Those were the days.
Today, with the real estate market having turned sluggish in the late 1980s, Falls' $1.6 million has dwindled to under $1 million. The rest of the fund, invested by a bank in conservative stocks and bonds, has grown to roughly $8 million. Most of those involved in making the investment - township officials and White himself - concede that it has not turned out as they had hoped.
"If I had known in '85 what I know today . . .," said former Falls Supervisor Richard Goulding, who was on the police pension committee that recommended the investment. "It was a bad decision, I can see that now. But hindsight is 20/20."
Although Falls' losing investment will not strip the pensioners of their checks, the state Auditor General's Office and two reviews of the investment have suggested that it was unusual and imprudent. The Falls case seems to illustrate how well-intentioned municipal officials often go astray when it comes to investing, according to dozens of Philadelphia-area municipal investment consultants, township and borough managers and finance directors.
"It is time that municipalities got serious about their pensions," said Christopher Engelbert, vice president of Smith Barney Consulting in Allentown, a firm that works with Norristown Borough and other municipalities in Montgomery, Bucks and Berks Counties. "We have seen some horror stories about how people invest their funds."
State officials and area consultants say that elected officials and administrators are often untrained to invest pension money. While risk is part of investing, the Falls experience has many asking whether investing in the latest rage is a game municipal officials should play.
"They were playing the market," said Jim McManamon, a retired Falls officer with 32 years on the force, who is upset with the township's investment. "It's all right for an individual . . . but to take public funds like that, I don't know."
The Auditor General's Office routinely reviews municipal pension plans. After receiving the office's 1993 report, Falls officials requested two independent reviews.
The three reviews show that the limited partnership - American Insured Mortgage Investors (AIM) - had no operating history, and the investment could not be sold for years, until recently. And, the reports say, the investors did not have an opportunity to evaluate the individual mortgages or managing partners before investing.
There are few specific regulations about how pension money should be invested, but state statutes require that "prudent judgment" be used. As a general rule, auditors and consultants say, no more than 10 percent of a total fund should be committed to limited partnerships.
In 11 disbursements, from 1985 to 1988, Falls purchased three series of investment units from AIM, which is a Maryland partnership that holds federally insured and co-insured mortgages. One report, conducted by Alexander & Alexander, a Philadelphia-based consulting firm, noted that the township invested between 15 and 31 percent of the total pension fund in the AIM series.
Not only did the investment lose principal, but there was also the hidden loss of potential earnings, said Steve Schell, a spokesman for the Auditor General's Office. Schell said that the type of investment and the amount committed to it was "very uncommon" for a municipality.
Although the investment has accrued more than $400,000 in dividends over the years - some of which has been channeled back into the general pension fund - if sold today, the $1.6 million investment would be worth about $600,000 less.
Most of the Falls police pension fund is managed by Meridian Asset Management in Malvern. Like most pension funds, it is invested largely in stocks and bonds. According to Lester Rich, who manages Falls' account for Meridian, the pension fund has realized an average annual return of 15 percent.
If the $1.6 million had remained with the rest of the pension money, it would have grown more than threefold, according to Rich's figures. Rich said none of Meridian's pension plan clients - who come from around the tri-state area - are invested in limited partnerships. And, a spokesman at the state-run pension agency - Pennsylvania Municipal Retirement System - which represents roughly 20 percent of all pension plans in the state, said there are no limited partnerships in the state's portfolio.
According to several former Falls employees, in the late 1980s the investment was questioned by the township's administrators, but it was not until all the investments went on the American Stock Exchange and a new township manager and finance officer took office that the questions turned into action.
Earlier this month, at the recommendation of the police pension committee, the Falls supervisors voted to sell more than $100,000 worth of its stake in the partnership - suffering an $80,000 loss since it was invested in 1988. The administration has vowed to closely monitor the rest of the investment.
White and the former board members say the AIM series appeared to be the safest way to diversify the pension portfolio and get involved in real estate. And, White says, the investments are now producing respectable dividends.
"I don't think it is as bad as it appears," White said. "As of this point (the investments) haven't yielded what alternative investments could have, but the game is not over."
Township officials still aren't sure how White ended up before the board. White says Alexander & Alexander invited him. The consulting agency told the township that isn't so. Memories are fading.
In a way, the Falls loss is like anyone's, said William Hellman, a Morrisville CPA and an auditor for Falls and many other Bucks County municipalities.
"Sometimes you do well," he said. "Sometimes you don't."
