Santa Monica Set to Debate Divestiture

Santa Monica could become one of the first cities in Southern California to begin withdrawing funds from banks that do business with South Africa if the City Council approves divestiture Tuesday night.

Councilman James P. Conn, who along with Councilman Dennis Zane has proposed divestment, said that he would ask the staff draft a divestment policy for the city. He will also ask the council to urge divestment by the state Public Employee Retirement System, which handles pensions for the city’s employees.

“We should not be making life easier for South Africa so they can continue to ignore the needs and demands of a majority of their population,” Councilman William H. Jennings said.

But Councilman David G. Epstein said that he has concerns about the proposal. He said that the South African government’s policy of apartheid is “disgusting,” but that divestiture would not be effective. He also said the council should be consistent in its policies and oppose all countries that violate human rights.

The council had planned to take up the matter last Tuesday but continued it because the issue did not come before the council until midnight and debate is expected.

Conn said that the divestment should be done carefully to minimize the financial impact on the city, but added, “I think it’s incumbent on us to be responsible, not only in a financial sense, but also in an ethical sense.”

Seeking Information

Santa Monica had about $92 million in banks and savings and loan firms at the end of March, finance director Michael Dennis said. Local opponents of apartheid claim that a substantial portion of the city’s money is in banks that do business with South Africa. Dennis could not confirm how much money is in any of the banks but said that the city has asked them for information on their business dealings with South Africa and is gathering material on the divestiture policies in other cities.

The action comes at a time of growing concern in the nation over ties to South Africa, with protests occurring on many college campuses, including UCLA, and in front of the South African Embassy in Washington. About 25 cities and five states have approved divestment policies. Earlier this month, Los Angeles Mayor Tom Bradley called for the city and its employee pension funds to divest from banks and firms with ties to South Africa.

The question has also been raised by other governmental bodies in Santa Monica. The school and college boards are considering some form of divestment. In both cases, most of the funds are managed by the Los Angeles County Treasury, which includes other school districts. Both boards are also considering resolutions asking for divestment by the the State Teachers Retirement System and the public employee pension system.

Two weeks ago, the Santa Monica College Board of Trustees voted to table a motion to ask the county to divest the college’s funds from banks doing business with South Africa. Santa Monica College, with an operating budget of $20 million to $27 million, has $2 million to $3 million in the county treasury pool.

Asked for Study

Last Monday, the Santa Monica-Malibu Unified School Board asked for a report by June 24 on the funds over which the board has discretion. Almost all of the district’s funds are held by the county treasury. At its high point, the balance is between $3 million and $4 million, according to fiscal services administrator Sharon Hoaglund.

Board member Connie Jenkins said that a quarterly report from the county shows that almost all of the district’s funds are held by banks that do business with South Africa.

Jenkins took issue with the agencies that have told the school boards that they cannot divest those funds because of a mandate to get the highest return on their investments.

“It is becoming quite clear that it is, in fact, possible,” Jenkins said. “If we don’t lose any money . . . then the question becomes why on earth would we want to support a country like South Africa with our money.”

“In principle, I think that tax money probably ought not to be used to enhance the apartheid system in South Africa,” said board member Peggy Lyons. “The board is divided on this so we don’t want to make a big issue out of it. Some board members feel it’s not right for the school board to be involved in any political decisions at all.”

Santa Monica would be the first city on the Westside to go through the divestiture process. The West Hollywood City Council passed an ordinance on April 4 that restricts the city from investing in any institutions doing business with South Africa.

West Hollywood has about $1.3 million invested in banks, according to Ted Kitos, an aide to Councilman Steve Schulte. The city also does not enter into contracts with firms doing business with South Africa.

Possible Risks

Culver City and Beverly Hills have not considered divestment proposals, according to city officials. Culver City has about $20 million in investments in banks, according to city Treasurer Sue McCabe. Beverly Hills has about $150 million in investments in banks and savings and loans, according to Finance Director Donald J. Oblander.

Oblander said that it is possible that divestment could pose financial risks for cities.

“I think if taken to the extreme it would create some big problems for everybody,” he said. “The cities would have to get into in-depth analysis of the investments of firm they (are) dealing with. . . . To the extent that you are taking away the city’s ability to invest in larger and theoretically more financially secure organizations, you may be exposing the city to risk on its investment funds.”