Opinion ID: 2343906
Heading Depth: 1
Heading Rank: 5

Heading: Authority to Invest Funds

Text: We now address the primary substantive issue: does the city council have the power to determine which department can invest pension funds? First, we must determine the derivation of the legal authority to invest and whether this authority is subject to control by the city council. A key component of this inquiry involves § 1404 of the Home Rule Charter of the City of Providence. This provision states in its entirety: 1404 Inconsistent acts and ordinances. Upon the taking of effect of this Charter and the validation of this section by the General Assembly, this Charter shall be deemed to have superseded Chapter 832 of the Public Laws of 1940 and all acts in amendment thereto which are inconsistent with this Charter and shall be deemed to have superseded all other acts and parts of acts applicable to the City of Providence which are inconsistent with this Charter. Upon the taking of effect of this Charter, all ordinances and resolutions inconsistent therewith shall be deemed to have been repealed, and all ordinances and resolutions which are consistent therewith shall remain in effect until amended or repealed by the city council in conformity with the terms of this Charter. According to § 1404, therefore, if § 908 of the charter, which describes the retirement board, is inconsistent with the retirement act, then the retirement act is superseded by the provisions of § 908. The individual plaintiffs claimed that the authority of the retirement board to invest funds derived from a provision of the retirement act, P.L. 1923, ch. 489, § 4, entitled Investment of Funds. These plaintiffs asserted further that the charter did not contain language that conflicted with the retirement act and that, therefore, the retirement act remained valid law. The city council, consequently, they argued, did not have the authority to amend existing state law, and therefore, the retirement board retained the authority to invest the retirement funds despite the city council's attempts to transfer this authority. We disagree. The retirement act, P.L. 1923, ch. 489, established a retirement system for the employees of the city of Providence and placed it under the management of the retirement board. Specifically, sec. 2 of the retirement act prescribed that the retirement system would have the powers and privileges of a corporation. In addition, this independent corporate entity was placed under the supervision of the state department of insurance, P.L. 1923, ch. 489, § 13 (although state supervision was removed by P.L. 1959, ch. 54, § 9). As discussed supra, the 1940 legislative charter [5] of Providence, continued in office the members of the retirement board appointed under the 1923 act until the expiration of their terms. Under the 1940 act, the retirement board retained all powers and duties that had been vested in the board and all such powers and duties as may be hereafter vested in said board by law, resolution or ordinance. P.L. 1940, ch. 832, ch. XXII, Sec. 132. On the first Monday in January 1983, the effective date of the Home Rule Charter, the retirement board became a city board under § 908 of that charter. See Fiore v. Lynch, 637 A.2d 1052, 1054 (R.I. 1994)(per curiam). The retirement board's status as an independent corporate entity did not survive its incorporation into the charter. See charter § 1404 Rather, the retirement board became, like all city departments, boards, and commissions, subject to the legislative power of the city council delineated in charter § 401 because the retirement board's authority is now derived from the Home Rule Charter, not the retirement act. See Betz, 605 A.2d at 839. Moreover, the General Assembly ratified, confirmed, validated and enacted the Home Rule Charter of the City of Providence through P.L. 1981, ch. 37, § 1, which specifically ratified the section establishing the retirement board: [T]he provisions of the home rule charter including, but not limited to sections 201, 204, 208, 209, 707, 908, 1210 and 1404 so adopted are hereby ratified, confirmed, validated and enacted. (Emphasis added.) This statement makes clear that the General Assembly specifically ratified the fundamentally changed retirement system as represented by the retirement board under § 908. Subsequently, the city council in 1991 enacted §§ 17-181 to 17-197 of the Code of Ordinances ( see supra ) followed by the 1993 amendments to § 17-184 that transferred the authority to invest from the retirement board to the Board of Investment Commissioners. Thus, it is our conclusion that the retirement act is inconsistent with the Home Rule Charter and has been superseded by § 908 of that charter. The retirement board currently derives its powers and duties from § 908 of the Home Rule Charter alone. Our inquiry now must focus on whether this provision grants to the retirement board the authority to invest pension funds. If the charter provision contains such a grant, the city council's enactment of the amendment violated the provisions of the Home Rule Charter. In its argument before this court, the retirement board asserted that the source of its authority to invest retirement funds was the Home Rule Charter The retirement board stressed that because its power derived from the Home Rule Charter, any attempts to transfer or to limit this power would require voter approval through a referendum. As evidence that the charter clearly and unambiguously provided the retirement board with the power to invest pension fund accounts, the retirement board cited our decision in Betz. In that case this court stated No question exists concerning the power of the [retirement] board to administer, to operate, to invest funds, and to exercise the quasi-judicial function of determining eligibility. (Emphasis added.) Betz, 605 A.2d at 839. It is important to emphasize, however, that the litigation in Betz occurred prior to the city council's reenactment of the retirement act as §§ 17-181 through 17-197. See Betz, 605 A.2d at 838. Both the retirement board and the individual plaintiffs contended that the Board of Investment Commissioners' powers were limited and devoid of the authority to administer pension funds. The increase of the Board of Investment Commissioners' powers under the amendment, according to the retirement board, needed the approval of the voters in the city because it was an attempt to amend the charter. With these contentions we disagree. Section 908 does not reveal a clear    and unambiguous grant of authority to the retirement board to invest pension and retirement funds. Rather, § 908(b)(1) grants to the retirement board the power [t]o establish rules and regulations for and be responsible for the administration and operation of the city employee retirement systems under its jurisdiction, and § 908(b)(2) directs the retirement board to report annually in detail to the city council in January, showing fiscal transactions and transmitting a copy of the system's balance sheet. These two subsections comprise the entire enumerated powers and responsibilities of the retirement board. It is thus apparent that the retirement board has fewer powers under the Home Rule Charter than were enumerated under the lengthy and detailed retirement act. Most notably, § 4 of the retirement act, P.L. 1923, ch. 489, the section that specifically granted to the retirement board the power to invest certain funds, was not incorporated into the Home Rule Charter, nor was such authority granted to a different agency, board, or department. Hence, the Home Rule Charter did not grant to the retirement board decision-making authority over pension funds. As noted supra, the retirement board's authority to invest pension funds was derived from the city council's grant of that power in ordinance 1991, chapter 91-5, [6] codified as §§ 17-181 through 17-197, of the Code of Ordinances, that essentially reenacted the retirement act, as amended. It is the conclusion of this court that under § 401 of the Home Rule Charter, the legislative powers vested in the city council are adequate and sufficient to enable the council to endow the retirement board (under ordinance 1991, chapter 91-5) and then the Board of Investment Commissioners (under ordinance 1993, chapter 93-12) with the authority to invest pension funds. Specifically, § 401 states, in pertinent part, that the powers and duties of the city council shall include, without limitation, the following: (a) [t]o enact such ordinances as the city council may consider necessary to insure the welfare and good order of the city. Given this authority, the city council could grant and transfer the authority to invest pension funds. Because the Home Rule Charter is silent on the issue of pension-fund investments, we are of the opinion that the retirement board's power and duty to administer the retirement system under § 908 do not require that the retirement board invest pension funds, nor do we hold that such authority is inherent in a retirement board. See, e.g., G.L. 1956 (1990 Reenactment) §§ 36-8-3 and 35-10-2 (statutes granting State Retirement Board general powers similar to that of the retirement board but vesting authority to invest funds in a different agency). Although the retirement board has contended that the Board of Investment Commissioners is not authorized to invest pension funds, we note that § 815 of the Home Rule Charter directs that [t]he board [of investment commissioners] shall have the control and management of all sinking funds established for the redemption of any bonds or notes issued by the city, or for the redemption of any bonds held by the city. The board shall hold any fire insurance fund, waterworks depreciation and extension fund, or any additional funds which the city council may by ordinance from time to time prescribe. It shall further be the responsibility of the board to direct the investment of all unencumbered and unappropriated funds of the city government, including but not limited to all bequests, devises and trusts. Accordingly, pursuant to ordinance 1993, chapter 93-12, and in the exercise of the authority under § 815 of the Home Rule Charter, the city council has validly prescribed that the Board of Investment Commissioners hold and invest the funds of the Employees' Retirement System. Absent a specific charter prohibition barring the transfer of investment authority from the retirement board to the Board of Investment Commissioners, we hold that ordinance 1993, chapter 93-12 is consistent with the charter. Because this issue is dispositive of the cases before this court, we refrain from addressing the parties' other contentions. For the foregoing reasons the defendants' appeal is sustained, and the judgment of the Superior Court is reversed. We remand the papers in these cases to the Superior Court with instructions to enter judgment denying all relief requested by the plaintiffs. BOURCIER, J., did not participate.