Mayor Shares Possible JEA Partnership On Pension Reform
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According to a COJ press release, Mayor Alvin Brown offered new details on Tuesday that show how Jacksonville’s community-owned utility, JEA, could partner with the City to reduce the $1.7 billion unfunded liability of the Police and Fire Pension Fund (PFPF) without the need for a utility rate increase.
Read More: http://www.metrojacksonville.com/article/2014-feb-mayor-shares-possible-jea-partnership-on-pension-reform
Will this mean that JEA customers will forego future rate reductions to prevent property tax increases?
"If the City cannot adequately provide those services, it affects everyone in our community – including JEA. Its employees and ratepayers are the same citizens and taxpayers who receive quality police and fire services, visit parks and libraries, use senior centers, benefit from Jacksonville Children's Commission programs and enjoy the economic benefits of companies moving to Jacksonville or expanding their operations here." Mayor Brown
One can hope that sufficient savings can be found in JEA operations not to warrant rate hikes and that natural gas prices remain low but I would not be looking for any rate decrease.
Look at it in a positive note. This is a tax being spread across all the utility customers rather just the property owners.
You mean the interest rate set at the public sale of JEA's bonds and the public and private investors who purchased the bonds in the public market????
Or, are you referring to something else?
Unfortunately, Stephen, neither, COJ or JEA, sets the rates on their bonds. The rates and specifically the yields are set by the market.
undeniably, the JEA, with the full participation of COJ, racked up a lot of debt in the past decades ... more so than almost any other similar utility as noted in the credit rating agencies analysis of JEA.
The only solution to that problem is to pay off the debt which JEA has been doing, see the reference in the article posted. As JEA improves its balance sheet, operating margins and debt loads, its credit rating will increase and consequently, the interest cost on any future bonds will be reduced by the market as an acknowledgement of that.
The only thing we can hope for is like I said no rate increase with the imposition of a new tax. Any rate reduction the JEA customers would have conceivably hoped for will instead be pledged to reduce the City's pension obligations.
QuoteThis is literally the most sensible thing a mayor has done in 10 years.
Taking money from fuel reserve accounts and counting on JEA outperforming their projections? That's a sensible way to solve the City's pension problems?
QuoteWill this mean that JEA customers will forego future rate reductions to prevent property tax increases?
In the case of fuel reserves, yes.
If that should go in the pocket of someone else, then that money should go back to customers in the form of rebates and/or rate freezes. Talk about regressive taxation policy.
Wow, I thought this was a bad idea before he'd revealed all the bad details. Leave it to Alvin Brown to find a way to outdo himself.
Quote from: Tacachale on February 18, 2014, 02:34:52 PM
Wow, I thought this was a bad idea before he'd revealed all the bad details. Leave it to Alvin Brown to find a way to outdo himself.
How about this?
http://members.jacksonville.com/news/metro/2014-02-18/story/jea-board-member-says-mayor-alvin-browns-office-pressured-him-approve
QuoteBower told his other board members that he refused to guarantee a yes vote, and he said Ronnie Belton, the city's chief financial officer, told him he should resign. Bower refused to resign.
"I was told I should resign," Bower said. "I'm not going to be anybody's puppet."
Bower, who is up for another term to the board, said his reappointment was deferred after his conversation with the Brown's administration.
^The hits just keep on coming!
Somebody please wake me up when Alvin Brown's term is over. ::)
It becomes more and more obvious that the mayor is simply the wrong man for the job. Hogan probably wouldn't have been any better, but it is pretty sad when we have to pick which we think will be the best selection from two bad choices. Hopefully we will get a decent challenger who actually has the capability to run this city.
Basing "savings" the Mayor could then use to reduce the pension debt on "better than projected growth" could be a recipe for - if not disaster - rate increases.
Quote· Revenue growth above projections in our growing community: While JEA has forecast based on rating agency advice, the latest report from the U.S. Department of Energy projects that electricity consumption nationwide will grow about 1 percent per year – 28 percent by 2040. A one percent increase in JEA's business would translate into $18 million in increased revenue per year.
A few years ago, JEA had to raise water/sewer rates because growth did not meat expectations. Nationwide trends may not apply here.
"I have concerns about unintended consequences," said Former Councilwoman Gwen Yates, a member of the (pension reform) task force. "I keep hearing words like 'likely' and 'unlikely' and 'could' and 'may.'"
http://www.bizjournals.com/jacksonville/news/2014/02/18/as-mayor-alvin-brown-pushes-jea.html
Quote from: stephendare on February 18, 2014, 08:55:17 PM
The bondholders will just have to scale back their expectations. Thats really all that happens.
Thanks. Its been a long day and you made me smile, well chuckle really.
I wish my creditors would scale back their expectations.
Quote from: stephendare on February 19, 2014, 01:57:38 AM
Quote from: Josh on February 18, 2014, 11:08:38 PM
I wish my creditors would scale back their expectations.
In this case, they are investors, not creditors, josh.
Bonds are not going to stop being sold. Unless anyone here thinks that the JEA is contemplating putting an end to the practice.
Selling bonds will not be the issue... buying will be... after you tell investors... "you will have to scale back your expectations". Investors will likely say the same thing...
Gosh I guess now they'll have to quit carrying a billion dollars in questionable outside investments. Sign me up. Of course in reality we all know they're just going to pass the increase in the franchise fee right along to us anyway, which Brown will be happy with because it's not 'technically' a 'tax.' As usual the phrase 'partnership' just means we taxpayers pay for it.
Public utilities have at least some incentive to keep debt levels high -- think about what FPL and Duke Energy feed on...
Seems to me this is a tax increase one way or the other. Though this way is far less transparent.
Would rather JEA stay focused on finding ways to meet all obligations while selling less power and less water, which is what it needs to do long-term anyway to keep our way of life sustainable.
While we seem to focus on the "Bond" aspect of Browns plan... the proposal actually contains other ways that JEA could help with the pension issue...
Quote· Savings from restructuring JEA pension obligations: Over 35 years, the utility can save $503 million with changes affecting only new workers, actuarial studies show.
· Savings from JEA's natural gas costs that continue to be below the utility's budget: JEA has experienced surpluses in its reserve fuel fund. In 2012, JEA produced a $35 million fuel surplus due to low natural gas prices. In 2013, the fuel surplus was nearly $37 million. A similar surplus is projected for 2014.
· Revenue growth above projections in our growing community: While JEA has forecast based on rating agency advice, the latest report from the U.S. Department of Energy projects that electricity consumption nationwide will grow about 1 percent per year – 28 percent by 2040. A one percent increase in JEA's business would translate into $18 million in increased revenue per year.
· Productivity gains: A modest 1 percent improvement in JEA's operating expenses translates into $3.7 million in annual savings.
· Savings from the reduction of debt: As it pays off its existing debt, JEA is already gaining significant annual savings as a result of lower principal and interest payments.
Depending on the what he is proposing... the restructure of JEA pensions has possibliities.
Assuming 1% growth and 1% increase in efficiancy an additional 20 mil can be found...
There is a story in the TU about a JEA board members appointment being withheld by the administration if he did not support the mayor's pension plan.
Guess you got to pay to see the story.
Here is a link to the Daily Record Article on the same issue (free to view):
"Peter Bower is in, out, then back in after Mayor Alvin Brown stalls appointment over pension disagreement"
http://jaxdailyrecord.com/showstory.php?Story_id=542281
It also seems that the projections and money the Mayor is counting on in his proposal are far from certain. See the article below:
"JEA report shows different picture than pitch Mayor Alvin Brown made to pension board"
http://jaxdailyrecord.com/showstory.php?Story_id=542278
Oh, and the fuel savings the Mayor wants to use to pay down the pension ... "Additionally, the fuel surplus serves as a rebate to customers." Dykes - Chief Financial Officer of JEA I'm assuming if the Mayor's plan takes the money for a rebate that we still don't consider his plan a new tax.
I still think the Mayor has some good ideas about letting JEA pull its new employees from the City pension plan (I'm assuming that they are not unionized). Maybe, JEA can use those savings to pay off those evil bond holders, i.e. your retirement funds, thereby reducing all our rates and making their statutory contributions to COJ.
QuoteThis is literally the most sensible thing a mayor has done in 10 years.
I am reminded of this and the Mayor in the form of this quote, "The best way to convince a fool that he is wrong is to let him have his own way", unfortunately the Mayor does not have the 30 year crystal ball to tell us if indeed JEA will grow enough to cover the shortfall in the early years, for the later years.
I seem to remember Walt Bussells investing City money in Wall Street Junk bonds to achieve a return that was "promised", yet never realized. It is time for Mr. Mayor to let the grown ups look at the REAL numbers today, not 10, 20, 30 years down the road, pay for the issues we have before us TODAY.
This is a dud of an option and JEA is not going along with it, the City Council is not going along with it, so why does the mayor try a 2nd time to push through NO NEW TAXES to help pay for this, when City Buildings have yet to be mentioned and Police/Fire is very good at take city land and selling it for a profit. Does Brown like beating his head against the brick wall, or does he just not know any better?
"Look at it in a positive note. This is a tax being spread across all the utility customers rather just the property owners"
This is not totally correct. There are many problems now and in the future. For now, let's look at it from the perspective of Good Governance.
We elect the council to represent us and to make decisions that affect the Community. They are responsible to us and have a duty to represent us. If the costs of the shorted pension funds are fostered on to the board of directors of JEA they will decide how the cost to recover the funds will be distributed to the users. Maybe commercial customers or industry will not pay and only residential will pay. Maybe the time over which it will be recouped will be 5 years, 10 years, who knows and who is responsible to us.
There is no direct representation for the community as the board is not elected and not required to consider our interests. It has the responsibility by law to look after the interests of the JEA.
Will the Mayor and the Council have abdicated their responsibility to decide who and how it is paid if the debt is passed to the JEA? Can this responsibility of deciding how and who will pay what amount be a Fiduciary Responsibility of office for the Mayor and/or Council?
Quote from: icarus on February 19, 2014, 02:41:20 PM
Here is a link to the Daily Record Article on the same issue (free to view):
"Peter Bower is in, out, then back in after Mayor Alvin Brown stalls appointment over pension disagreement"
http://jaxdailyrecord.com/showstory.php?Story_id=542281
It also seems that the projections and money the Mayor is counting on in his proposal are far from certain. See the article below:
"JEA report shows different picture than pitch Mayor Alvin Brown made to pension board"
http://jaxdailyrecord.com/showstory.php?Story_id=542278
Oh, and the fuel savings the Mayor wants to use to pay down the pension ... "Additionally, the fuel surplus serves as a rebate to customers." Dykes - Chief Financial Officer of JEA I'm assuming if the Mayor's plan takes the money for a rebate that we still don't consider his plan a new tax.
I still think the Mayor has some good ideas about letting JEA pull its new employees from the City pension plan (I'm assuming that they are not unionized). Maybe, JEA can use those savings to pay off those evil bond holders, i.e. your retirement funds, thereby reducing all our rates and making their statutory contributions to COJ.
That behavior is disturbing, something you'd expect from a Chicago politician.
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February 23, 2015
It appears that the Jacksonville City Council will not be deliberating the pension deal as an entire body until two weeks from tomorrow, given that health-related scheduling conflicts have pushed the requisite deliberation by the Rules Committee back twice now.
When last we checked in on this, the agreement had gotten through two committees. Ordinance 2015-54 was passed by Finance by a 5-2 margin, and the Recreation, Community Development, Public Health and Safety Committee passed it 5-1.
The bill was slated to go to the Rules Committee Friday morning, which would have put it on track to be considered Tuesday night, but two factors have delayed the Rules Committee consideration.
The first: the death of the father of Committee member Matt Schellenberg, which led to him being out of office for the balance of last week, and led Rules Chairman Bill Gulliford to postpone the meeting.
The hope from the Administration was for an expedited Rules meeting; however, that hope was dashed by Guilliford.
For full story click link: http://floridapolitics.com/archives/8419
Brown wants to use the JEA to avoid doing what is necessary and raising taxes to pay for the underfunded pension.
He is completely undeserving of the office he was elected to because he is unwilling to make the unpopular but necessary decisions.