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

[ChriswUfGator]

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.

You seem to start with the premise that unnecessary borrowing is a wise financial move, so I'm not sure where you go with that? If you want an actual discussion that's one thing, this doesn't appear to be it. And FWIW no, I don't borrow to buy cars, or any other depreciating asset for that matter. It's not a good financial move.

[fieldafm]

What unnecessary borrowing is JEA undertaking?

[icarus]

None fieldafm. JEA and every utility both, public and private, must take on periodic planned and unplanned capital improvements that require additional liquidity, i.e. bond issues.  You see in addition to capital improvements they have to maintain a healthy amount of liquidity in case of unplanned events so that they can be in a position to restore power and water to communities in case of natural or man made disasters.

or in the alternative world:

It just seems that the secret order of bondholders, also known as the insiders by some, has expanded their influence to City Hall. They have managed to gain control of the Mayor's Office and the City Council; to further their goals of planting their agents as the board of the JEA and making sure evry budget and bond issue is approved.

Their further ability to manipulate the pricing of public bond offerings on open international markets and to charge higher than market interest rates is nothing short of machiavellian.  I dare say they have even been able to influence credit rating agencies and Big 4 accounting firms to further there schemes.

[fieldafm]

Have to agree with Icarus here. You are making referances that JEA is somehow manipulating debt markets, have off ledger balance sheets and now making a veiled comparison to companies like Enron. 

Somehow, the debate over whether to shift the City's unfunded pension burden away from taxpayers and on to...well, taxpayers, has made an irrelevant turn to some bizarre conspiracy theories. 

[icarus]

Stephen - I apologize to the extent my sarcasm exceeds the reasonable.  I get frustrated when debates or discussions get sidetracked with conspiracy theories and intimations of issues, no matter how relevant on their own, that bear no real rational relation to the original topic of discussion.

The best conspiracy theories are the ones laced with a hint of truth.  Case in point, the Enron and Anderson references.  Few people even actually understand Enron's business or what happened. Fewer people understand that JEA has its own energy trading subsidiary.

The fact is we have a Mayor with a penchant for seeing his face on television and his name in print accompanied by a seeming inability to do his job.  He produced a budget so absurd that he could have saved everyone a lot of time by not even attempting one. Now, his answer to a very serious issue is to pass a financial burden on to JEA versus dealing with the issue head on and making some real decisions.

Jim and Harry are both very nice, professional and capable attorneys.  I have a lot of respect for both but neither really was an expert on structured finance so I understand why they find it difficult to follow.

Again, the Mayor needs to focus on the union contracts, the investment performance and management of the Fund and the budget priorities of the City before he starts borrowing from Peter to pay Paul.

[My left foot]

The amount that the mayor wants JEA to contribute is nearly the exact amount that was conjured up by the city for a scoreboard that has averaged 15.4 points this season. Alanis Morrisette - Isn't Ironic softly plays in background.

[mtraininjax]

The fact is we have a Mayor with a penchant for seeing his face on television and his name in print accompanied by a seeming inability to do his job.  He produced a budget so absurd that he could have saved everyone a lot of time by not even attempting one. Now, his answer to a very serious issue is to pass a financial burden on to JEA versus dealing with the issue head on and making some real decisions.

Yeah, pretty much sums up the mayor, he doesn't do a thing unless there is a camera or TV crew on him. Great way to lead the city.

[ChriswUfGator]

Stephen - I apologize to the extent my sarcasm exceeds the reasonable.  I get frustrated when debates or discussions get sidetracked with conspiracy theories and intimations of issues, no matter how relevant on their own, that bear no real rational relation to the original topic of discussion.

The best conspiracy theories are the ones laced with a hint of truth.  Case in point, the Enron and Anderson references.  Few people even actually understand Enron's business or what happened. Fewer people understand that JEA has its own energy trading subsidiary.

The fact is we have a Mayor with a penchant for seeing his face on television and his name in print accompanied by a seeming inability to do his job.  He produced a budget so absurd that he could have saved everyone a lot of time by not even attempting one. Now, his answer to a very serious issue is to pass a financial burden on to JEA versus dealing with the issue head on and making some real decisions.

Jim and Harry are both very nice, professional and capable attorneys.  I have a lot of respect for both but neither really was an expert on structured finance so I understand why they find it difficult to follow.

Again, the Mayor needs to focus on the union contracts, the investment performance and management of the Fund and the budget priorities of the City before he starts borrowing from Peter to pay Paul.

I don't think you have much right to be frustrated at it, when you're the one doing it. You and field have used hyperbole and straw men to pigeonhole and derail any actual discussion, without bothering apparently to know the underlying facts. Now your last post appears to be the "I'm just frustrated" (with the problem you created) voice of reason. It's like watching a schizophrenic talking amongst themselves.

I guess my question at this point is why this is such a hot button issue that you have a knee-jerk reaction and intentionally kill a discussion before it starts? Of all the topics on this site, why this one? What's your connection to JEA?

[ChriswUfGator]

What unnecessary borrowing is JEA undertaking?

JEA does far too much business with insiders, both in terms of borrowing and investing, for my comfort level. Or anyone's really. This is generally part of a larger game to reduce their contributions to COJ below the level set in their charter. JEA is hardly a victim here, and if you're running for office then I'd expect you to get up to speed on this rather than drinking the kool-ade like the present council, which at this point appears willing to accept something less than 5% when the city is actually entitled to 20%.

You and I have only ever gotten into it one time when you first joined this site, over downtown occupancy figures in a C&W market report that I called bunk. A year or two after our debate DVI came out and agreed virtually spot-on with my guesstimate. I never did go back and rub it in your face. But surely you must recognize I don't deal in bullshit and innuendo. Nor do I think that you do that, we otherwise agree on pretty much everything.

We've all collectively got a problem with this organization running around and lobbying to operate as though it's a private enterprise, when it's not. They also want to keep the money they make. Too bad. It's a taxpayer asset and serves the taxpayers, that's why it was created. Weaseling out of the public contributions mandated in their charter, or viewing it like a surcharge to be passed along to their customers, is unacceptable. It's not a private enterprise, and they need to pay their 20% and shut up about it. We generally agree on 99% of things most of the time, and I think if you actually look at what's occurring with JEA we'll agree on this one too. If you want a meaningful debate, it's here to be had, but this one immediately devolved into strawmen and pigeonholing.

[Shine]

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. 

Some pretty good post here by Icarus. 

Don't get too close to the sun.

[icarus]

So while I think we agree on Brown's performance, I am regrettably forced to part ways with you in feeling that the JEA is some kind of victim here.

The JEA isn't the victim here. I've got no sympathy for them. However, I'm not going to sit idly by and watch people justify what the Mayor is proposing because of their feelings about JEA especially when most of the discussion is rife with conspiratorial notions and not facts, i.e. insiders, bond holders siphoning, cooked books, et al.

I want to make one thing absolutely clear here. We are the victim. 

The Mayor keeps trotting out one trick ponies. Pension reform that would magically fix the budget and keep him from raising taxes but fail pensioners and taxpayers. Now, instead of actually rolling up his sleeves reviewing the performance of the departments and their budgets and engaging the voters with discussion on priorities for spending, he is going to look for another wallet to borrow from so he doesn't have to do his job. Oh, and, he won't have to raise taxes.

I know enough about JEA's finances and the bond agreements approved by the mayor and City Council to know that if you saddle JEA with a $40 million dollar a year fixed payment, it will only have one effect. JEA will raise rates to compensate ... in other words the buck gets passed on to us.  We need to focus on the actual outcome not the political justification for robbing Peter to pay Paul.

[Tacachale]

So while I think we agree on Brown's performance, I am regrettably forced to part ways with you in feeling that the JEA is some kind of victim here.

The JEA isn't the victim here. I've got no sympathy for them. However, I'm not going to sit idly by and watch people justify what the Mayor is proposing because of their feelings about JEA especially when most of the discussion is rife with conspiratorial notions and not facts, i.e. insiders, bond holders siphoning, cooked books, et al.

I want to make one thing absolutely clear here. We are the victim. 

The Mayor keeps trotting out one trick ponies. Pension reform that would magically fix the budget and keep him from raising taxes but fail pensioners and taxpayers. Now, instead of actually rolling up his sleeves reviewing the performance of the departments and their budgets and engaging the voters with discussion on priorities for spending, he is going to look for another wallet to borrow from so he doesn't have to do his job. Oh, and, he won't have to raise taxes.

I know enough about JEA's finances and the bond agreements approved by the mayor and City Council to know that if you saddle JEA with a $40 million dollar a year fixed payment, it will only have one effect. JEA will raise rates to compensate ... in other words the buck gets passed on to us.  We need to focus on the actual outcome not the political justification for robbing Peter to pay Paul.

Very, very well said.

[vicupstate]

It seems the 'proof' that JEA is corrupt and cooking the books is based on testimony at the Consolidation hearings and nothing more.  If the testimony were so damning, why isn't Lori Breyer, some other committee member, or someone else that heard the 'smoking gun' doing something about it?

I've never heard of any public or private utility not using bonds and debt instruments as a normal course of business.  The burden on proof that something nefarious is going on is on Stephen and Chrisw.  JEA's financials are there for anyone to see. You have to prove they are corrupt, JEA doesn't have to prove they AREN'T. 

Can you provide the verbatim quotes from the hearings that you find the most suspicious?

I would say that skipping Pension contributions and cutting property tax rates during the 'good times' had/have a lot to do with the city's current problems, irregardless of JEA.

[Tacachale]

Icarus is right, even if JEA needed reform, just demanding $40 million without any plan for that reform isn't going to fix the problem. It's just going to result in them raising rates so the mayor can maintain appearances. And it doesn't even scratch the surface of what needs to be done for the pensions.

[thelakelander]

Council skeptical about JEA funds

The City Council member maybe closest to the JEA has seen Mayor Alvin Brown's pension plan that seeks an additional $40 million annually from the utility — and he's skeptical it will work.

"I think there is a lot of wishful thinking in it," said council member Bill Bishop. "Could it be done? Sure it could be done. Can it be done without impacting electric rates? I doubt it."

The $40 million per year would be in addition to the $110 million JEA already gives the city annually.

Bishop said Wednesday that JEA is a capital-intensive business that has "a lot of debt" it is trying to pay back. A bond rating agency's first priority, he says, is to determine "how it's going to be paid back." That's especially true when the utility is in a relatively flat revenue period, he said.

full article: http://www.jaxdailyrecord.com/showstory.php?Story_id=541660