When thinking back on the construction of the 360 State St. apartment complex completed in 2010, Ward 7 Alderman Doug Hausladen ’04 said he had an “ah-ha! moment” for a new, progressive city investment strategy.
After realizing that the new apartment complex was financed in part via a multiemployer pension fund, Hausladen said he had a vision that New Haven retirees’ pension funds — the largest of which are the Police and Fire Fund, or P&F, and City Employees Retirement Fund, or CERF — could invest in New Haven real estate. Hausladen said he believes this would expand the city’s tax base and thus allow it to lower property taxes, reducing the financial burden of households and luring business back to the city.
Union officials voiced optimism for the plan but emphasized that the pension boards in control of the funds would need months of planning before any formal investment strategy could come to fruition.
The P&F and the CERF both currently invest a total of around $25 million in real estate, including stakes in The New York Times Building, a JPMorgan Chase office in Tampa, supermarkets in Hungary and a Montana replacement auto parts store. But neither fund has funneled any of their money into the New Haven real estate market — a trend that Hausladen wants to change.
James Kottage, chairperson of P&F and president of the New Haven Fire Union, said Hausladen’s proposal is a good idea.
“Anytime you can invest in your own community, as long as you’re able to get return and avoid your risks and due diligence, it’s a positive way to get a return. New Haven’s a good place to invest,” he said.
Kottage said that he has begun investigating the proposal and has spoken with Michael O’Neill, New Haven’s acting controller, who he said seemed interested in the idea. Kottage added that the proposal may come up at the P&F board’s April meeting.
Jerome Sagnella, chairperson of CERF, said he is open to any investment strategy that could benefit the fund. He emphasized that any potential New Haven project would be evaluated just like the fund’s other investments.
“We can’t just put something in to make people happy,” Sagnella said.
Both Kottage and Sagnella said their boards may discuss Hausladen’s proposal in the coming months.
The city’s vacancy rate in 2012 was 14.4 percent, according to a 2012 report by Colliers International, 1.6 points higher than it was in 2011 and the third straight year the rate had increased. The report cited AT&T’s divestment from New Haven last November, including the company’s recent exit from a 77,000-square-feet office on Long Wharf Drive, as the major reason for the increase. Hausladen said that if the pension funds invested in New Haven real estate, it will jump-start the economy and provide enough revenue for the city to decrease property taxes, bringing back business and easing the burden on the neighborhood populations.
“Once the pie gets bigger, there’s less pie that has to be divided to the neighborhoods to pay for,” Hausladen said.
Joshua Humphreys, a fellow at the Tellus Institute and expert on socially responsible investing, said more than 15 years of research show socially conscious investments need not perform worse than other financial opportunities. Some studies, he said, have shown certain targeted socially-conscious investing, such as environmental efficiency, actually perform better than their counterparts.
But Humphreys warned against what he called “economically targeted” investment — or funds that will only invest in their local communities — because pensions that pursued such strategies in the late 1980s and early 1990s faced mixed results. He said pensions that have chosen different strategies such as environmental targeting have enjoyed higher returns and that few still employ economic targeting.
“In a way, it’s not really germane because we’re in a new world,” Humphreys said.
Nevertheless, Mark Abraham ’04, the executive director of DataHaven, said that New Haven was very attractive for residential and commercial developers because of its extensive public transportation relative to neighboring towns. Abraham said real estate near public transportation often sells for around 42 percent more than their “transit-poor” counterparts.
“Recent construction trends in Greater New Haven show that there’s more value to capture in centrally located areas with good transit access,” Abraham said. “Residents and employers are increasingly looking for greater accessibility and transportation options.”
New Haven was home to over $6 billion of taxable property in 2012, according to Mayor John DeStefano Jr.’s 2013–’14 budget proposal.