San Diego’s pension investments tied to luxury trips?

Take an all-expenses paid trip to Shanghai and stay in the 307-room state-of-the-art Hyatt Andaz overlooking the city’s skyline.

Follow it up with a two-night stay at the Four Seasons Hotel perched above Boston’s Public Garden.

Then, a trip up the Southern California coast for a two-night, all-expenses-paid stay at the Italian-seaside-village-themed Resort at Pelican Hill in Newport Beach.

These may sound like “showcase showdown” prizes offered to contestants on The Price Is Right, but these free trips and stays at four-star hotels across the globe were taken over the course of the past year by San Diego City Employees’ Retirement System senior investment officer Jamie Hamrick.

Since April 2015, according to gift reports filed with San Diego’s city clerk, Hamrick jetted off nine times to attend conferences and meet with real estate investment firms that the pension fund invests in. The potential investees looking for money from San Diego’s pension plan have spent over $16,000 on hotels, airlines, transportation, and food.

The trips, according to investment reports and internal memos obtained by the Reader, have paid off — at least for the six investment firms that Hamrick visited — to the tune of $260 million worth of investments.

Hamrick’s free trips...

...include a June 2015 getaway to Amsterdam to stay at the Andaz Hyatt located on the banks of the Prinsengracht Canal, less than a mile from the Anne Frank House and Vincent Van Gogh Museum. The two-night trip cost Europa Capital Partners, a real estate investment firm headquarted in London, a total of $6196. Six months later, Hamrick and the other members of the pension system’s investment team recommended that the board invest $20 million in Europa Capital Fund, in order to “concentrate on the established markets of the [United Kingdom, Germany, and France.]”

In October 2015 Hamrick was back on the road, this time flying to Shanghai, again choosing the Andaz Hyatt for accommodations, to meet with LaSalle Investment Management. The trip cost a total of $3265. In May 2016, seven months after the trip, Hamrick and her investment team recommended investing $20 million in LaSalle Asian Fund.

The trips, says San Diego City Employee Retirement System spokesperson Jessica Packard, are necessary to “obtain updates and investment insights into each of these funds” and is a time when investors can “discuss, direct, and vote on pertinent issues related to these funds. [The San Diego City Employee Retirement System] can only accept travel expenses in connection with those investments in which [the retirement system] holds an advisory committee seat.”

San Diego ethics commission

Before April 2015, San Diego’s $6.7 billion public pension fund paid out-of-pocket to fly investment officers to conferences or advisory committee meetings. The travel expenses did not need to be reported to the city but instead were only required to be disclosed in travel and training reports to pension-board members.

That changed in 2015 when pension officials approached San Diego’s ethics commission for an opinion on whether outside investment firms can pay for pension executives’ travel.

Allowing such travel arrangements, reasoned the pension-system staff, would save money. After all, “[the San Diego City Employee Retirement System] has a limited travel budget,” says Packard. “As a result, staff was not able to attend every Real Estate Advisory Committee Meeting and Annual Meeting.”

But does allowing outside investment firms to jet pension officers off to fancy hotels in faraway places create a conflict of interest? State law requires elected officials to recuse themselves from any decision that involves any gift giver. And while Hamrick does not vote on which funds to invest in, she and the fund’s other investment officers give recommendations to the board. The board typically follows their advice.

According to San Diego’s ethics commissioner, Stacey Fulhorst, the law allows an entity to pay for travel if it “facilitates the public’s business to the City or a City agency (like [the San Diego City Employee Retirement System]) without designating an individual official to use the travel payments. If the City agency accepts the travel payments and designates an individual to use them, the agency files a Form 801 with the City Clerk to disclose the payments, which are not considered gifts to the individual who ultimately uses them.”

The pension

Over the course of the past decade, the city’s retirement system, in the form of pension payments, has sucked money from a cash-depleted city. During that time, state and federal investigators found evidence of conflicts of interest, corruption, and a lack of transparency.

According to a 2014 report from the Reason Foundation, “San Diego’s pension story is filled with scandal, indictments, a suspended credit rating, significant budget deficits and service cuts, resignations of top city officials, and talk of municipal bankruptcy.”

In 2012, voters approved Proposition B. The proposition, among other reforms, required that city employees, excluding police officers, enroll in 401(k) plans while simultaneously capping the city’s contribution.

And while the reforms have helped, the pension fund continues to have money problems.

According to the most recent valuations, the City of San Diego is $96.2 million upside down, resulting in the underfunding of 25.6 percent of city retirement packages. And while the unfunded liability has decreased since the pension-system nadir in 2012 when deficits were estimated at $2.3 billion, the pension fund continues to underperform. According to pension documents, fiscal year 2015 fell short of targets by $6.8 million.

Pension board’s new direction

To try and address the deficits, pension staffers have focused on real estate investments to foot the bill. According to a July performance report, the pension fund is looking to boost its investments in real estate.

So far, the $260 million in uncommitted funds given to the six real estate investment funds have yet to pay off for the city’s retirees. According to a real estate performance review, four of the six funds have brought in small returns for the retirement system.