As the October 2nd pipeline rupture off the Huntington Beach shoreline of reminds us, our reliance on fossil fuels is fraught with environmental and economic risk. An estimated 131,000 gallons of crude spewed into the Pacific Ocean, creating a highly-toxic 13-square mile oil slick that is now washing up onto Southern California beaches and into fragile coastal wetlands rich in biodiversity. Of course, damage is not limited to occasional oil spills. Every moment of every day, the burning of fossil fuels release carbon dioxide into the air, creating a greenhouse gas effect that traps heat in Earth’s atmosphere and accelerates global warming.
On September 28th I presented to the City of El Cerrito’s Financial Advisory Board (“FAB”) a proposed socially-responsible investing (“SRI”) clause to the City’s official Investment Policy that would prohibit the direct investment of City funds in fossil fuel and tobacco companies. After discussion and debate, the FAB voted 3-to-1 to recommend that the City Council adopt as policy the “3.6 Responsible Investing” directive below:
Investment Policy Addition – Fossil Fuels and Tobacco
The City of El Cerrito’s Financial Advisory Board (“FAB”) recommends that the City Council adopt an amended Investment Policy with language (1) encouraging socially responsible investing; (2) prohibiting investments in entities that engage in the direct exploration, drilling, production, refining, or marketing of fossil fuels; and (3) prohibiting investments in entities that engage in the direct production or marketing of tobacco products.
To this end, the Financial Advisory Board recommends that the following language be included in the City of El Cerrito Investment Policy:
3.6 Responsible Investing: The City of El Cerrito recognizes that it has a shared responsibility to protect the lives and livelihoods of its inhabitants from the catastrophic threat of climate change and societal costs of harmful tobacco products. The City believes that its financial investments should support a future where all its inhabitants can live healthy lives without the negative environmental, economic and/or health impacts of global warming and addictive tobacco.
- Investments are encouraged in entities that are involved in the production of renewable energy and sustainable agriculture and have demonstrated a commitment to environmental sustainability and transparent, accountable corporate governance.
- No investment is to be made directly in publicly-traded companies or private entities that engage in the direct exploration, drilling, production, refining, or marketing of fossil fuels.
- No investment is to be made directly in publicly-traded companies or private entities that engage in the direct production or marketing of harmful tobacco and tobacco-related products, including but not limited to cigarettes and e-cigarettes.
- All investments in the Local Agency Investment Fund (“LAIF”) are exempt from section 3.6.
The Financial Advisory Board is a City Council-appointed group of up to five resident volunteers with financial expertise. I am one of four current members; a fifth position has been vacant for several months. To be clear, a FAB “recommendation” is only that—a recommendation, with the City Council under no obligation to adopt it.
At least for now, the proposed SRI clause is largely symbolic as the City’s “rainy day” fund and emergency reserves have been depleted by overspending and mismanagement, leaving almost nothing to invest. El Cerrito’s finances are a mess—and have been so for many years, long before COVID-19. As you may recall, the California State Auditor conducted a thorough review in 2019 and placed the City in the State’s “Local High Risk Program.” Among the more than 400 cities monitored by the State Auditor’s office, El Cerrito ranked from sixth to eighth from the bottom between 2016-2020, consistently among the worst in the state in terms of overall fiscal health and financial risk (https://www.auditor.ca.gov/local_high_risk/at-a-glance-csa). In a letter to the Governor, the State Auditor wrote:
In general, we determined that the city is at high risk of financial instability because of its continual overspending, poor budgeting practices, and lack of a comprehensive plan to address its financial challenges, all of which threaten the future provision of city services.
To pay its bills on time, the City issues Tax Revenue Anticipation Notes (“TRANs”), short-term loans that serve a bit like a payday loan (with “payday” being the October and April property tax collection dates). Until the borrowed money is spent, it is held in the State of California’s Local Agency Investment Fund (“LAIF”), a low-cost, low-risk, investment account managed by the State’s Treasurer’s Office. Although the Treasurer’s Office is committed to socially responsible investing and does not directly invest the LAIF in either fossil fuels or tobacco, FAB members wanted to be absolutely certain that holding funds in the LAIF would not violate the City’s investment policy. That concern is addressed by the fourth bullet of the “Responsible Investing” clause exempting investments in the LAIF.
The City’s Finance Director Mark Rasiah, who attends but is not a voting member of FAB, strongly opposed the recommendation, falsely asserting it would cost the City between $40,000-$50,000 to implement. FAB Chairperson Dick Patterson was the lone “no” vote, expressing his belief that fossil fuel companies are leaders in the pursuit for renewable energy and that El Cerrito’s investment policy would do nothing to alter the behavior of individuals who are the end users of fossil fuels and ultimately responsible. While Finance Director Rasiah acknowledged his responsibility to present FAB’s recommendation to the City Council for review, he also made it clear that he would likely recommend that the responsible investing clause not be approved.
Initially, I was not terribly concerned about the Finance Director’s opposition. The proposed SRI addition is so well-researched, clearly and simply stated, common among municipalities, and unencumbering that it was hard to imagine City Council members voting against it when they met next on October 5th. What I did not anticipate is that FAB’s recommendation would simply be left off the City Council meeting agenda.
I ask for your help now in getting City Council approval of the above “3.6 Responsible Investing” guidelines. Please email El Cerrito’s city clerk, mayor and councilmembers and ask that the FAB-recommended “3.6 Responsible Investing” guidelines be added to the City Council’s agenda and approved as an addition to the City’s investment policy. Importantly, please include “Public Comments” in the subject line of your email (for example, “Public Comments – Responsible Investing”). Following the City’s “no less than 72 hours in advance” public notification policy, the agenda for the Tuesday, October 19th City Council meeting will be set on Thursday, October 14th. Public comment emails received by 4:00 pm Tuesday, October 19th (three hours before the 7:00 pm City Council meeting) will be included in the meeting packet.
Mayor Paul Fadelli – firstname.lastname@example.org
Mayor Pro Tem Gabe Quinto – email@example.com
Councilmember Lisa Motoyama – firstname.lastname@example.org
Councilmember Tessa Rudnick – email@example.com
Councilmember Janet Abelson – firstname.lastname@example.org
City Clerk Holly Charléty – email@example.com
Lastly, please join the upcoming Tuesday, October 19th City Council meeting via Zoom and provide public comments in support of the proposed responsible investing guidelines. The Zoom link for City Council meetings changes with each meeting and can be difficult to find, but eventually it will be posted at the top of the meeting agenda and buried among the links at http://www.el-cerrito.org/114/City-Council-Meetings and http://www.el-cerrito.org/482/Council-Meeting-Videos-Materials.