Observations and musings on Jacksonville Politics

Jacksonville’s Impending Pension Crisis

The pension crisis is bearing down hard on the City of Jacksonville, much like a Category 3 storm that has the potential for increasing wind speed. With a current unfunded liability in excess of $1 billion, the problem has now become an issue so large our elected officials can no longer ignore it.

The City Council formed a Special Pension Committee to make recommendations as to actions the City can take to deal with the deepening issue.  Their report, which was due to the Council President on June 2, has been pushed back to June 30.  This extension will coincide with the incoming Council Presidency of Richard Clark, at which point he will have the option to determine whether or not the committee should continue if they have not yet finished up their report.

Not surprisingly, Jacksonville is not alone.  A website entitled The Pension Tsunami gives daily headlines of cities and states dealing with pension problems from around the country.  Different governments are dealing with the problems in different ways.  One Florida city, Pensacola, made the decision to move all of their general employees to the Florida Retirement System.  This change, which went into effect on June 18, 2007, resulted in a reduction in city contributions from 50% to 9.85% for the regular class employees who are now part of the FRS.

While the FRS may be an option for Jacksonville’s general employees as well, we do not have the option of folding the police and fireman’s pension funds in the FRS because of a number of reasons, including the fact that the City receives money from both the state and federal government for the funds.  For the Police and Fire Pension Fund, the City contributes money, the members contribute some and a small contribution is also derived from court fines.  Additionally, there is roughly $10 million that is contributed each year from the state. The bulk of the money that is paid out—about 85%—comes from earnings.  Jacksonville has guaranteed an 8.4% return, something that is not feasible given the current market conditions. (The Florida Retirement System, as an aside, guarantees a return of 6.4%.)

In January, JCCI recognized the reality that the city’s needs were unsustainable at an 8.48 millage rate and suggested several steps the city could take in righting the ship.  Among those were:

• Real estate transfers—which would help meet the City’s obligations and create jobs to
renovate the real estate at the same time.
• Overfund in good years to create a cushion for bad stock market years.
• Make pension contributions on DROP participants
• Strengthen the Ordinance Code to 90% funded before benefits can be enhanced for
both pension funds.
• Greater discretion in investment options.
• Refinance the unfunded liability by stretching out obligation and/or using POB’s

Another solution is to, once again, revisit what the city is promising to new employees.  The city’s new defined contribution pension plan, which is not as good as a defined benefit plan, is still guaranteeing a return of 7%—a full 1% above most defined contribution plans.

The Police and Fire Pension Fund has also suggested several solutions, including turning over parts of Cecil Field, the Jacksonville Shipyards and building future fire stations, which would then be leased back to the City.

It’s important to realize that while real estate may be part of the solution, it will not solve all of Jacksonville’s pension problems.  For starters, real estate is not a guaranteed investment.  In fact, the California Public Employees’ Retirement System has seen their real estate portfolio shrink by $3 billion over the past few months.  They now stand to lose the entirety of a $922 million investment in a 20,000 home development that failed.

The solution, regardless of what it is, will not be painless and will likely require concessions from both the unions and the city—meaning the taxpayers.  Perhaps the most important and pressing matter is the acknowledgement from all involved parties that the city is truly on the brink of a crisis with its pension funds and the time to act is now.  If Council members haven’t yet gotten that message, they may learn it the hard way via a voter revolt in 2011.


Filed under: Jacksonville, Jacksonville City Council, Mayor of Jacksonville, , ,

Will Pensions Break Jacksonville?

With Fraternal Order of Police President Nelson Cuba threatening to sue the City over a pension dispute, it’s probably time the City of Jacksonville got truly serious and faced up to the rather serious spectre of unsustainable pension contributions.  In today’s Florida Times-Union, Ron Littlepage pegs the unfunded liability at over $1 billion.

This isn’t exactly a good time to be talking about sweetening pension plans that could end up bankrupting the city.

Here are the latest figures from the Mayor’s Office on how much the unfunded liability in the city’s three pension plans has increased since the economy tanked.

– The unfunded liability for the Police and Fire Pension Fund jumped from $534 million in September 2007 to $789 million in September 2008.

– For the general employees plan, it increased from $192.5 million to $331 million.

– And for correctional officers, it went from $38.5 million to $55 million.

Add those together and it’s a total unfunded liability of $1.175 billion.

This January 2, 2009 Memo from Alan Mosley, the City’s Chief Administrative Officer, is an effort to make members of the City Council aware of the precarious path the City is currently on in relation to the three pension plans.  According to Mosley, current contributions to the Police & Fire Pension Plan—$56.5 million—will have a staggering increase of nearly 180% over the next 20 years.  One doesn’t need to know the minutia of pension plans to understand exactly how that would cripple the budget of the City.   Read the rest of this entry »

Filed under: Jacksonville, Jacksonville City Council, , , , ,

TU: Close the double-dipping loophole

As we reported earlier, at least two State legislators (Senator Fasano and Representative Schenck) intend to close the State’s double dipping loophole.  Today, the TU editorial board joins the growing chorus of voices calling for the demise of the loophole at the State level.   While the TU didn’t find any City employees in a database put together by the St. Pete Times, they may want to take a look a little closer to home where the City has its own form of “double dipping” practices. 

Most recently, the City enacted the following measures: 

In 2005, City Council passed a bill (2005-373) to allow retired correctional & police officers to be employed as temporary part time Court Bailiffs or temporary Logistical & Technical Support Officers in JSO to serve as city employees without losing pension benefits.  

In 2006, City Council passed a bill (2006-1391) to allow any time service retiree of the City of Jacksonville General Employee Retiement Plan to return to work on a part-time or temporary basis without losing their retirement benefits.

And just this past year, City Council passed 2008-341 which allows post-retirement re-employment by JSO in positions of Mail Coordinators, Aviation Supervisor, Court Bailiff Supervisor & Corrections Bond Custodian and allows them to retain their pensions.

Although this is not technically double-dipping in that these employees do not participate in the City’s pension fund, these employees are being rehired and paid City salaries while still collecting their pension benefits. 

So does the City have its own form of “double dipping”?  In the words of Sarah Palin – you betcha. 

Filed under: Florida, Florida Legislature, Jacksonville, Jacksonville City Council, Mayor of Jacksonville, , , , , , , , , ,

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