The Santa Monica City Council voted unanimously Tuesday night to develop a policy for withdrawing city funds from banks and companies that do business with South Africa.
The vote came after several council members expressed their distaste for the South African government and its system of apartheid.
The council asked the city staff to prepare a report within three months to identify those city funds invested in institutions with business dealings in South Africa and a plan for divesting those funds. A public hearing will be conducted when the report is presented to the council.
Some council members said they were concerned that divestiture would affect the city's financial security and asked the staff to analyze the financial risks of divestiture in the report.
Councilman James P. Conn, who introduced the motion, said that the divestiture could be accomplished without affecting the city's investments.
He said divestiture would "punish" the institutions doing business in South Africa by withdrawing city funds.
$2 Million Involved
Santa Monica Finance Director Michael Dennis said that about $2 million of the $91.5 million the city has invested in banks would be affected. Dennis said that $52.3 million is invested in federal securities, $27.8 million in certificates of deposit, $5.9 million in banker's acceptances and $5.5 million in repurchase agreements.
Some of the city's money is invested in federal securities and may simply be held by banks that have dealings with South Africa, Conn said. He said, however, that there is debate over whether those institutions still benefit from holding the city's securities.
City Manager John Jalili said the divestiture would not affect the pensions of city employees, which are handled by the state Public Employee Retirement System.
Conn said that divestiture has been adopted by the cities of New York, Washington and Philadelphia. "For a city of our size, we would be leading the way for the West Coast," he said.
Santa Monica would be one of the first cities in Southern California to divest. Los Angeles Mayor Tom Bradley has called for divestiture of city and employee pension funds.
The council's vote comes at a time when school boards are also proposing divestiture. The University of California Board of Regents has declared a one-month moratorium on investments in companies doing business with South Africa.
The Santa Monica/Malibu Unified School Board and the Santa Monica College Board are considering divesting funds over which they have control.
Councilman David G. Epstein said that he is concerned about protecting staff members who manage the funds from any responsibility if divestiture hurts the city financially. He said the city's action is more than a resolution. "We're talking about taking our money out of one bank and putting it in another. It's the taxpayer's money," he said.
Epstein also said that the city should boycott other repressive governments, such as the Soviet Union. But he called apartheid "despicable." It is "a system in which the dominant group identifies repression as a matter of principle. It is particularly despicable in a world in which most governments are despicable."
Mayor Christine E. Reed expressed concern that the city may be forced to move its funds from large banks to small and medium-sized institutions that would have "difficulties dealing with us as a major account."
"If the council is going to do this with the city funds, we ought to put our own money on the table," she said, adding that council members should be willing to move their personal investments, if necessary.
She also said that there may be problems in identifying which banks the city could use under the divestiture policy. "I don't want to get sucked into the larger debate about who's clean and who isn't. . . . How do you certify the good guys from the bad guys?"
Some council members said that the action is largely symbolic. "Even if we get most of the cities and Fortune 500 companies to do this, I don't think we should think this would have an effect on South Africa," Epstein said. "This is mostly an expression of our own moral concerns about the issue and not something that would put the last nail in the coffin of apartheid."
But Councilman William H. Jennings said that "it's not so much a matter of a boycott as far as I'm concerned as refusing to lend support. . . . If it doesn't have an impact beyond the city limits, at least what we are doing within our borders" is correct.
Having an Impact
Conn said that divestiture by cities and agencies is having an impact. He cited the growing number of U.S. companies in South Africa that have become signatories to the Sullivan Principles, a code that attempts to improve conditions for non-white employees.
"Clearly those corporations are responding to the threat of an economic boycott," Conn said.