It has been clear for about a year that the root of much of the city of Atlanta’s financial problems is the pension system for city workers.

City Councilman Howard Shook of Buckhead, who chairs the council’s Finance/Executive Committee, which deals with budgets and the pension funds for general employees, police officers and firefighters, now is one of the leaders in a council movement to change the way the assets of those pension funds are allowed to be invested.

As part of the 2009 legislative agenda the City Council passed Nov. 17, the city is seeking approval from the General Assembly to allow those pension assets to be invested in real estate investment trusts (REITs), foreign markets and emerging markets. Georgia law forbids such investments by public employee retirement systems.

Greater flexibility in pension fund investments is one of a series of proposals the cash-strapped city plans to put before state lawmakers when the 2009 session begins Jan. 12.

One of every four dollars in the general fund goes to covering pension obligations. City officials want the ability to invest the pension assets in REITs and foreign markets because they believe that those markets will yield greater returns than domestic funds.

The city’s pension funds have declined in book value by millions of dollars this year because of the U.S. economic downturn.

“We’re in a worse investment position, but they won’t let us make these other investments,” Shook recently said. “That further erodes what we have got.”

State Sen. Kasim Reed, D-Atlanta, said the pension proposal addresses concerns lawmakers might have over greater risks by limiting those new investments to 10 percent of the pension funds’ assets.

— John Schaffner