Pension Officials Have Done $1 Million of "Due Diligence" in Luxury Vacation Destinations

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The Dallas Police & Fire Pension Fund stumbled into a PR disaster when it went all in on the allegedly-art destroying Museum Tower, but that was far from its only foray into real estate. At times, as Anna reported last year, as much of a third of the fund's $3 billion portfolio has been tied up in luxury subdivisions, apartments, retail centers, and glittering residential towers.

The investments carry a high level of risk, but they have another side effect illustrated in documents released last week to the Morning News and WFAA: giving pension officials and board members a handy excuse to travel the globe.

The Morning News puts the travel expenses for trips taken by officials and board members at about $1 million over the past four years. The preferred destination seems to be Napa Valley -- there have been 18 trips there since 2007 -- but itineraries have also included jaunts to Hawaii, Italy, Scotland, Abu Dhabi and elsewhere.

Pension officials say they're merely doing their due diligence as stewards of the retirement savings of the city's active and retired police and firefighters. Firefighter Rick Salinas, deputy vice chairman of the pension fund's 12 member board, posted a statement on the fund's website yesterday, preemptively defending the travel costs.

Salinas writes that officials have been swamped by an "avalanche" of open records requests that staffers are "working tirelessly" to respond to. After all, "Sunlight is the best disinfectant," he quotes former Supreme Court Justice William Douglas as saying before launching into his defense.

"The Pension System investment portfolio is very complex and global by design; it does not put all of its eggs in one basket," Salinas writes. "The Pension System's investments are spread around the globe for the purpose of avoiding being corralled into any asset class or investment that would negatively affect the overall performance of the fund. Reflecting our core value of accountability, the Pension System Staff and Trustees travel only when necessary to perform due diligence."

True enough. Pension officials and the 12-member board are indeed charged with overseeing the fund's investments, and one can't realistically keep tabs on a housing development in Hawaii sitting in the fund's office on Harry Hines.

Then again, it's awfully convenient that the most scrutinized parts of the fund's portfolio happen to be located in idyllic vacation destinations.

"We need to ask the tough questions," Councilman Scott Griggs, who sits on the pension's board, told WFAA. "Should we be involved in apartments in Arlington, Texas, or luxury properties in Napa Valley and Hawaii? What serves the pension fund best?"

He predicted that board members are coming to the realization that the luxury investments might not be necessary and could soon reduce its luxury real estate holdings. And, as the Morning News reports, pension officials are already downgrading their travel accommodations. For a trip to Napa last month, he stayed at a Holiday Inn Express.

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The only job the administrators of the The Dallas Police & Fire Pension Fund should have is putting together a Request For Price (RFP) quote for a professional money management firm to outsource their jobs to.  Rick Salinas has no clue what to do when managing money at that level.  He may be a good fireman, but that doesn't make him a good investor.  I'm highly doubtful he understands how to invest to achieve decent returns at manageable risk.  Loading up on real estate is NOT the way to do it.  Take the management of the Fireman and Police money away from them to remove the temptation to waste it on "diligence" trips and give it to a professional pension fund manager that has a proven track record of delivering solid and steady returns.  The vast majority of municipalities outsource pension fund management for exactly those reasons.  


If the pension fund is healthy, then *some* of these trips may be justified. The DMN and Observer should be reporting on how these investments are doing (we all know about Museum Tower, of course).


The DMN doesn't say this outright, but City Council members are among the board members going on those expensive trips. That's an issue that's been tentatively poked at in the press before, when 7 people went to Abu Dhabi, including Dave Neumann:

The pension fund's budget allocates $100,000 for travel this year, which is referred to as "continuing education." Pension fund staff cut that amount by 25 percent this year, after complaints from the membership that it was excessive. 

Myrna.Minkoff-Katz topcommenter

Highly speculative and dangerous.  This lapse in caution may cost taxpayers billions.


@downtownworker As I pointed out on another blog earlier today, the 2011 real estate portfolio returns for Dallas Police & Fire were absolutely disastrous (a loss exceeding 6% versus an average gain by other pension funds exceeding 14%).  It is very, very unusual for a fund to diverge so widely from the benchmark, and the explanation provided by the Fund's management was largely nonsensical.


@Anna_Merlan Can't believe you would ever even suggest that Neumann would have been involved in something such as this.  We all know his record is stellar.  He only ever advocated for folks in OC and never upset the apple cart.  At all.


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