Mayor Brown wants $40 million more from JEA to pay pension obligation

[icarus]

Well, I just assume when you asked for profits that meant net income.  JEA does provide a breakout of its financials in its annual report by operating division electric versus sewer and water.  It also breaks out non-operating revenues and expenses such as the income from energy trading and interest on the $6 billion in debt.

Maybe, if you were more clear in the argument you are trying to make, I could help you by excerpting the relevant financial data for you. Glad to help in anyway I can.

[Tacachale]

So is the COJ contribution coming out of the net operating income, or is that factored as an operating expense? Either way another $40 million is going to be a big chunk out of the income.

[icarus]

Tacachale - Net Income is calculated under generally accepted accounting principles (GAAP) which does not include the contribution to COJ.  The COJ contribution is stated separately. 

The net income does include the tariffs and taxes paid to COJ which is separate and in addition to the annual contribution (stated separately).

[icarus]

Unfortunately, the only financial data you or I are going to have access to is the data contained in the quarterly and annual reports.  These reports are audited by an independent international accounting firm so unless you feel E&Y is not doing an appropriate audit of the numbers they are a reliable presentation.

I'm sure I could provide monthly numbers and I can even probably provide a graph of average monthly energy consumption which intuitively should mimic revenues.  But seeing as revenue does not equate to profit and is not reflective of cash available for contribution to the COJ. I'm not sure what the point is unless you are trying to make a plea simply on the fact that they have large revenues.

Based on the analysis of the credit agencies and some bond analyst coverage, JEA's financial ratios are inline with industry but for an inordinately high debt ratio which I indicated before was the result of acquisitions and trying to artificially maintain low utility rates several decades ago. This is just one more reason why taking more from an agency trying to compensate for the bad decisions of previous management would be a bad idea.

I'm not sure anyone is trying to argue that previous City administrations and previous management of JEA did not make some financial missteps and that those missteps have not directly resulted in impacting both user rates and contributions to the City.  I just don't see how taxing the utility with an additional contribution doesn't directly impact current users and how the possibility of higher rates doesn't factor in to the evaluations of industries considering whether to locate here.

Again, maybe if you just came out and made a specific argument,  it would be easier to discuss. I promise I won't dismiss it and I'd be more than happy to consider it.

[icarus]

... I'm sure I could provide monthly numbers and I can even probably provide a graph of average monthly energy consumption which intuitively should mimic revenues.  But seeing as revenue does not equate to profit and is not reflective of cash available for contribution to the COJ. I'm not sure what the point is unless you are trying to make a plea simply on the fact that they have large revenues. ...

so you dont have any idea of the revenues?

I absolutely do. I just don't see the relevance and the rest of my comment spoke to that.

[icarus]

Total Operating Revenue: $1,812,819,000

There are some additional non-operating revenues but they are more than offset by non-operating expenses so I am not sure they are relevant in terms of determining revenue.

[icarus]

... But seeing as revenue does not equate to profit and is not reflective of cash available for contribution to the COJ. I'm not sure what the point is unless you are trying to make a plea simply on the fact that they have large revenues.

and any idea what those non operating revenues are?

So 2 BILLION dollars annually?  and thats just on 'operating' revenue......  which would make 40 million about 2% of that lesser figure.

Non-operating revenues include about $4.5 million from energy trading and a few miscellaneous items but they are all wiped out by the $200m plus in debt service.

[icarus]

Right now, your electric rate consists of the base rate and the fuel rate.  The fuel rate reflects the variances, i.e. price spikes in coal or natural gas.  Contributions to the City of Jacksonville represent about 16% of the base rate and debt service represents about 22%.

I've already noted and conceded that JEA has a relatively high debt burden.  I've also noted that new management is making a lot of effort to compensate for decisions of past administrations and management.  By utilizing operating revenue and cash reserves rather than new debt, JEA is going to be able to reduce payments for debt service as a percentage of the whole. Also, the nuclear plant in SC is anticipated to go live in 2018 which will eliminate the amount of cash being invested in construction of that facility and provide a stable and consistent source of cheaper energy, e.g. improving cash flows.

Considering all of that, I personally would rather invest in the future and allow JEA to get itself in a better financial position to not only continue its current rate of increased contributions but be in a better position to provide greater contributions in the future.

Plus .. maybe you missed that part where I mentioned the City has already mortgaged the money from JEA to fund its own capital improvements.  Gee .... I wonder why we have so much debt ....

[Tacachale]

If it were privately owned, and didn't cover water and sewer, it wouldn't be contributing anything to COJ.

[icarus]

Stephen -

I neither agree that the group of bondholders are:

(1) small .. its over $6 billion in bonds

(2) responsible for the decisions to borrow made by JEA and COJ

(3) that the bondholders aren't anything but independent parties .....

(4) nor that large amounts of debt are not part of the normal course of business for a capital intensive business like utilities

(5) nor that JEA had the capital reserves to make the changes included in the Better Jacksonville Plan or to consolidate the fragmented water and sewer system without taking on debt

What I am willing to agree to is that:

(1) debt service at JEA is higher than average

(2) that this is the direct result of decisions made by previous management and former City Council/Mayors, e.g. mortgaging our futures

(3) has no real relation to the Mayor's proposal other than to illustrate that he is climbing on a pretty high ladder to drop that last 'bale' of straw on the camel's (JEA's) back whilst asking it to walk all the way across the Sahara without stumbling (e.g. 14 years).

[icarus]

Well, hopefully after all that, we can also agree that the mayor's proposal is as Chris would put it, albeit crudely, ... bullshit ;-)

[ChriswUfGator]

Well, hopefully after all that, we can also agree that the mayor's proposal is as Chris would put it, albeit crudely, ... bullshit ;-)

I never disagreed that the mayor's proposal (any of them really, not just related to pension reform) are bullshit, or ill-conceived. Pretty much anything he thinks up is, I doubt anyone could argue that point. My gripe with JEA is that they have at any one time about $740mm invested in other companies, and I question the insider participation in these outside investments, and I also question why they carry the level of bond debt they carry, which seems excessive both considering their free cash flow and considering the size of the operation overall. It seems that after all of that we pretty much agree on the basics...