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Organized labor power rests with pension assets for cities.

Organized labor's membership and clout in the workplace continues to decline, but its power in the multibillion-dollar world of pensions, housing and economic development is on the rise.

The AFL-CIO's Housing Investment Trust, which pools monies from union pension funds, across the country, is now promising to invest $660 million and leverage those dollars into $1.2 billion for urban America in the next five years.

The money is scheduled to finance homeless shelters, apartment buildings with one-third of units set aside for lower-income people, some single-family housing, and job-generating commercial projects. Of course the move is in labor's self-interest, too: 15,000 to 20,000 union construction jobs will be created in the 30 target cities, including Detroit, Dallas, Denver, Minneapolis- St. Paul, Philadelphia, New Orleans, Phoenix and Portland.

But this move is much more than unions feathering their own nest.

It is labor's most tangible commitment to America's dispossessed people and neighborhoods since the last great wave of industrial organizing battles, some half century ago.

To be fully effective, the investments depend on whether the Senate, in a vote expected this month, goes along with a House- passed bill letting the AFL-CIO investment trust tap up to $100 million in Department of Housing and Urban Development's Section 8 housing subsidies.

Section 8 guarantees, by assuming an adequate rental flow, would make it easier for the AFL-CIO investment trust to attract the other partners it hopes will contribute some $500 million to the effort--foundations, corporations seeking low-income housing tax credits and community development block grants.

The rent subsidies will also make it easier for Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.) to guarantee the housing loans.

The guarantees are critical to safeguarding the retirement income of the union pension plan participants.

For HUD Secretary Henry Cisneros' vastly overcommitted and underfunded department, the deal looks golden: $1.2 billion in housing and development for a twelfth of the cost, $100 million.

The AFL-CIO brought the idea to Cisneros last spring and he accepted quickly. Cisneros sees an exciting model and precedent:

using fairly modest sums of taxpayer money to enable outlays of multimillions, even billions, of dollars from U.S. pension funds which now total $4.1 trillion, 33 percent of the country's financial assets.

There's no reason in the world, says Stephen Coyle, hard-charging director of the AFL-CIO investment trusts and former director of the Boston Redevelopment Authority, that a lot more pension wealth couldn't finance housing and commercial development in America's hard-pressed neighborhoods.

"People have a right to know where their pension funds are going," says Coyle. A quick glance at urban America, he adds, proves "that a high economic tide no longer sails all boats. Lots of our urban boats aren't sailing at all. Pensioners want and deserve investments that provide security and liquidity for their money, and competitive rates of return. But they'd also like to see their pension savings reinvested in their own communities. We're proving they can have both."

The AFL-CIO's housing trust, now almost 30 years old, financed 6,700 units in the last three years. Non-profit local organizations--either union-sponsored or community development corporations like the ASIAN CDC (cq) in Boston--are generally the developers. Over the last five years, the trust has earned a respectable 9.3 percent rate of return. The unions' Building Investment Trust, started up in 1988 to finance commercial projects, most recently reported a 7.1 annual rate of return.

But with the HUD partnership, Coyle hopes to expand the unions' investments dramatically. He aims to work with scores more local non-profits to help them penetrate the maze of regulations and multilayered financing necessary to get projects launched. And he hopes to light a torch to show private and government worker funds the way to doing well by doing good.

Coyle bristles at the way pension fund managers are rapidly shifting funds--up to $200 billion now, it's estimated--into foreign investments. Their investments abroad dwarf what they've been willing to put into affordable housing and community development here.

If that trend continues, warns Coyle, "by the end of this decade we could see over $500 billion of American workers' savings invested overseas, even as we disinvest in our own country, and even though overseas pension fund investments generally underperform what our own AFL-CIO investment trust is earning."

Coyle would love to see pension monies, with government guarantees, invested in reviving American industries, bringing back industries like rail and transit car-making that we foolishly let slip away to European and Japanese competitors who often pay their workers (italics) more than we do.

What's refreshing about this is the mixture of historic union militancy--the kind we mostly hear in folk songs, or read of in the history books--combined with a hard-headed insistence on using Americans' new big cash trove, their pensions, to invest in their own cities and neighborhoods.

One can argue about the details, but not the timeliness.

(c) 1993, Washington Post Writers Group
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Title Annotation:American Federation of Labor and Congress of Industrial Organizations
Author:Peirce, Neal R.
Publication:Nation's Cities Weekly
Date:Sep 13, 1993
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