NYC's public pensions could help finance post-Sandy fixes

Thu Dec 6, 2012 6:45pm EST

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Dec 6 (Reuters) - Financing for the rebuilding of housing and infrastructure after Superstorm Sandy could come from New York City's public pensions, the city's comptroller said on Thursday.

New York City Comptroller John Liu said that he would present a plan to board members of the pension funds in the coming weeks to put some of the funds' nearly $127.8 billion into infrastructure projects, as well as housing.

Possible proposals to help people recover from the storm include investments in single-family mortgages and offering small-business loans, as well as teaming up with other investors to finance multifamily residential real estate, according to a spokesman.

Liu, who is the investment adviser and custodian for the city's five pension funds, did not disclose other details of the plan. The funds cover about 581,000 active and retired members.

"Now that there is a huge need to rebuild tens of thousands of homes in the city, the use of the city's pension funds as capital to accelerate these projects is going to be vital and necessary," Liu said. "It can be done in a way where we gain a good return for our pensioners and taxpayers."

Sandy damaged or destroyed homes, businesses, tunnels, roads, trains, water treatment plants and other infrastructure across New York, New Jersey, Connecticut and beyond when it swept ashore on Oct. 29.

New York City Mayor Michael Bloomberg has said that private and indirect losses to the city from the storm totaled at least $19 billion.

Of that, private insurance is expected to cover $3.8 billion, with Federal Emergency Management Agency reimbursements to cover at least an additional $5.4 billion. Bloomberg has asked Congress for $9.8 billion to pay the rest.

New York's Metropolitan Transportation Authority, operator of the country's largest mass transit system, has proposed financing $4.8 billion of repairs and upgrades with the proceeds from bond sales, until the debt can be paid off with reimbursements from FEMA and insurance.

ALREADY ALLOCATED

Like other public pension funds across the U.S., New York City's funds have already been making some investments in real estate and other hard assets.

Since the 1980s, the city's pension funds have allocated up to 2 percent of their assets to so-called economically targeted investments like low- to middle-income housing.

Currently, about 1 percent of their $127.8 billion in combined assets are in such investments.

In September, for example, Liu announced that two of the five funds would invest $19 million to provide a 30-year, fixed-rate mortgage for a housing project in the city's South Bronx that could not find financing elsewhere. The mortgage is insured by a state mortgage agency.

"The rebuilding efforts in the aftermath of Sandy will require much larger amounts of capital financing," Liu said.

As of June 30, the one-year return for the pension funds' portfolio of economically targeted investments was 7.09 percent and the 10-year overall return was 6.31 percent, according to Liu's office.

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