At the Ann Arbor City Council meeting Monday night, council members reconsidered the Ann Arbor Energy Commission’s resolution to divest the city’s pension fund from certain fossil fuel industries, but they postponed a vote on the matter.

The original resolution, proposed at the Sept. 2 meeting, was one vote short of approval. Council decided to carry over the topic to Monday’s meeting to reconsider the issue after it failed to pass earlier in September. Council again opened discussion to vote on the resolution but eventually ended in postponing the item.

The presented resolution, which was drafted by the Energy Commission, asked that council recommend ending any further investment of pension funds to fossil fuel industries. The resolution explains the city’s duty to support and maintain the public health of residents and also cites Ann Arbor’s Climate Action Plan to reduce greenhouse gas emissions by 25 percent by 2025.

Council members generally expressed interest in supporting the resolution but were hesitant to vote for the measure because the move could result in a potential financial loss for the employee pension fund. Early on in the discussion, Councilmember Mike Anglin (D–Ward 5) reminded the council that the resolution was not a mandate to the pension board but still “urged” the council to divest.

Council members discussed the viability of divesting from fossil fuel industries if the city adopted the policy. Generally, council members expressed concerns for the future of pension funding.

Councilmember Stephen Kunselman (D–Ward 3) said he was wary of “meddling” in the pensions, noting the economic woes of Detroit over the summer in part due to that city’s pension obligations.

Nancy Walker, executive director of the employees’ retirement system, told council members that the pension board hasn’t taken an official position on the issue. However, a preliminary analysis of index funds found that none that are completely free of fossil-fuel investment.

“Organizations, such as pension funds, that do have fiduciary duty really struggle with how to balance that fiduciary duty with what look like an increase in cost,” Walker said.

Six members of the public asked council to consider divestment, including two students and a University professor. Individuals cited divestments in the past regarding tobacco and apartheid, and the symbolic effort to combat climate change.

LSA sophomore Laura Hobbs spoke to the council in support of the resolution, noting similar divestment efforts in college towns on the West Coast.

“This commitment sends a message not just to stakeholders nationwide, but also to the students in these communities,” Hobbs said to the council. “By agreeing to divest from fossil fuels, the city is showing students that Ann Arbor recognizes the harmful effects of climate change.”

Business Prof. Kai Petainen presented a paper to council in which he cautioned the proposed divestment.

“You’re basically selling out of an entire sector and the fifth-largest sector in that market is that sector” Petainen said. “If you do that, it means that index funds, which hold that sector, can’t hold that sector anymore.”

Petainen said other risks included increased risk for the fund overall and increased fees. While the original resolution claimed the divestment would pose “little or no risk to return on investments,” Petainen said the study was too small in scale to accurately represent the Ann Arbor employee pensions.

Councilmember Sally Petersen (D–Ward 2) suggested that, rather than divesting, council invest in clean energy and enhance green initiatives in other areas other than pensions.

“If they were to go with the recommendation, I feel strongly that it would be inconsistent with this City Council’s priority for fiscal discipline,” Petersen said in an interview during a break. “Given that our pension fund is already underfunded, that cost would create further liabilities.”

After much discussion, the council moved to postpone until the pension board had a chance to evaluate the proposal. The movement to postpone passed, and the council will readdress the issue at its second meeting in October.

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