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

[thelakelander]

"My first reaction would be that I don't think there's any way you could do anything close to that without having a financial impact on our customers," JEA board Chairman Mike Hightower said Tuesday in an interview.

http://members.jacksonville.com/news/metro/2014-01-21/story/mayor-brown-proposes-boosting-jeas-annual-contributions-40-million-help

http://www.news4jax.com/news/mayor-brown-use-jea-funds-to-fill-pension-deficit/-/475880/24038900/-/106qbrkz/-/index.html

[icarus]

I'm going to take it from your left pocket instead of your right ... Its a fee not a tax.

Mayor Brown continues to play semantics much like other politicians. 

[Captain Zissou]

Yeah.... The Pension Fund is exactly like every other typical investment fund....

[Noone]

We all have a JEA house next to some swamp land that we can sell you. Next great meeting of the LOST which is FIND also is diverting taxpayer money for special Backroom deals is meeting on 1/23/15 at 9:30 am in council chambers.

This is all Positive.

Visit Jacksonville!

[Tacachale]

Well, he already made the City Council do his job because he was so scared of raising taxes, why not pass the next buck over to JEA? The school district's on deck, I'm sure.

[carpnter]

I'm going to take it from your left pocket instead of your right ... Its a fee not a tax.

Mayor Brown continues to play semantics much like other politicians.

The JEA is pocketing 600 million dollars a year that it should be contributing back to the city.  This should have happened a looooong time ago.

That money doesnt go into the operations of the bloody enterprise, it goes into the pockets of the small group of private bondholders.

This is actually a positive to see the mayor step in and handle this with the JEA.

The energy company has been looting its franchise for years now.  They are supposed to contribute 20 percent of their profits back to the city every year. (it used to be 60 percent when the City directly owned the utility) but the practice has devolved into a one on one negotiation between whoever is president of the City Council and the Executive Director of the JEA.

This past year, the JEA contributed almost 5% of their profits, not 20%.

That amount boiled down to 200 million dollars.  It should have been 800 million.

Its a pity that the Council President isnt strong enough to demand the correct amount, and the Mayor has to step in.  But I see it as a good sign on Brown's part.

If they continue to threaten the residents with more additional rate hikes, then I think the mayor should offer to Audit the goddam outfit and lets play a good round of Ken Lay ( http://en.wikipedia.org/wiki/Kenneth_Lay )

It might be amusing to see a few "Bondholders' fake their deaths.

If JEA sold bonds to pay for capital improvements or upgrades, then the bond holders deserve to be paid back at the interest rate that the bonds were sold at.  If this were a situation where people owned stock then I would agree that the city should get its cut before anyone else gets theirs.  If JEA stiffs the bond holders, something I am not sure they could even legally do, they would probably never be able to obtain funds for capital expenditures in the future, but we the customers would be stuck with significantly higher utility bills.

[icarus]

The JEA is pocketing 600 million dollars a year that it should be contributing back to the city.  This should have happened a looooong time ago.

That money doesnt go into the operations of the bloody enterprise, it goes into the pockets of the small group of private bondholders.

Stephen - Some times you make very articulate arguments and other times you come across as ranting especially when it comes to areas dealing with finance.

First, JEA is a not-for-profit utility owned 100% by the City of Jacksonville.  Its Board of Directors and CEO are appointed by the Mayor and the City Council.

The JEA's debt program is regulated by the City Charter and City Council approval of debt issuance and debt refinancing is required.  The City typically authorizes a debt issuance of several hundred million dollars each for the water/sewer and electric systems once every few years to provide the utility with the ability to meet its capital needs as they arise. 

The 'Bondholders' include pension funds, 401ks, mutual funds, and individuals investing for their own retirement and savings.  The 'Bondholders are only entitled to the face value of the bond plus the stated interest rate.  The math is not complicated but suffice it to say the 'Bondholders' are not siphoning off money beyond what they have loaned plus interest.

As part of going to the market to raise money with bonds, "the City covenants with the JEA and with the bond holders that so long as any electric system bonds remain outstanding, the City will not exercise any present or future power to appropriate revenues of the JEA electric system for City purposes in a manner that would impair or affect the JEA's ability to service the debt on such bonds."

Basically, both, JEA and the City, are constrained in how much money they can pull from the utility as long as JEA owes money to bondholders.  No amount can be withdrawn that would impact JEAs ability to repay.  Also, to the extent the City gets greedy and pulls too much money from JEA, it adversely impacts JEA's financials and they then have to pay even more in interest if they have to issue more bonds.

Unlike the pension fund, JEA's finances are made public and you can easily review and educate yourself on what they earn and what any capital is used for.

Meanwhile, my opinion about Brown and his tactics stand. If it walks like a duck, looks like a duck, and sounds like a duck, its a duck or in this case a tax. 

[ChriswUfGator]

I'm going to take it from your left pocket instead of your right ... Its a fee not a tax.

Mayor Brown continues to play semantics much like other politicians.

The JEA is pocketing 600 million dollars a year that it should be contributing back to the city.  This should have happened a looooong time ago.

That money doesnt go into the operations of the bloody enterprise, it goes into the pockets of the small group of private bondholders.

This is actually a positive to see the mayor step in and handle this with the JEA.

The energy company has been looting its franchise for years now.  They are supposed to contribute 20 percent of their profits back to the city every year. (it used to be 60 percent when the City directly owned the utility) but the practice has devolved into a one on one negotiation between whoever is president of the City Council and the Executive Director of the JEA.

This past year, the JEA contributed almost 5% of their profits, not 20%.

That amount boiled down to 200 million dollars.  It should have been 800 million.

Its a pity that the Council President isnt strong enough to demand the correct amount, and the Mayor has to step in.  But I see it as a good sign on Brown's part.

If they continue to threaten the residents with more additional rate hikes, then I think the mayor should offer to Audit the goddam outfit and lets play a good round of Ken Lay ( http://en.wikipedia.org/wiki/Kenneth_Lay )

It might be amusing to see a few "Bondholders' fake their deaths.

If JEA sold bonds to pay for capital improvements or upgrades, then the bond holders deserve to be paid back at the interest rate that the bonds were sold at.  If this were a situation where people owned stock then I would agree that the city should get its cut before anyone else gets theirs.  If JEA stiffs the bond holders, something I am not sure they could even legally do, they would probably never be able to obtain funds for capital expenditures in the future, but we the customers would be stuck with significantly higher utility bills.

Well therein lies the rub. If the company has cash reserves and revenues that would comfortably pay for the improvements, but yet insists on borrowing the funds anyway from insider-connected groups, and pays over market considering their credit rating, what do you call that, remembering of course that we're dealing with taxpayer money?

[icarus]

Ernst and Young audits the books of the JEA every year. Excellent firm. I have more faith in the finances of JEA than the COJ.

JEA does not own a nuclear plant. They did have an option to purchase 20% of a nuclear plant being built in SC by Duke.  It is potentially a cheaper and cleaner source of energy for almost 200,000 homes in Jacksonville.

In 2012, almost 50% of the JEA's net operating profits were paid back into COJ, well over $100m.

But, I digress and you have missed the entire point. Mayor Brown is playing sleight of hand. Saying you are not going to raise taxes but simultaneously raising a user fee, levy, charge, or in this case raiding your savings account to cover your checking account .... is still a tax.

[mtraininjax]

But, I digress and you have missed the entire point. Mayor Brown is playing sleight of hand. Saying you are not going to raise taxes but simultaneously raising a user fee, levy, charge, or in this case raiding your savings account to cover your checking account .... is still a tax.

+1000

of course the cameras are rolling and Brown chooses to show up and lead, right on camera. He should have had Sleiman there with him as his cheerleader!

[fieldafm]

borrowing the funds anyway from insider-connected groups,

Not sure I'm following. So you're against a company making a wise financial decision to amortize an expenditure over a period that is well short of an asset's useful remaining life by engaging in a transaction with institutional investors like teacher's pension funds? Have you ever took out a mortgage on a home or a car loan? 

That's a bizarre statement.

[fieldafm]

Well, he already made the City Council do his job because he was so scared of raising taxes, why not pass the next buck over to JEA? The school district's on deck, I'm sure.

On the surface, I agree. 
Keeping an open (but still leaning skeptical) mind until we see what the actual proposal is first. 

[fieldafm]

borrowing the funds anyway from insider-connected groups,

Not sure I'm following. So you're against a company making a wise financial decision to amortize an expenditure over a period that is well short of an asset's useful remaining life by engaging in a transaction with institutional investors like teacher's pension funds? Have you ever took out a mortgage on a home or a car loan? 

That's a bizarre statement.

It would be, I think if it were for a private for profit company.

But borrowed money is never free is it?

So, you would prefer that JEA only pay cash for every single bit of capital expenditure (which are ENORMOUS in the business of delivering energy)?  I really don't see how that's advantageous.  Building one large water main project would probably eat up most of JEA's current cash. Then what happens the next year when four more large projects are required?  We experience rolling black outs like North Korea?

Respectfully do not  agree with your point at all, dear friend.

[fieldafm]

I must be missing your point entirely, and if so I apologize.  But if you are claiming that a JEA Board meeting is as hard to get into as a Skull and Bones gathering, or that JEA's financials are kept in an off, off book ledger next to the Dead Sea Scrolls then the hyperbole is a bit overhyped.  Any public utility company is highly regulated and is required to disclose a complete picture of their financial status.

https://jea.com/About_Us/Tariffs_and_Reports/FY12_Electric_System_Annual_Disclosure_Report.aspx

Page 64 starts going into debt service.  Page 3 of the Ernst & Young audit goes into the balance sheet.

[ChriswUfGator]

Ernst and Young audits the books of the JEA every year. Excellent firm. I have more faith in the finances of JEA than the COJ.

JEA does not own a nuclear plant. They did have an option to purchase 20% of a nuclear plant being built in SC by Duke.  It is potentially a cheaper and cleaner source of energy for almost 200,000 homes in Jacksonville.

In 2012, almost 50% of the JEA's net operating profits were paid back into COJ, well over $100m.

But, I digress and you have missed the entire point. Mayor Brown is playing sleight of hand. Saying you are not going to raise taxes but simultaneously raising a user fee, levy, charge, or in this case raiding your savings account to cover your checking account .... is still a tax.

Yes, people said the same of Arthur Andersen.