Mayor, other leaders brace for conflict over police-fire pension

[stjr]

The police and fire fighters may try and personalize this with the Mayor or other opposing politicians, but the fact is that their pension plan is just way too rich and will do to the taxpayers and the City what such plans and benefits have done to General Motors: Bankrupt us. For this reason, these plans, most not nearly as rich as what the City has, are going the way of the Do-do bird in the private sector.  No company wants to guarantee anymore a benefit to be given decades in the future.

The union leaders refusal to speak of any kind of compromise, cost sharing (i.e. like a 401K where employees make contributions to their own retirement) or phase in of a lower benefit for new employees when such costs are consuming major portions of the City's budget doesn't fly.  This isn't about lacking appreciation for our fine police and firefighters.  But, when taxpayers are facing pay cuts, job elimination, schools being gutted, and other cutbacks, it seems reasonable to ask police and firefighters to face similar economic realities and give back some on an overly rich benefit (like a GUARANTEED 8.4% return each year) that was poorly negotiated in the past by the City.  Maybe if the City put less to the pensions, it could hire more police and firefighters which has been another demand of the unions.

Last I checked, police and fire are major functions for the City but not the only ones.  And, when the taxpayers start getting special tax bills for the union's pensions, watch for a major backlash from the public.

Mayor Peyton has nothing but the citizens at heart in this issue as a lame duck mayor and gets extra special credit for taking it on given that the police and fire fighters got him elected.  Unresolved, this issue will cost taxpayers more and more forever and ever.  Failure to control it will mean both higher taxes and greatly reduced services from the City.  We need to really get behind the Mayor on this one and show he has grassroots support.  The battle over Trail Ridge will be minor compared to this one.

Mayor, other leaders brace for conflict over police-fire pension
Firefighter, police unions are not letting go of city's pension promises.

    * By David Hunt
    * Story updated at 3:49 AM on Sunday, May. 31, 2009

They were once a muscular ally, the brotherhood of police and firefighters who decided John Peyton, a virtually unknown businessman, should be the city's next mayor.

That was six years ago. Peyton won the unions' support, then the election - against a popular former sheriff.

Now, those unions' retirement plans are in the mayor's crosshairs.

While the mayor hasn't pulled the trigger, he said it's either that or leave taxpayers throwing cash at a broken pension plan snowballing into a projected $110 million expense next year.

It's an ugly reality that's plagued cities from San Diego to Philadelphia as officials nationwide consider everything from deferring benefits to taking out loans to cover retirement checks.

In Jacksonville, it's an issue at the top of the Peyton agenda for his final two years in office. It's also a potential balancing act for a handful of City Council members who may try to succeed him.

Reducing benefits would mean reducing the future retirement payout of well-organized, tight-knit groups that can help mean the difference between victory and defeat at the polls.

Both firefighters union President Randy Wyse and police union President Nelson Cuba say they'll be watching how mayoral hopefuls handle the pension issue. The general message: Mess with our retirement, lose our support.

That's a definite threat, said University of North Florida political science professor Henry Thomas. He said union backing means campaign-boosting word-of-mouth, feet on the street - and votes.

"Candidates go out of their way to get their support," he said. "We have a more conservative voter base with more people who are pro-fire and pro-police."

With power comes privilege. Thomas pointed to Peyton's 2003 election. Shortly after taking office, the mayor replaced an unpopular fire chief before increasing public safety funding by $43 million.

But in recent weeks, Peyton has given speeches to civic leaders and elected officials about the need to restructure pensions.

"It's a tough issue because you're talking about the benefits of people you care about. And the groups have a lot of political clout," Peyton said. "But if you look at the numbers, they're staggering."

Budget planners expect to put $110 million toward the retirement plans for police officers, firefighters, corrections officers and general City Hall workers next year. That would eat up roughly 10 percent of the general fund.

Just six years ago, the pension contribution was $33.8 million; this year, it's $76 million.

City's contributions eyed

The police and fire union received $54 million this year, the bulk of the contribution.

Cost has skyrocketed, but that's not the unions' fault, Wyse said.

He looks critically at the 1990s, when the city relied so much on a strong stock market that it kept contributions to a minimum.

When the stock market tumbled over the past year, the pensions were hit hard. A May 19 city Finance Department report showed the retirement funds are nearly $1.2 billion under-funded.

While that number is often scoffed at - it represents what the city would be out if every employee retired at once - Wyse said reducing it is the city's problem.

"We want no changes to our benefits," Wyse said. "Why does this have to fall on the backs of the workers? There's a way to fix it. Make the pension contribution you were supposed to make - but didn't."

Police and fire pension fund administrator John Keane backed that thought on Friday by putting out a written statement saying the city should step up the funding.

Wyse said Councilman Stephen Joost earned union respect several months ago when he spearheaded legislation preventing the city from taking a funding break - commonly called a "pension holiday" - in the future.

Former Mayor John Delaney's budget planners became notorious for this in retrospect as a strong stock market went limp, leaving Peyton with the problem. Joost said he expects compromise on the pension issue, but sees a rocky horizon.

"I wouldn't be surprised if the unions play hardball," Joost said. "That's what they're supposed to do."

Lengthy process expected

Councilman Kevin Hyde, who is considering a mayoral run, said a tight rope rolls out as he tries to explain to the unions that pension restructure is for their own good.

The problem with the plan: By the time some employees need it, the money might not be there.

Hyde said he expects pension restructuring to take several years, with the unions negotiating for new agreements.

"I think we can get to a fair, appropriate level of benefits that will get people to come work for the city and stay at the city. Absolutely," Hyde said. "Will everybody be happy? Probably not."

Hyde said he's against breaking promises in current contracts, but said payouts will have to be reduced over time.

Cuba opposes the notion of phasing in lower benefits as new employees are hired.

"You can't tell two people doing the same job that one won't retire as well as the other. How do you recruit like that?" he said.

Council President Ronnie Fussell said he's leaning against a mayoral run, but expects the unions to be watching the pension issue closely for whoever campaigns.

"Talk about an emotional issue," he said.

Fussell appointed a pension task force in March. During a recent meeting, Chief Financial Officer Mickey Miller told the task force it would take several additional tax mills and about 12 years to cover the pensions' projected debts.

"Nobody jumped to make a motion that we pass that," said Councilman Michael Corrigan.

Mayor feels the heat

Peyton said cutting the pension cost - now at $275,000 a day - means cutting benefits.

Council President-elect Richard Clark said the problem might best be solved by adopting a private-sector model, where more responsibility is placed on the employee to save than the employer to pay out.

"It used to be back in the day that city employees and government employees got more to retire because they were paid less," Clark said. "We now hire good people because salaries are competitive. There's no reason that backside cost shouldn't fall on the employee."

Cuba has long maintained that his troops could stand to earn better salaries, but says it's a sacrifice many in public service are willing to make when they know they're guaranteed a working-class retirement.

The mayor's office takes the lead in negotiating contracts with the unions. At this point, Peyton's plan is loose. At the top of the list: a controversial deferred retirement option that begins paying out before an employee has worked their final day. The option guarantees an 8.4 percent return on investment no matter what the stock market does.

That's an option separating Jacksonville's plan from many others, but Cuba and Wyse maintain the benefits are average.

Cuba has been critical of the mayor's recent speaking tour. Peyton has been describing the pension problem to elected officials and business people while also saying the city needs better parks - but can't afford them.

"It's like he's throwing us under the bus," Cuba said. "If you didn't have public safety, you wouldn't have anything for the citizens because you'd have a Detroit. Everybody would be leaving."

Peyton disagreed, saying he was trying to give a broad overview of city priorities.

Union negotiations, where pension talks will begin, are expected in the coming months, but no immediate savings are expected for the 2009-10 budget.

From: http://jacksonville.com/news/metro/2009-05-31/story/mayor_other_leaders_brace_for_conflict_over_police-fire_pension

[Deuce]

Overall I support pensions for public sector, but I'm biased as I'm in one! 

However, I call bull crappy on this comment:

"You can't tell two people doing the same job that one won't retire as well as the other. How do you recruit like that?" he said.

This is what the Fed govt had to do a few years back. New fed employees don't have nearly as good a pension as those who've been working for 20 years.

I see nothing wrong with announcing changes that will apply only to new hires as long as benefits remain the same for those already in the pension. I think this is a great approach to reduce the pension costs while keeping all current people in the plan happy.

[Jason]

Why should the pensions for anyone in Fire and Law enforcement suffer?  The most important public services seem to always suffer the most.  But if it must be than I agree with Deuce.  The new guys should sign up knowing that they may not get the same benefits as the vetrans.

[BridgeTroll]

This is easily one of the most important issues that the city administration has got to solve.

This issue is a smaller version of what the state and the federal government are up against.  Social Security is a pension fund... Medicare is an extension of that.  Social Security, Medicare, Military, and federal retirees are a huge portion of the governments budget that is... "untouchable".

There are three choices... raise taxes... cut services... or a combination...

[stjr]

Why should the pensions for anyone in Fire and Law enforcement suffer?  The most important public services seem to always suffer the most.  But if it must be than I agree with Deuce.  The new guys should sign up knowing that they may not get the same benefits as the vetrans.

No one is saying we shouldn't properly provide for police and fire employees.  But, there are limits.  And, they are not the only vital employees in public service.  If the City didn't need a position, it wouldn't be paying someone to do it (at least in theory   ).  So, I don't think its fair to imply that the most important public services are police and fire to the exclusion of other public services (e.g. public health, transportation, tax collection to pay for all those other services, etc.)

In context, it looks to me like the police and fire are doing far better financially than our educators.  Maybe, if we supported educators and education more, we wouldn't need so many police.

In the end, this isn't about pitting one group against another, it's about using fair market principals to get the job done.  I have heard that qualified applicants can wait for long periods of time to get on these forces due to how few positions become open.  If we have more than enough qualified applicants for police and fire positions, maybe it is TOO GOOD of a job, salary and benefit-wise.  Someone should determine that we pay just enough to attract an adequate number of qualified personnel - nothing more and nothing less.  Compensation and benefits should not be based on politics or who yells the loudest but on the market value of the job.  If we still can't afford it, then the taxpayers need to decide if they are willing to pay more in taxes or do without.  It's very simple.

In practice, I am not surprised union leaders are on their soapbox advocating for more, more, more.  That is their job.  To the benefit of the unions, the City has failed at its job offsetting the union positions over the years with some backbone.  Now, the City is being pushed to the brink and the mayor is being forced to get things back to fair market as we can not afford for the past to continue into the future.

[Steve]

This issue has the potential to define this administration (good or bad).  Screw it up, and everyone will forget about the Courthouse and Trail Ridge.  Do it right and everyone will probably still remember the Courthouse, but potentially forget about Trail Ridge.

[BridgeTroll]

Sorry Stephen... I stand by the analogy.  This was not caused by "the bush years... or Wall street"  It would have happened regardless.  The promises made cannot be kept... nor could they have been.

[BridgeTroll]

It is the SAME thing as the underfunded Social security system...  What is the difference?  Social security will not be solvent in a few years... same with this pension fund.  You can increase funding...(taxes) or decrease the payout.  Local, state, and federal governments have been avoiding this issue for many years... delaying the inevitable painful fixes for the next administration... WHY?  Because no solution will help what ever politician that is stuck with the hot potato of funding these pensions... 

This situation is not unique to Jacksonville... tax more or cut benefits....

[BridgeTroll]

Sorry to disappoint you Stephen but this has nothing to do with my political views on social security or any other federal program...  Except that they are both grossly underfunded.  Apples and oranges may sound dissimilar but both are fruit that only grow when well fertilized and irrigated...

[Jason]

Why should the pensions for anyone in Fire and Law enforcement suffer?  The most important public services seem to always suffer the most.  But if it must be than I agree with Deuce.  The new guys should sign up knowing that they may not get the same benefits as the vetrans.

No one is saying we shouldn't properly provide for police and fire employees.  But, there are limits.  And, they are not the only vital employees in public service.  If the City didn't need a position, it wouldn't be paying someone to do it (at least in theory   ).  So, I don't think its fair to imply that the most important public services are police and fire to the exclusion of other public services (e.g. public health, transportation, tax collection to pay for all those other services, etc.)

In context, it looks to me like the police and fire are doing far better financially than our educators.  Maybe, if we supported educators and education more, we wouldn't need so many police.

In the end, this isn't about pitting one group against another, it's about using fair market principals to get the job done.  I have heard that qualified applicants can wait for long periods of time to get on these forces due to how few positions become open.  If we have more than enough qualified applicants for police and fire positions, maybe it is TOO GOOD of a job, salary and benefit-wise.  Someone should determine that we pay just enough to attract an adequate number of qualified personnel - nothing more and nothing less.  Compensation and benefits should not be based on politics or who yells the loudest but on the market value of the job.  If we still can't afford it, then the taxpayers need to decide if they are willing to pay more in taxes or do without.  It's very simple.

In practice, I am not surprised union leaders are on their soapbox advocating for more, more, more.  That is their job.  To the benefit of the unions, the City has failed at its job offsetting the union positions over the years with some backbone.  Now, the City is being pushed to the brink and the mayor is being forced to get things back to fair market as we can not afford for the past to continue into the future.

I'm with you Stjr.  I didn't mean to imply that one service was more important than the other, just that it seems our social services, educators, police, firemen, etc seem to take the hit before other city funded services such as roads, pocket parks, and other less necessary projects and services.  Granted, all of which are important, but there are levels of survival we should all be willing to endure to ensure that those people that protect and serve in one manner or another should be treated fairly.

I'm preaching to the choir here but everyone has been directly affected and or influenced by our teachers, police, fire/paramedics, doctors but only a small percentage benefit from the new Kernan overpass, or the Main St. pocket park (just to name a couple).....

[stjr]

RED FLAG - City Council "Digging for Ideas".  Yup, they are playing in the mud so things are sure to get dirty.  They are actually talking about giving away City real estate gems like the Shipyards and Cecil Field in lieu of pension payments.  Great.  Now, the police and fire will own us like the Chinese own the U.S.

My favorite:  Having a dedicated millage rate to pay the pension obligations.  Let's do this and see how long taxpayers support the status quo.  Unfortunately, I don't think our Council has the stomach to do it but they should.

Silliest idea:  The police and fire unions saying we should hire MORE of them so that the obligations become a smaller percentage of the total funds.  Yeah, and the absolute obligation dollars keep growing.  Talk about self serving double talk!

To fill pension gaps, Jacksonville City Council digging for ideas
Committee is combing through ideas to fill in pension funding gaps.
By Steve Patterson Story updated at 6:02 AM on Wednesday, Jun. 3, 2009

To fix Jacksonville City Hall's pension woes, is it smart to give up the Shipyards? How about raising property taxes? Or borrowing money to buy stocks?

Those ideas have all been pitched to a special City Council committee looking for ways to fill hundreds of millions of dollars in funding gaps in city retirement plans.

The committee could begin to agree on some answers this month, when it's expected to hear more about whether last year's stock slump makes this a time to borrow money by selling bonds and then investing in Wall Street.

"I think there's a real opportunity today that didn't exist a year ago," city Finance Director Mickey Miller told members last month.

Miller said he looked at the same idea - and rejected it - when he was hired away from Orlando's government a few years ago. He's glad he did, he said, because stocks tanked.

"Had we presented something to you at that time, we would have been regretful today," he told council members.

But with Wall Street looking very different these days, the investment possible through so-called "pension obligation bonds" is back on a list of choices council members are mulling.

The bonds are "one of the more interesting vehicles" to come up, said Councilman Michael Corrigan, the committee's chairman. But he's not convinced yet they're a safe deal.

"Are we really just getting a zero-percent credit card to pay for our house payment and then six months from now, we need another credit card?" he asked.

Other ideas that have come up - suggested by pension fund managers - include collecting a special stream of property taxes just for pension costs and handing over city-owned real estate in lieu of cash payments to finance the funds.

The Police and Fire Pension Fund suggested releasing land at Cecil Field or possibly the Shipyards, the downtown waterfront where a developer could face foreclosure by the city over unpaid debt payments.

The police and fire fund has taken land payments before, administrator John Keane said. The fund owns a building on Hemming Plaza that's being turned into a City Hall annex to be leased back to the city. It also received three landmark buildings that it resold to developer Cameron Kuhn, who later lost them to foreclosure.

In a memo to council members, Keane also suggested the fund might take responsibility for building fire stations, then lease them to the city.

Land deals might be a good idea but only if they're done carefully, Councilman Stephen Joost said. Leasing buildings to the city, for example, sounds right to him, but hoping for a buyer at Cecil Field doesn't.

In restoring a building for the city, "they know that by tying up X amount of money, they're getting a future annuity. That makes sense," Joost said. "But when you're going out and just buying raw land and you don't know what its future is going to be, that concerns me."

One thing likely to face a challenge is setting a fixed amount of property taxes being committed each year to the funds.

Council members have been told they could take a bite out of the unfunded liability by raising property tax rates $1 on every $1,000 of taxable land value and pledging that to pension commitments every year for a decade. That increase, called 1 mill, would represent about a 6 percent hike in Duval County's overall tax rate.

Bad idea, Corrigan said.

It's the mayor's and council's job to manage property taxes sensibly, Corrigan said. Pledging a fixed stream every year for pensions ties elected officials' hands, he said.

A police and fire memo released Friday outlined a series of other ideas to chip away at the problem. Among those were requiring the city to pay more each year into pensions than is needed that year; hiring more police and firefighters to grow the pension system's total resources; and using unexpected financial windfalls to help fill the pension gap, rather than spending it on new projects elsewhere.

From:  http://www.jacksonville.com/news/metro/2009-06-03/story/to_fill_pension_gaps_jacksonville_city_council_digging_for_ideas

[Sigma]

Bridgetroll.  This is in no way similar and the analogy is inapt.

The biggest problem with the Pension is actually more similar to the problem that the Bush years fueled with Wall Street.  No direct supervision over financial risktaking, with the taxpayers being forced to pony up for the losses.

I don't know the exact figures, Im sure someone else does, or we can procure them later.

But we, as a City, guarantee something like a 20% return on the entire investment fund annually.

First of all that is a hell of a lot of a return.

We allow the Pension to make whatever investment decisions it would like, and at the end of the year, whatever happens, win lose or draw, the City makes up for the difference.  On years that the Fund Managers do well, we contribute less.  On years that their decisions blow, we dig deep and pay the price for whatever went wrong.

Apparently the City, which guarantees the actual return every year has no direct ability to stop bad decision making either (not that there has been, no one knows).

But any reasonable person has to admit that a 20% guaranteed growth of an investment fund is a little more than optimistic.

Of course, the practice of sprawl has made the city into a mammoth creature requiring many more people on the force just to patrol it, and the unfunded mandates of the Feds (such as this stupid war on Drugs, Immigrants, and Insurance late pays) combined with the boneheaded local traditions like SWAT TEAM busting art bars like TSI, The Pearl, and The Metro or the incredibly cynical legislation passed to keep the husbands of Councilwomen from getting titillated at local topless bars have exploded costs exponentially over the past few decades.

Perhaps its time we also reexamined the actual causes of these staggering police budgets.

Stephen in another post -
http://www.metrojacksonville.com/forum/index.php/topic,5172.msg80742/topicseen.html#new
you seem to say that we should be gratefull to all the wonderful services that we have to pay for because they cost so much less than those same services purchased on the open market. 

You seem to contradict yourself.

[Sigma]

It just seems that you argue in favor of a city like New York, mis-managed and bankrupt - with some of the highest taxes in the country, while hammering Jacksonville for an unsustainable pension system. 

Both issues are bad to me - betcha see some new "fees" come out of this.  I really enjoyed seeing my property taxes drop while writing out the check for waste services and storm water run off fees the other day. 

[stjr]

I have an idea:  Let's give the Police and Fire Pension Funds the ownership and operating rights to Trail Ridge and consider it even.  They can fight with Waste Management and Republic, etc. over how to divvy us the dollars and we can wipe out the pension obligations with the added $750 million or more in savings the City was supposed to get.  Two problems solved at once and the mayor can just smile at his good fortune. 

[Sigma]

http://www.nypost.com/seven/04082009/news/regionalnews/tax_hike_on_rich_is_apple_dumping_163417.htm

"You're talking about a huge increased burden concentrated on those who work in New York City and those on Long Island, [many of whom commute to the city]."

Mayor Bloomberg has warned that some of the wealthiest New Yorkers might simply pack up and leave if taxes here keeping climbing. Kellerman called that a legitimate concern.

"One percent of filers have incomes of more than $500,000 and they pay 47.8 percent of the [city's] income tax," she said.

"That's 41,000 households. You shouldn't have a tax structure that depends on 41,000 people. There's something very wrong with that."

Donald Trump told Fox News that he knows of 25 to 30 wealthy individuals who are going to flee or who are weighing their options.

And he told The Post on Monday, "Rich people are going to leave this state. Why should they pay New York state taxes on money they made out of state?

"I told the governor, everyone is going to move to Palm Beach, the nicest place in the world, where there is no income tax!"

Stephen, I guess New York is great is you are not among the "evil rich".  When they all move out, who's gonna flip the bill?

http://www.nydailynews.com/ny_local/2008/12/16/2008-12-16_gov_david_paterson_unveils_dire_new_york.html

Gov. David Paterson unveils dire New York State budget that includes new taxes, layoffs and cuts