Item 11 - Review of Antidiscrimination Policy for City Investments AGENDA REPORT
CITY OF POWAY
This report is included on the Consent Calendar. There will be no separate discussion of the
repor~ prior to approval by the City Council unless mentDers of the Council, staff or public
have this report pulled for discussion, please fill out a slip indicating the report number
and give it to the City Clerk prior to the beginning of the City Council meeting.
TO: Mayor and M~abers of the City Council
FR~M: James L. City ~V~ana~
BY: Kay D. Jimno, Director of Services
DATE: May 6, 1986
~JBJECT:
Staff has been requested to prepare a six month review
tion clauses add the City's ' policy, policies in
state that ' will not be made with
who de business with others who practice ~nis form
of "social investing" has become a issue and the question is
whether the City of Pow-ay should incl~e such a policy in its '
There has been D~ change in the findings which were in the staff
report of November 12, 1985. A copy of that report is
It is { that the city Council receive and file this report and further
tJ%at staff prepare a status report on this subject for City Council review in
one year.
1) Agenda Report of Nove~lber 12, 1985
~ACTION:
_.1 of 9 MAY 6 1986 ITEM
AGENDA REPORT
CITY OF POWAY
This report is included on the Consent Calendar. There will be no separate discussion of the
report prior to approval by the City Council unless members of the Council, staff or public
request it to be removed from the Consent Calendar and discussed separately, If you wish to
have this report pulled for discussion, please fill out a slip indicating the report number
and give.it to the City Clerk prior to the beginning of the City Council meeting.
TO: Mayor and Members of the City Oouncil
FROM: James L. City" ~ .
BY: Kay D. Jimno, Director of Servi~
DATE: November 12, 1985 ~
Staff has been to prepare a report
clauses and the City's policy.
policies in ' state that invest-
ments will not be made with who do business with others who prac-
tice This form of "social ' has becc~ a
issue and the question is whether the City of Poway should include such a policy
in its '
The Finance staff has policies with finance offi-
cer~ from various cities in San Diego County. We have also reviewed
reports the policy by the San Diego Unified School
a policy that was aimed at in
having ' in South Africa. In staff reviewed the San Diego
City report to the San Diego City Council on an
policy for fund (See "A" )
The concept of "social in the private sector where invest-
ment in the stock of other is allowed. To divest of the stock of com-
panies doing business with, for example, South Africa, would be a form of
economic sanction against those
ACTION: Received and filed report,
2 Of 9 NOV121985 iTEM 12
M,~¥6 1906 ITEIV] ~,
Agenda Report
Policy for City
November 12, 1985
Page 2
Cities may not invest in the stock of co~I~nies. Tnerefore, the on ,,
business is with banks. To withhold the City's dollars tom banks
who may do business with who may have economic ' n South
Africa punishes no one but the citizens of Poway who will not be ga ning the
best rate of return on of their money.
The City finance officers contacted ~d the use of an
policy for economic and reasons. ~uch a would limit the
earnings pro ~uced by ' by .the number of to
c~oose from or ~ , any process to determine
whether ' remain in o0mpliance with the policy would be quite time
an. probably Finally, such a policy would most likely
prohibit ' with the Local Agency Fund, which is part of the
State Treasury and is used by many local agencies as an vehicle when
bank rates are not as Due to the size of the it often
pays higher returns, however, it does business with ~ institu-
tions having ' that could be contrary to an policy.
As a the State is working on a"
plan and when ' would permit the City of Poway to benefit as a deposi-
tor in the LAIF.
From a practical the City is limited in where it can place invest-
ments. As of the date of the last report, the City had $
invested in of deposits from 41 banks or savings and
loans, $ on deposit with the State Treasury, and ' with a
book value of $987,579 in National Mortgage
If t e City were to withdraw the $ from the State Treasury and attempt
to p ace these funds in of deposit with banks or savings
and .oans, the City would not only suffer a loss in its earnings but would have
a time ' this money. The City could be severly in
the number of banks and savings and loan that ' could be made in,
since many of these banks and savings and loans do business with who
have intrests in South Africa.
It is that the City Council receive and file this report and further
that staff prepare a status report on this subject for City Council review in
six months.
/ml
A) San Diego City report to San Diego City Council
3 Of 9 NOV121S85 ITEM 12
1986 ITEl¥1
OFFICE OF
THE CiTY ATTORNEY
BUILDING
CITY OF SAN DIEGO
JOHN W. WITT f619} 236-6220
OPINION NUMBER 85-1
May 8, 1985
City Council Over
Fund
REQUESTED BY: Rules
BY: Jack Katz, Chief Deputy
What is the role of the City Council its
ability to direct the Board's actions and ts
[ Board's] role under Charter § 1 4
n the general is the urther
inquiry of whether a "Social to
policy would the
cited by the Board.
It is our legal opinion that, to the of
the San Diego City Charter, the City Council cannot direct
be made by the Board. The City
Council may, by
. ing classes or type~ of
within which by the Board shall be
[Charter ¢ 144.] This it has done [see
No. R-259541, dated October 31, 1983] and we shall discuss those
in further detail. The Council may also amend the
to or modify those ~d~-~nal
classes or types of it for the Board. We
shall also discuss this further on in this Suffice it'
to say at this point that those are meant to guide and
not
The inquiry "Social as it
may the cannot be
at this time, as a matter of legal without further facts
and It would appear, on its face, that
of ' would limit
with a impact In and
of "Social and
may very well be that is,
one charged with duties may not avoid or ignore trust
q Of 9 Nov ].2'~985 ITEM 12
.............. · ..... -'- · ~.~Y 6 7986 I T F...
Rules -2- May 8, 1985
fund solely on a "social
basis when, to do so, would impact the
trust portfolio and inter~ere with of '
return. To the greatest extent possible, we intend to confine
our to matters of law as they concern the
Board the City in regard to ' of
System funds, leaving to others the moral, social and
political d' and
At the Rules meeting of January 14, 1985, a
was the City change its
policy so that no would be placed with
or doing in South Africa.
See City Manager Report No. 85-44, dated January 24, 1985.] A
was by the City Manager in said report and a
made that current policy be
, the of the Board of
a report to the Rules dated
January 22, 1985, in which he the same concern and
but from a [trust] fund point of view.
The matter was ~o March 11, 1985 for further
and The Rules
and 85-3 to the
dated as the same day of the setting forth further
and The Rules after
the matter to the City Manager for further study and
inpu of to the City for an
opin on the role of the Council its
abil ty to direct the Board and
the entire matter to May 13, 1985. The City Manager
has an interim report, No. 85-169, dated
April 4, 1985 and indicated it will provide a full report for the
Rules meeting of May 13, 1985. This opinion is our
to the from the Rules
This office has, on many
the r le of the Board of
[S~e, , dated 16, 1982 ( y Dave
Morris and Apr 11, 1983 (by Jack Katz); o Law dated
April , 1972 ( y Robert J. Logan) and Oct her 16, 198 (by ~ave
Morris ; and Op nion No. 82-4, dated 23, 1982 (by John
Kaheny .] A common thread of legal and principle in
the ci ed and opinion weaves a c ear mosaic as it
relates to the role and of the Board of
[herein "Board"].
NOV ].2 1985 ITEM 12
5 of 9 NAY'6 1986 ITEM
Rules -3- May 8, 1985
The System [herein ] is by and
to San Diego City Charter § 141, et seq.
Those Charter were into the current
Charter at its in 1931. to the Charter, a
series of have been enacted for the purpose
of giving effect to those [ Code §
et seq.l The Board is ~urther to enact and has
enacted Board Rules to augment the by
and and the
and to carry out
its as set forth in the Charter and
Code.
The duty and to invest funds is
vested solely and in the Board [Charter §
144]. That is a matter of organic law and
not a matter of grace; it flows from the people of
The City of San Di~go via the Charter to the Board. The
of San Diego, in the Charter and its various
and chose to place the for and
of funds in an bo~y. The
to invest such funds is granted under well
define [See aga.n, Charter § 144 and
in Counc.1 No. R-259541.] We
note, owever, that within those
are st~ within the and'
of the Board and are not We note fUrther
that within the
must be by
Further, those funds were [and are] as
"trust" funds, and managed for the benefit
of the System and '[See
Charter § 145.]
The we now must address is "What is the nature and
extent of duty and of the Board as against
Board members are of such trust fund~ and are
for that degree of and as
by law. [ Civil Code § 2228, et seq.]
are held to a duty of care.
that duty of care the 0f good
faith. [76 § 409 et seq.] The of good
faith means the trustee must act in the of the trust
are obliged to use utmost care to protect
trust and make the trust A1 ,
101 457 ~n v. Trust Co., 80
377 (1926).
Board members have a to seek and
obtain a maximum degree of return, bearing in mind and
F the risk involved for the sole and
v.,1 2 985 IT E WI
12
6 of 9 m,q¥ 1986
ITEM 11
Rules -4- May 8, 1985
purpose by the Charter. , if
funds are improperly or poorly ultimate res~
lies with the Board and. liability may attach both jointly and
severally. The ultimate concern is return realized as
a of rudent for the benefit of the system
and the and The
pr nciple [citing Rules Consultant Report
No. 85-3] requ res that be guided sole
factors such as highest and most secure rate o
trustee must act in the best of the trust
The system's participants and have a clear
exp that the fund will prosper by proper
from our April 11, 1983 to
we that ["acting in best
of trust"]
means that the funds must be so treated [and
] as to the return for the
benefit of the of the system
with given to degree
of risk. Each must be against the
other but the primary concern is the benefit
for the well-being of the system.
This is all the more tru,
ly funded.
The trust 'lities are such that
they may not be abused or taken lightly. As
the return to the system must
be within a
and prudent' Funds may not be
because of of cause when
exist which provide
greater return. Such in reduced
an
and
to that extent, a gift of public
funds. ''
It is that Board members are legally char ed with a
, [see, January.22, 1 85 letter
to ules from the of the Board of
] one which must be free from F orces
see ing to direct, or impose a wil upon the
Board and the trust funds, for other than that for which
the fund was Those forces impose an
tension on the trust funds which must be in
trust fund principles. A the power to invest
funds is vested n the Board, of
of any other C ty entity, 'ovided that the
comply with u 3g
under the City Charter. The prudence or imprudence
t986 ITE
7 Of 9 0V1 ;985 ITEM 12
Rules -6- May 8, 1985
fund. However, in the final the City Council is
~ and granted the sole power to
with ~ion to the
Board's and counsel's atlon.
As earlier in this the are just
that -- meant to 'and
They canno an do not mandate any Upon
o the Board has the
sole ~ to which will
be ma~ hose classes or types of
by The City Council does not have the
, under any of law, ~ which
must be
An action by Council to will,
, impact the ability and role of Board members as
to return and fiscal
of the system. The extent of such impact is
best lef~ to ' counsel and the system's
actuary to and
Turning to the present trust fund the
therein have been ~ upon of
counsel to exit
· . They legally exist. The Council may not
, any of the to be ' ~ A change
in serve to provide
only in nature and effect, for of funds.
Such change does not and should not direc of present
validly held. Any other could, and very
would, lead to a a verse impact
.on the asset value of the trust fund
that said change by Council imposes
or This, in turn, would impact
[to an extent yet to be ] the fiscal of the
system, and upon the Board's to and
prudent of such trust funds.
SUMMARY
In summary, the Board serves in a role
and must be ever mindful of the purpose for with the
trust fund was i.e., to provide funds for the
of the system and payment of granted by the
system. In such trustee , the Board must invest the~
funds to the return for the benefit of the
system, the and
On the other hand, the City Council is y vested with
the to classes or types of
within which the Board may conduct
The Charter places no upon this
NOV-l 1985 ITEM 1.2
8 o f 9
Rules C -7- May 8, 1985
and, as a the ability [of the Council] to
those guidelines is p however, no attempt ~s
made to mandate specific ·
one caveat is must be given to the
im act of any The
f scal viabi ity of the system shoui be p The monetary
o the system is calculab e and upo the
a il~ty of t e system [and the Board to meet that in
a and prudent manner may reate a funding
In that event, however remote, the C ty may be legally lia le to
the and for such short all.
JOHN W. WITT, City
JK:smm: 715.5: 142: (x043)
9 of 9 NOV 1 2 1985 IT E M 12
~.~¥6 1986 ITEM ','~