Jacksonville pension reform | Pension360

Florida Pension Changes May Unravel As Board Debates Reforms

The Jacksonville City Council and Mayor Alvin Brown spent most of the summer months debating and constructing a pension reform measure that aimed to improve the funding of the city’s Police and Fire Pension Fund.

The Council approved the measure earlier this month. Now, the measure sits in front of the Police and Fire Pension Board, which will vote on it by January 15.

There’s no guarantee the board will approve the measure. From the Florida Times-Union:

It’s always been expected that changes to the 3 percent COLA and the guaranteed 8.4 percent return on DROP accounts for current employees were going to be stumbling blocks.

But the benefit changes for new hires hadn’t caused much of a stir until the board met last week to review the agreement.

Board members Richard Tuten and Larry Schmitt, representing the firefighters and police, said the changes are hard to swallow and will make it difficult to recruit good people needed to protect the city.

A third member of the board, former Sheriff Nat Glover, said he is uncomfortable with the changes and also concerned about the safety of the city.

Walt Bussells, the board’s chairman, said if a vote were taken, it would be 3-2 against.

“If we did do that, it kills the whole deal,” he said.

[…]

Tuten was the most vocal in his criticism of the changes for new hires and current employees.

He offered what he said was a string of broken promises and fear of more changes by politicians that “we can’t trust any farther than we can throw them.”

“If we are going to get keistered here, let’s go to court right now,” he said. “That’s what I get from my members.”

The measure calls for benefit changes for new police and fire hires, as well as COLA changes for current employees. In return, the city would pay an additional $40 million a year into the Police and Fire fund for the next 10 years.

Photo by pshab via Flickr CC License

Jacksonville Pension Reform Bill, Approved by Council, Could Still Stall

The Jacksonville City Council approved the city’s long-debated reform plan last month, which increase future employees contributions to the city’s Police and Fire Pension Fund, as well as boost the city’s payments by $40 million annually.

But now the proposal is awaiting approval from the Police and Fire Pension Fund, and one big question remains: how will the city pay for its higher payments? From News4Jax.com:

The Police and Fire Pension Fund met Monday to look at the city’s proposal to deal with the $1.7 billion pension deficit and the members are stuck on a major issue: how the city will pay for it.

The Jacksonville City Council approved a plan without designating a funding source and gave the pension board a little more than a month to approve or reject it.

The pension board is debating several issues again, including whether new members should carry the brunt of reform.

Under the plan approved by the council, future police and firefighters would undergo significant changes in the way their retirement is funded. They would pay more and the city would pay more into the retirement fund to bring it in line.

The pension board previously agreed to those changes in the plan, but now it might change its stance.

The board will reportedly meet again on Jan. 5 to vote on the reform measure.

Photo by pshab via Flickr CC License

Jacksonville Will Vote On Pension Reform Measure This Week

After months of debate, the Jacksonville City Council could approve this week a measure to reduce the city’s pension debt.

Observers say the measure, which would increase city pension contributions, change retiree COLAS and give the Council the right to change benefits, has the votes needed to pass through the Council.

From the Florida Times-Union:

The full council will meet Tuesday and could take a vote on the legislation.

Thirteen council members — more than a necessary majority for passage — voted last week in favor of the bill during two committee meetings after making several changes they said make the agreement a financially better deal for taxpayers.

After years of failed attempts to reform the police and fire pension and reduce the city’s $1.65 billion debt obligation to it, council members appear close to passing a bill that Brown’s administration says will save the city $1.2 billion over a 30-year period.

“I suspect there will be limited discussion on it, and I suspect the vote will be significantly in favor, maybe even an unanimous vote,” said Councilman John Crescimbeni.

If the Council passes the bill, it will still need to be approved by the Police and Fire Pension Fund Board. There’s no guarantee they will accept the deal. From the Florida Times-Union:

The pension fund board is composed of five members. The police and firefighters union each appoint one member, the City Council appoints two members and the fifth member is chosen by the four other members.

Whether the board members pass the bill remains a major question, because it includes some significant differences from Brown’s original legislation that they supported.

Council amendments include changes to guaranteed annual cost-of-living adjustments that current police and firefighters will receive to their pensions and interest rates earned in their Deferred Retirement Option Program accounts. The council would also retain the power to impose pension benefit changes in three years if future collective bargaining talks reach an impasse.

When Brown negotiated his deal with the pension fund earlier this year, pension board members nixed the concepts now included in the council’s changes.

Officials from the mayor office told the council last month that any changes made to the deal could effectively kill it.

The reform measure would increase city contributions to the pension system by $40 million per year for the next 10 years. It would also change the way COLAs are calculated and would give the Council the right to change worker benefits for the next three years.

Photo by pshab via Flickr CC License

Public Utility Company: We Can’t Afford Jacksonville’s Pension Reform Deal

A key part of Jacksonville Mayor Alvin Brown’s pension reform proposal was forcing the city to pay an addition $40 million every year for 10 years into the city’s Police and Fire Pension Fund.

But the question was always: where does the city get that money?

The solution, pushed for months by Brown, was to have JEA, a public utility company, make the payments.

But after further analysis, JEA says it simply can’t foot the bill.

From the Florida Times-Union:

In a closely-watched report completed with help from outside attorneys and financial consultants, JEA says it can’t afford Mayor Alvin Brown’s proposal to use the utility’s financial muscle to help pay off the city’s $1.65 billion Police and Fire Pension Fund debt, according to a draft copy of the document.

The report’s conclusion is a body blow to Brown’s efforts to pass his signature pension-bill, and it echoes skepticism some JEA officials have aired for months about the idea — which would have JEA pay an additional $40 million a year for 10 years on top of the more than $100 million it already contributes annually to the city’s general fund.

“JEA recognizes the challenges for our community resulting from very significant unfunded pension liabilities for the Police and Fire Pension Fund and General Employee Pension Plan, which includes JEA employees,” the report says. “However, at this time, we are unable to increase our contribution to the City of Jacksonville without increasing rates, and even with a rate increase an increase in contribution to the city threatens our bond ratings.”

JEA says that it has other challenges it needs to address, and shifting more money towards the pension system would hurt its credit. From the FTU:

The report details many of the financial challenges facing JEA: industry-wide declines in electric and water sales, impending federal regulations that could come with massive costs and billions of dollars of its own in existing debt.

Several City Council members quickly dismissed Brown’s idea earlier this year, saying it’s clear JEA has too much on its plate.

The nation’s major credit-rating agencies have cautioned JEA that increasing its city contribution — which historically has been higher than the industry average — to address Jacksonville’s pension crisis could hurt its credit.

Officials in surrounding Northeast Florida counties that also use services from the city-owned utility have said they’re wary about the plan if it means higher rates for customers.

JEA already contributes about $100 million to the city’s pension system.

Task Force Leader: Jacksonville Needs to Approve Pension Reform

Over the summer, Jacksonville’s mayor put together a Retirement Reform Task Force. The Task Force’s job description, according to the city website, is to “review the proposed public safety pension reform agreement, seek input from stakeholders and other interested citizens, and make recommendations on how the City should proceed.”

On Monday, the leader of that task force, William E. Scheu, wrote a column for the Florida Times-Union urging the Jacksonville city council to approve the pension reform measure currently in front of them.

The reform measure aims to improve the funding of the city’s public safety pension system by forcing the city to make higher payments to the system – to the tune of an extra $40 million a year.

But city council members are worried because the mayor has not specified where he will get that extra money.

Scheu acknowledges that concern, but says this is the best chance to enact a pension reform measure built by compromise.

From the column:

Last year a broad-based, stakeholder-representative task force met 17 times and urged a comprehensive reform that recognized the interests of the various parties, acknowledged the legal conundrum in which the city was forced to operate and examined various alternatives for reform.

The solutions the task force proposed with the help of The Pew Charitable Trusts included significant governance reforms, benefit reductions for both future and existing employees, a reformed plan design and a funding source for accelerated pension contributions.

Task force members considered the fact that litigation was a present fact but an expensive and uncertain route for the future.

Its solution was a compromise that is not perfect, but is attainable and sustainable.

It was supported by the Times-Union and most business, civic and political leaders.

[…]

While the mayor has not provided good leadership in refusing to identify a dedicated funding source for the additional pension contributions recommended by the task force, the City Council should not abandon its own responsibilities and “kick the can” further down the road.

The City Council has an opportunity to move Jacksonville forward by adopting the proposal now before it. It is imperfect, but it is a responsible step toward ensuring that Jacksonville’s quality of life will improve and that the annual fights over funding the city’s core services will end.

The Fitch and Moody’s rating agencies have recognized that Jacksonville’s financial condition is sick.

It is time to enact pension reform.

It is time for Jacksonville to take its medicine for the harm inflicted on it by our leaders in earlier years.

Read the entire column here.

Fitch Slaps Jacksonville With Credit Downgrade Over Pension Obligations

Fitch warned Jacksonville earlier this year that a credit downgrade was waiting in the wings if the city didn’t move to control its rising pension costs.

Fitch has now followed through on the threat, downgrading several city bonds from AA+ to AA, and others from AA to AA-.

In doing so, Fitch becomes the second agency to downgrade Jacksonville’s credit in the last four months. Moody’s did so in June.

From the Jacksonville Daily Record:

Fitch Ratings has downgraded several of Jacksonville’s bonds, citing pension risk and lack of reform as key drivers to its negative changes.

In all, about $1 billion in bonds and commercial paper notes were downgraded. Three bonds went from AA+ to AA, while one bond and the city’s commercial paper went from AA to AA-.

Regarding the city’s unlimited tax general obligation, its pension and liability profile is more consistent with an AA rating as opposed to an AA+ rating, the agency explains in its notes. Ratings affect the city’s interest rates on borrowing.

“The rating action focuses on credit risk associated with the city’s pension plans, which have a large collective unfunded actuarial accrued liability and rapidly escalating funding costs,” it states.

The city’s police and fire pension plan’s unfunded liability is more than $1.6 billion. The annual cost of paying into the plan is a projected $154 million for fiscal year 2014-15, up $6 million from the year before.

Chief among Fitch’s concerns is the city’s stalled pension reform efforts. One Fitch analyst said reform has been “very slow to evolve”. From the Florida Times-Union:

Fitch Ratings voiced concerns Monday about whether Jacksonville can actually achieve pension reform that will strengthen the city’s financial outlook.

[…]

After noting that some City Council members have filed amendments seeking to change a pension bill introduced by Mayor Alvin Brown, Fitch’s report questions “when or if” the City Council will vote on that bill.

Fitch also points out that Brown’s bill doesn’t identify a “definitive long-term funding source” to pay for a $400 million piece of Brown’s proposal — a criticism also lodged by several City Council members and the Jacksonville Civic Council, a high-profile business group.

[…]

Fitch put Jacksonville on notice earlier this year it would downgrade the city’s ratings if pension reform isn’t achieved. Brown filed his pension bill in June but it went on the back-burner during the summer budget hearings. The City Council conducted its first session last Wednesday to discuss the bill.

The Mayor’s Office has said the question-filled meeting was productive. But Fitch’s analysts were “concerned that it was not the progress they were after,” said city Chief Financial Officer Ronnie Belton, who talked to the analysts last week.

“I think the message from them is, ‘We’re looking for you to deal with the No. 1 issue you’ve got,’ ” Belton said.

Read the Fitch report here.

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