Consistent with State law, Santa Monica reviewed its City Investment Policy at the City Council’s Feb. 26 meeting.
There was not much of a discussion, however, at the meeting itself, as Council members unanimously approved the City Investment Policy earlier this month as part of its consent calendar. The item was not pulled for discussion so it was passed with a collection of other consent calendar items.
As is the case each year, the City Investment Policy covers current investments in fossil fuel companies and outlines various objectives of how City Hall may spend its money.
The policy officially reads: “It is the policy of the City of Santa Monica (City) to invest public funds in a manner which will safely preserve portfolio principal, provide adequate liquidity to meet the City’s cash flow needs, and optimize returns while conforming to all federal, state, and local statutes governing the investment of public funds.”
With investment come divestments. Accordingly, City Hall has confirmed its current investment policy does not include any investments in fossil fuel companies.
“While the City portfolio does not have any current investments in fossil fuel companies, the Cemetery and Mausoleum funds (the trust funds holding funds paid by customers at the time of internment) do,” City staff added. “Although these funds are not truly City funds, the Council is responsible for setting the guidelines for their investment. Investments have followed and continue to follow the City’s guidelines for socially responsible investing.”
According to City staff, about 10 percent of Woodlawn’s portfolio – nearly $1 million – “is currently held in firms that could be classified as fossil fuel companies generating $30,000 -$40,000 annually in interest and dividend income.”
“Under divestment, these investments would be replaced with investments in other sectors. However, it should be noted that reducing portfolio diversification could increase portfolio volatility, and in the long term, could result in a decrease in the total return of the portfolio,” City staff added.
Woodlawn currently generates about $400,000 per year for perpetual care services, according to staff.
“Staff recommends that the City divest from all investments in fossil fuel companies as defined by the 350.org guidelines. This divestment would be made as soon as possible without fiscally impacting the Cemetery and Mausoleum Perpetual Care funds, but in all cases would be done within two years,” City staff stated. “No further investments would be made in fossil fuel companies in either the Cemetery and Mausoleum Perpetual Care funds or any other City investment portfolio. The City’s Investment Policy would be amended to reflect this action.”
The City Investment Policy also outlines the priority order of investment objectives; investments in safety initiatives are the highest priority, followed by ensuring the investments are liquid. The rate of return on investments is a tertiary priority.
