senate Bill S3402

Signed By Governor
2011-2012 Legislative Session

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

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Archive: Last Bill Status - Signed by Governor


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed by Governor

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Sep 23, 2011 signed chap.554
Sep 12, 2011 delivered to governor
Jun 16, 2011 returned to senate
passed assembly
ordered to third reading rules cal.366
substituted for a5369
May 02, 2011 referred to ways and means
delivered to assembly
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

Votes

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Mar 23, 2011 - Civil Service and Pensions committee Vote

S3402
11
0
committee
11
Aye
0
Nay
1
Aye with Reservations
0
Absent
0
Excused
0
Abstained
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Civil Service and Pensions Committee Vote: Mar 23, 2011

aye wr (1)

Co-Sponsors

S3402 - Bill Details

See Assembly Version of this Bill:
A5369
Law Section:
Retirement and Social Security Law
Laws Affected:
Amd §177, R & SS L
Versions Introduced in 2009-2010 Legislative Session:
S3511A, A5315A

S3402 - Bill Texts

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

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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.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  3402

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                            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,
2010 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
10  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.

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