Mayor Shares Possible JEA Partnership On Pension ReformFebruary 18, 2014 25 comments Print Article
According to a COJ press release, Mayor Alvin Brown offered new details on Tuesday that show how Jacksonville’s community-owned utility, JEA, could partner with the City to reduce the $1.7 billion unfunded liability of the Police and Fire Pension Fund (PFPF) without the need for a utility rate increase.
“This is a challenge we face together as one community. And we must solve it by acting together as one community,” Mayor Brown said.
In January, Mayor Brown met with the Jacksonville Retirement Reform Task Force and proposed a comprehensive pension reform plan that saves taxpayers $2.75 billion from the City’s general fund over 35 years, according to actuarial reviews. The mayor’s proposal also saves $130 million over the next five years.
Mayor Brown’s plan provides a solution to skyrocketing pension obligations for police and firefighters. In just over a decade, the city’s annual obligation to the PFPF has jumped 15-fold to $148 million in this year’s budget.
“Every dollar spent on these rising pension costs is a dollar taken from essential services to protect public safety, grow our economy and improve the quality of life in Jacksonville, “ said Mayor Brown. “If the City cannot adequately provide those services, it affects everyone in our community – including JEA. Its employees and ratepayers are the same citizens and taxpayers who receive quality police and fire services, visit parks and libraries, use senior centers, benefit from Jacksonville Children’s Commission programs and enjoy the economic benefits of companies moving to Jacksonville or expanding their operations here.”
As part of the plan, Mayor Brown offered to begin discussions with JEA to participate in an expanded financial partnership with the City to accelerate payment of the $1.7 billion unfunded liability. He proposed that JEA consider investing an additional $40 million per year for the next 14 years – or until the PFPF reaches an 80 percent balance, which could be sooner.
In exchange, the City is committed to working with JEA to find revenue and savings opportunities to help offset the costs of an increased contribution. For example, the City is prepared to accept JEA’s long-standing request that it be allowed to create its own pension plan separate from the City’s General Employees Pension Plan (GEPP). That step could help save JEA more than $500 million over the next 35 years.
On Tuesday at a meeting of a Task Force subcommittee, Mayor Brown detailed revenue and savings opportunities for JEA to partner with the City and help reduce the large unfunded liability in police and fire pensions. He said these opportunities include:
· Savings from restructuring JEA pension obligations: Over 35 years, the utility can save $503 million with changes affecting only new workers, actuarial studies show.
· Savings from JEA’s natural gas costs that continue to be below the utility’s budget: JEA has experienced surpluses in its reserve fuel fund. In 2012, JEA produced a $35 million fuel surplus due to low natural gas prices. In 2013, the fuel surplus was nearly $37 million. A similar surplus is projected for 2014.
· Revenue growth above projections in our growing community: While JEA has forecast based on rating agency advice, the latest report from the U.S. Department of Energy projects that electricity consumption nationwide will grow about 1 percent per year – 28 percent by 2040. A one percent increase in JEA’s business would translate into $18 million in increased revenue per year.
· Productivity gains: A modest 1 percent improvement in JEA’s operating expenses translates into $3.7 million in annual savings.
· Savings from the reduction of debt: As it pays off its existing debt, JEA is already gaining significant annual savings as a result of lower principal and interest payments.
JEA and the City of Jacksonville have a long-standing financial partnership. Since the time of consolidation nearly 50 years ago, the utility has worked with City Hall to participate in solutions to community challenges, including economic development and public infrastructure.
“We all live in Jacksonville, and we must work together to do what’s right for the community,” said Mayor Brown. “I am confident we can forge a partnership with JEA to solve this major financial challenge for taxpayers.”
The proposal is under review by the 18-member Retirement Reform Task Force, which is chaired by attorney Bill Scheu. Mayor Brown spoke to the Plan Funding Subcommittee of the task force on Tuesday. The full task force is scheduled to meet at 1 p.m. on Wednesday in the Lynwood Roberts Room at City Hall at St. James.
Source: City of Jacksonville Press Release