A Pitch for the Inner Cities
State Treasurer Philip Angelides wants California to spread the wealth. To that end, he’s proposing an $8-billion infusion of public and private capital into low-income areas that have been bypassed by the stock market run-up, the high-tech boom, the dot-com explosion and other routes to riches. His pitch is this: Creation of new businesses, stores, office buildings, apartments and homes in overlooked markets is a sound investment that will provide solid returns for state-run pension funds and private investors.
Though a Democrat, Angelides is not singing the old-fashioned liberal song about throwing money at a problem. He is promoting state-supported investments that make money and stir progress. Angelides envisions investment bankers partnering with the state’s brimming public pension funds to treat California’s inner cities as emerging markets, just as they seek profits in developing economies like Malaysia or Mexico.
His vision includes venture capitalists, the big-money players who have helped start high-tech and dot-com businesses. They can mentor and help companies grow and, the state treasurer believes, could attract other investors.
To get private investors to take another look at potential profits in low-income areas, he points to above-average returns reaped by major department stores and supermarkets that have invested in inner-city neighborhoods.
California is expected to grow by 20 million people in the next two decades. The current shortage of affordable apartments and single-family homes should also translate into development opportunities in certain areas traditionally written off by private investors who see only worn stereotypes and exaggerated perceptions of crime. Angelides says that when density is factored in, the crime rate is often no higher than that of the suburbs.
Sacramento’s public pension funds have already committed to some of this type of investment, and Angelides is asking them to do more. He sits on the boards of the California Public Employees Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) and is seeking funding of $5 billion, which is just 2% of the assets of these funds.
A real estate developer before becoming treasurer, Angelides knows that homeownership and locally owned businesses add stability to marginal areas, whether in South-Central Los Angeles or the San Joaquin Valley. Now he’s become a pitchman for the cause, and the pitch is worth a listen.
