SACRAMENTO - When Phil Angelides took over as state treasurer in 1999, he was dismayed by the way California awarded federal tax credits to encourage developers to build low-income housing. It used a lottery.
"We said, 'There's got to be a smarter way to do this,' " he recalled.
Angelides abolished the lottery and replaced it with a ranking system that rewards developers whose projects charge lower rents, promote "smart growth" by placing housing near job centers and transportation corridors, and meet standards for energy efficiency.
"You end up funding projects that don't just create housing, but build neighborhoods," he said.
The housing initiative illustrates the way Angelides, the Democratic candidate for governor, has used his office to further his agenda, including investing in inner cities and environmental technologies, and yanking state investments from tobacco companies and companies doing business in Sudan.
He also led a charge to regulate Wall Street by seeking to eliminate conflicts of interest among money managers and investment banks, and created programs to help give loans to small businesses and provide housing assistance to teachers.
"I've taken an office that some might see as a backwater and made it a champion for the people of California," he said.
Angelides said his success in remaking the treasurer's office has prepared him to serve as governor.
However, some wonder whether his extreme attention to detail, which seemed to work well in the treasurer's office, is suited for the vastly larger role of governor.
Others say Angelides faces a conflict of interest because he accepted campaign funds from money managers and law firms that do business with his office.
On the campaign trail, Angelides' record as treasurer isn't getting much attention.
For most of the election season, Republican Gov. Arnold Schwarzenegger's campaign has forced Angelides on the defensive, requiring him to explain his proposed tax increases on the wealthy and corporations to increase funding for education.
Angelides trails by double digits in the polls and his underdog status has left him lagging behind in fundraising, making it difficult for him to afford many TV ads to tout his record as treasurer.
"What has he done for the past eight years? Nobody seems to know about it," said Jaime Regalado, executive director of the Edmund G. "Pat" Brown Institute of Public Affairs at California State University Los Angeles. "He does have things to crow about. He has accomplishments. He has vision, but it's not getting out."
While average voters may know little about Angelides' tenure, his record was strong enough among Democratic activists to help him win his party's nomination for governor.
Tim Hodson, director of the Center for California Studies at California State University Sacramento, said Angelides has been effective in making his voice heard on issues such as bond sales and pension investments.
"Angelides has been one of the more successful in using his office to get some attention and to implement his policy goals," he said.
The treasurer sells state bonds, administers a variety of funding programs, and chairs 13 boards and commissions that make financial decisions about funding schools, health clinics and other services.
The treasurer also has a seat on the board of the state's two largest pension funds: the California Public Employees Retirement System and the State Teachers Retirement System, known as Cal-PERS and Cal-STRS, respectively.
Perhaps Angelides' major accomplishment as treasurer was enacting the "double bottom" line initiative to invest state pension funds in inner cities to produce high returns, but also to help revitalize struggling neighborhoods.
Harvard graduate
In an interview, Angelides, a Harvard graduate who started his career at the state Department of Housing and Community Development, said he was profoundly influenced by Michael Porter, a Harvard economics professor.
Porter has written about the competitive advantages of inner cities, which include reasonable land prices, a trained work force and existing infrastructure.
"American financial managers know more about investing in China than they do about investing in inner cities, like City Heights in San Diego," Angelides said.
Since 2001, Cal-PERS, the state's main pension fund for government workers, has invested nearly $4 billion in urban real estate. During the past five years, Angelides said, returns for inner-city investments have averaged 22 percent.
Angelides also used his pension fund power to promote environmentally friendly policies.
In 2004, he launched the Green Wave initiative, helping to persuade Cal-PERS and Cal-STRS to invest $1.5 billion in renewable energy, cutting-edge environmental technologies and environmentally responsible companies.
UCLA management professor David Mitchell said that Angelides' socially responsible investing programs are only a tiny portion of the portfolios of the pension funds. Cal-PERS, for example, has a $190 billion investment portfolio.
Potentially, Mitchell said, the return on these directed investments could be higher than traditional investments, if they help revitalize the state's inner cities or jump-start environmental technologies.
The difficulty, according to Mitchell, is evaluating how they perform compared with more traditional investments.
Some critics say Angelides' pursuit of social policies through investments has forced him to accept a lower rate of return.
'It shortchanges'
"He's been making investments based on social policies, rather than on the best investment returns," said Adrian Moore, vice president of the Reason Foundation, which espouses a free-market philosophy. "It shortchanges retirees and taxpayers by not getting the best returns for his investments."
However, Cal-PERS spokesman Brad Pacheco said the overall return on investment during the past five years has averaged 7.4 percent, meaning that the urban real estate investment has outperformed the overall fund.
Moore also criticized Angelides for using his office to make policy, rather than just do the best job possible of handling bond sales and other responsibilities.
During his tenure as treasurer, Angelides has frequently clashed with the governor.
He opposed the $15 billion in deficit bonds that Schwarzenegger promoted and voters approved in 2004, and worked hard against a variety of budget cuts, including proposals to slash college outreach programs.
This year, Schwarzenegger has embraced several ideas first backed by Angelides.
Angelides, for example, was an early proponent of investing in infrastructure - a cause that Schwarzenegger has trumpeted all year long, culminating in his campaign for transportation, school, housing and levee bonds that go before voters Nov. 7.
In 2005, Angelides got little notice when he called on Cal-PERS to use its clout to persuade companies to stop doing business with Sudan.
At a meeting of black ministers last week in Sacramento, Angelides said that Schwarzenegger's representatives opposed his efforts. "Time and time again the governor's appointees voted against my motions," he said.
Those votes were confirmed by the governor's staff yesterday.
But in September, Schwarzenegger gained considerable attention by holding a ceremony with actor George Clooney and signing legislation barring the state's pension funds from investing in companies with an active business in Sudan.
Into the details
After he was elected treasurer, Angelides immediately delved into the details of the job, looking at how he could influence policy by using his seat on the boards and commissions that make financial decisions for the state, drafting new initiatives and even editing news releases sent out by his office.
He developed a reputation for working late nights and calling staff members at all hours.
"He knows what the treasurer's office does, backward and forward, better than most of the staff," said former Deputy Treasurer Carrie Cornwell, who served under Angelides.
He made all the key decisions in the office, she said, including masterminding the new system for allocating federal tax credits for low-income housing based on identifiable criteria, not on a random system.
Geoff Brown, president of USA Properties, a low-income housing developer, said the change has been popular among developers. "It's a more logical system," he said.
Cornwell called Angelides a voracious reader with a sharp and precise mind. "He's a quick thinker and expects others to be quick thinkers too," she said.
During this campaign, Angelides' reputation as a micromanager has grown, with stories of the most minor decisions being held up until he approves.
Tony Quinn, co-editor of the Target Book, which analyzes California politics, said Angelides has spent so much time focusing on the details of the campaign that he has not been able to focus on a few key themes.
Quinn said Angelides' management style could be a liability in the governor's office.
"It would not translate well," he said. "The governor's office is just too big."
Angelides said he knows how to lead by directing policy, setting aggressive goals and allowing his staff to do its work. However, he said, his attention to detail and analysis would also serve him well as governor.
"People who are leaders not only have to have big ideas," he said, "but they have to understand what makes an organization go."
