S3402-2011 - NY Senate Open Legislation - Authorizes the eight New York state public retirement systems to increase their asset investments in real property to ten percent

Increases to ten percent the amount of assets in the New York state teachers' retirement system which may be invested in real estate.

Sponsor: GOLDEN / Co-sponsor(s): SAVINO
Law Section: Retirement and Social Security Law / Law: Amd S177, R & SS L

S3402-2011 Actions

Sep 23, 2011: SIGNED CHAP.554
Sep 12, 2011: DELIVERED TO GOVERNOR
Jun 16, 2011: returned to senate
Jun 16, 2011: passed assembly
Jun 16, 2011: ordered to third reading rules cal.366
Jun 16, 2011: substituted for a5369
May 2, 2011: referred to ways and means
May 2, 2011: DELIVERED TO ASSEMBLY
May 2, 2011: PASSED SENATE
Mar 28, 2011: ADVANCED TO THIRD READING
Mar 24, 2011: 2ND REPORT CAL.
Mar 23, 2011: 1ST REPORT CAL.257
Feb 18, 2011: REFERRED TO CIVIL SERVICE AND PENSIONS

S3402-2011 Meetings

Civil Service and Pensions: Mar 23, 2011

S3402-2011 Calendars

Active List: May 2, 2011 , Floor Calendar: Mar 24, 2011 , Floor Calendar: Mar 28, 2011 , Floor Calendar: Mar 29, 2011 , Floor Calendar: Mar 30, 2011 , Floor Calendar: Mar 31, 2011 , Floor Calendar: Apr 4, 2011 , Floor Calendar: Apr 5, 2011 , Floor Calendar: Apr 6, 2011 , Floor Calendar: Apr 11, 2011 , Floor Calendar: Apr 12, 2011 , Floor Calendar: Apr 13, 2011 , Floor Calendar: May 2, 2011

S3402-2011 Votes

VOTE: COMMITTEE VOTE: - Civil Service and Pensions - Mar 23, 2011

Ayes (11): Golden, Fuschillo, Hannon, Lanza, Little, Martins, O'Mara, Krueger, Addabbo, Dilan, Savino
Ayes W/R (1): Perkins

VOTE: FLOOR VOTE: - May 2, 2011

Ayes (60): Adams, Addabbo, Alesi, Avella, Ball, Bonacic, Breslin, Carlucci, DeFrancisco, Diaz, Dilan, Duane, Espaillat, Farley, Flanagan, Fuschillo, Gallivan, Gianaris, Golden, Griffo, Grisanti, Hannon, Hassell-Thomps, Huntley, Johnson, Kennedy, Klein, Krueger, Kruger, Lanza, Larkin, LaValle, Libous, Little, Marcellino, Martins, Maziarz, McDonald, Montgomery, Nozzolio, O'Mara, Parker, Peralta, Perkins, Ranzenhofer, Ritchie, Rivera, Robach, Saland, Sampson, Savino, Serrano, Seward, Skelos, Squadron, Stavisky, Stewart-Cousin, Valesky, Young, Zeldin
Excused (2): Oppenheimer, Smith

S3402-2011 Memo

BILL NUMBER:S3402

TITLE OF BILL:
An act
to amend the retirement and social security law, in relation to
increasing to ten percent the amount of assets of the New York state
teachers' retirement system which may be invested in real property

PURPOSE OF THE BILL:
This bill would increase the percentage of assets which may be
invested by public employee retirement systems in real estate under
Retirement and social Security Law �177(6) from five to ten percent.

SUMMARY AND JUSTIFICATION:
Public employee retirement systems may only invest in capital assets
to the extent permitted by law. Systems generally rely upon the
investment authorizations contained in section 177 of the Retirement
and Social Security Law, the so-called "legal list".

Over the years, the authorizations in that section have been
liberalized to reflect changes in the universe of investable capital
assets and trends in institutional investment. The most recent change
in the legal list occurred in 1997 with the enactment of Chapter 560
of the Laws of 1997 which made a number of significant changes in the
list for the benefit of the systems and public employee members and
retirees that they serve.

With the aging of the "baby boom" generation, public employee
retirement systems are experiencing an ever increasing number of
retirements and a growth in the retirement payroll that must be
funded. Hence, public employee retirement systems are looking more at
investments in the types of capital assets which can provide a steady
stream of income to help fund the growing retirement payroll.

Real estate is an asset which is ideally suited to play an
income producing role in the investment portfolios of public employee
retirement systems. A considerable part of the return realized from
real estate investments takes the form of cash income from rents.
Moreover, institutional quality properties with stable tenant bases of
income are usually well-situated to maintain their income streams
through the ups and downs of the business cycle.

Subdivision 6 of RSSL �177 is the provision in the legal list which
expressly authorizes investments in real estate. Investments under
that subdivision, however, are currently limited to 5% of a system's
assets. Any additional investments in real estate must be made under
the "basket clause", subdivision 9 of RSSL �177.

The Retirement Board requests the Legislature give recognition to the
growing importance of the role real estate investments will have to
play in enabling retirement systems to meet growing retirement
payrolls by increasing the limit on real estate investment in RSSL
�177(6) from five to ten percent. The Retirement Board also requests
the addition of a new paragraph f to allow real estate oriented funds
or partnerships in which a retirement system might invest to be
classified, at the system's election, as a real estate asset for the


purposes of the proposed ten percent limitation. New paragraph f
would enable a system more easily to classify investments in real
estate oriented funds and partnerships which invest in a variety of
different types of real estate assets.

FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

S3402-2011 Text

 S T A T E   O F   N E W   Y O R K
 
                                          3402
 2011-2012 Regular Sessions
 I N  SENATE
 February 18, 2011
 
 Introduced by Sen. GOLDEN -- (at request of the New York State Teachers'
 Retirement System) -- read twice and ordered printed, and when printed
 to be committed to the Committee on Civil Service and Pensions
 AN  ACT  to amend the retirement and social security law, in relation to
 increasing to ten percent the amount of assets of the New  York  state
 teachers' retirement system which may be invested in real property
 

THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM
 BLY, DO ENACT AS FOLLOWS:

 

Section 1. Paragraph (e) of  subdivision  6  of  section  177  of  the
 retirement  and  social  security  law, as amended by chapter 560 of the
 laws of 1997, is amended to read as follows:

 (e) Such real property, other than property to be used  primarily  for
 agricultural,  horticultural,  ranch, mining, recreational, amusement or
 club purposes, as may be acquired, as an investment for  the  production
 of  income (INCLUDING CAPITAL APPRECIATION), or as may be acquired to be
 improved or developed for such investment purpose pursuant to an  exist
 ing program therefor, subject to the following limitations: (1) the cost
 of  each parcel of real property so acquired under the authority of this
 subdivision, including the estimated cost to the fund of the improvement
 or development thereof, when added to the value of all other real  prop
 erty  then  held  by  it  pursuant to this subdivision, shall not exceed
 [five] TEN per cent of its assets, and (2) the cost of  each  parcel  of
 real  property acquired under the authority of this subdivision, includ
 ing the estimated cost to the fund of  the  improvement  or  development
 thereof, shall not exceed two per cent of the fund's assets.
 

S 2. Subdivision 6 of section 177 of the retirement and social securi
 ty law is amended by adding a new paragraph (f) to read as follows:

 (F)  NOTWITHSTANDING  ANY  OTHER  PROVISION  OF  THIS ARTICLE, FOR THE
 PURPOSES OF THIS SUBDIVISION, AN INVESTMENT IN AN ENTITY THAT INVESTS OR
 PROPOSES TO INVEST, DIRECTLY OR INDIRECTLY THROUGH  ONE  OR  MORE  OTHER
 ENTITIES,  AT LEAST A MAJORITY OF ITS ASSETS IN (1) ANY INTEREST IN REAL
 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
 [ ] is old law to be omitted.
 LBD08934-01-1
        S. 3402                             2
 PROPERTY OF ANY KIND OR CHARACTER AS AN INVESTMENT FOR THE PRODUCTION OF
 INCOME (INCLUDING CAPITAL APPRECIATION), OR (2) DEBT INSTRUMENTS SECURED
 BY ANY INTEREST IN REAL ESTATE MAY BE CONSIDERED AN INVESTMENT  IN  REAL
 ESTATE  PURSUANT  TO THIS SUBDIVISION AND INCLUDED IN THE ASSETS SUBJECT
 TO THE TEN PERCENT LIMITATION OF PARAGRAPH (E) OF THIS SUBDIVISION.
 

S 3. This act shall take effect immediately.
 FISCAL NOTE.--Pursuant to Legislative Law,

Section 50:

 This bill would amend subdivision 6 of section 177 of  the  Retirement
 and  Social Security Law to increase the percentage of assets of the New
 York State Teachers' Retirement System (NYSTRS) which may be invested in
 real estate from five to ten percent. Additionally, this bill would  add
 a  new  paragraph  f  to subdivision 6 of section 177 to allow NYSTRS to
 classify, at the System's election, real estate oriented funds or  part
 nerships as a real estate asset for investment purposes.
 It  is estimated that there will be no annual cost to the employers of
 members of the New York State Teachers' Retirement System if  this  bill
 is enacted.
 The  source of this estimate is Fiscal Note 2011-4 dated September 24,
 prepared by the Actuary of the New York State Teachers'  Retirement
 System and is intended for use only during the 2011 Legislative Session.
 FISCAL NOTE.--Pursuant to Legislative Law,

Section 50:

 PROVISIONS  OF PROPOSED LEGISLATION: with respect to the New York City
 Retirement Systems ("NYCRS"),  this  proposed  legislation  would  amend
 Retirement  and  Social  Security  Law ("RSSL")

Section 177.6(e) and add
 Section 177.6(f) to permit an increase to 10% the maximum percentage  of
 NYCRS  assets that could be invested in real property investments and to
 define certain investments as investments in real estate subject to  the
 Section 177.6(e) limitations.
 The  Effective  Date  of the proposed legislation would be the date of
 enactment.
 IMPACT  ON  REAL  PROPERTY  INVESTMENTS:   Currently,   with   certain
 exceptions and limitations, the investments of the NYCRS in real proper
 ties  as  defined  in  the law may not exceed 5% of Fund assets and such
 properties must be for production of investment income.
 The proposed legislation, if enacted, would increase such real proper
 ty investment limitation to 10% of Fund assets on and after  the  Effec
 tive Date.
 In  addition,  the proposed legislation would include capital appreci
 ation within the definition of production of income from  real  property
 investments.
 Further, for purposes of categorizing those investments that are to be
 considered  real  property  investments,  the proposed legislation would
 permit the inclusion of:

 1. Any investment in an entity that  invests  or  proposes  to  invest
 directly or indirectly at least a majority of its assets in any interest
 in real property of any kind or character, or
 2. Debt instruments secured by any interest in real estate.
 FINANCIAL  IMPACT - EMPLOYER CONTRIBUTIONS: With respect to the NYCRS,
 the enactment of this proposed legislation would not, in and of  itself,
 result in any change in employer contributions.
 The ultimate cost of a Retirement Program is the benefits it pays. The
 financing of that ultimate cost is provided by contributions and invest
 ment income.
 Investment  income depends upon the amount of assets of the respective
 NYCRS Fund and the rate of return received on those assets. The rate  of
        S. 3402                             3
 return depends to a large extent upon the asset allocation policy of the
 respective NYCRS Fund.
 To the extent that the NYCRS increase their investments in the securi
 ties  authorized  by  this  proposed  legislation  and  those securities
 produce greater (lesser) rates of return than the rates of  return  that
 the  NYCRS would otherwise have achieved, then employer contributions to
 the NYCRS would be lesser (greater).
 STATEMENT OF ACTUARIAL OPINION I, Robert C.  North, Jr., am the  Chief
 Actuary  for  the New York City Retirement Systems. I am a Fellow of the
 Society of Actuaries and a Member of the American Academy of  Actuaries.
 I  meet the Qualification Standards of the American Academy of Actuaries
 to render the actuarial opinion contained herein.
 FISCAL NOTE IDENTIFICATION: This estimate is  intended  for  use  only
 during  the  2011  Legislation Session. It is Fiscal Note 2011-01, dated
 August 16, 2010, prepared by the Chief Actuary for  the  New  York  City
 Retirement Systems.
 FISCAL NOTE.--Pursuant to Legislative Law,

Section 50:

 This  bill  would  amend  the  Retirement  and  Social Security Law to
 increase the percentage of assets of the  eight  (8)  public  retirement
 systems of New York State which may be invested in real estate from 5 to
 percent.  It would also allow such Systems to elect to classify real
 estate oriented funds or partnerships as a real estate asset for invest
 ment purposes.
 If this bill is enacted, insofar as this bill  affects  the  New  York
 State  and Local Employees' Retirement System and the New York State and
 Local Police and Fire Retirement System, we assume that there  would  be
 small investment changes. Any increases or decreases in investment earn
 ings  will  result  in decreases or increases, respectively, in employer
 contributions. Annual changes in assets will be shared by all  employers
 and will be spread over the future working lifetimes of active members.
 This estimate, dated January 7, 2011, and intended for use only during
 the 2011 Legislative Session, is Fiscal Note No. 2011-83 prepared by the
 Actuary  for  the  New York State and Local Employees' Retirement System
 and the New York State and Local Police and Fire Retirement System.

S3402-2011: Authorizes the eight New York state public retirement systems to increase their asset investments in real property to ten percent