco.
NOW,THEREFORE,BE IT RESOLVED THAT,the Board of Supevisors of the
County of San Mateo,State of California urge the San Mateo County Bmployces'Retirement
Association to divest any and all holdings in securities ofpubhcly traded companies that derive
revenue from the sale of tobacco products because tobacco stocks can no longer be justified as a
prudent investment;and
BE IT FURTHER RESOLVED,that the Board of Supervisors of the County of San
Mateo urges the California State Legislature to pass legislation calling for state and municipal
pension funds to divest from holding tobacco stocks.
Regularly passed and adopted the day of& �
A YES and in favor ofsaid said resolution:
Supervisors: MARY GRIFFIN
JERRY HILL
RICHARD S' QORDJN
RC'aL JACQ& C:IBSCIV
MICHAEL D. NEYIN
NOES and against said resolution:
Supervisors. NUNS
Absent Supervisors. NONE
MAR YGPJFFBV
President, Board of Supervisors
County of San Mateo
State of California
(Government Code section 25103)
I certo that a copy of the original resolution filed in the Office Of the Clerk of the Board of
Supervisors of Sart Mateo County has been delivered to the President of the Board of Supervisors.
DALE ELLEN YOUNG, be)
Clerk.of the Board of Supervisors
TaTPL P.06