When we proposed that the City of Jacksonville partner with JEA to reduce the more than $1.6 billion unfunded pension liability at the Jacksonville Police and Fire Pension Plan, many were instantly critical. But the Metro Jacksonville community (in particular Stephen Dare) went out of its way to give the idea a fair hearing. Thank you again for fostering an open exchange of ideas.
Today, the Florida Times-Union reported that a highly respected financial firm, The MAEVA Group, has affirmed what we steadfastly believed: the City of Jacksonville's $2 billion subsidiary (JEA) has a large capacity for annual savings which can be utilized to help taxpayers and ratepayers. MAEVA's analysis should ease the skepticism about JEA partnering with the City to address public finance challenges such as pension debt.
See http://jacksonville.com/news/2015-10-05/story/new-study-says-jea-could-improve-its-bottom-line-and-save-millions-each-year
I should note that MAEVA has significant Jacksonville experience. It teamed with the Pew Charitable Trusts to advise the Jacksonville Retirement Reform Task Force from 2013-2014, and received plaudits for its excellent staff work. Most of MAEVA's recommendations for governance reforms at the Police and Fire Pension Fund became part of the final agreement between the City and the Fund.
MAEVA also has extensive power industry experience. As it states in the report released today, "MAEVA's principals have significant expertise in energy and power, having spent a large amount of time in the power generation sector (both regulated and non-regulated) over the past 20 years. Among many other transactions and projects, our Chairman and CEO Harry Wilson analyzed a potential restructuring of the Los Angeles Department of Water & Power, a municipally owned utility. That early experience launched our longstanding interest in opportunities for large savings at utilities."
If someone would like a copy or knows how to post documents on this thread, I'll be happy to email you the MAEVA report. Please just let me know.
Thanks for the comment, Chris. I agree that this report lends credence to the idea that JEA is capable of producing more returns for the city. It's looking more and more to be the case. But that wasn't the only issue with that plan.
In my opinion, the real issue with the plan was that it was essentially taking an up front payment from JEA of $120 million (or whatever it was), but allowing JEA to reduce its annual contribution to the city. It traded long-term revenue for a short term sum. This was a good deal for JEA, as it would save a lot more than $120 million in the long run, but it's not a hit the city's annual budget could take.
Quote from: Tacachale on October 06, 2015, 12:47:27 PM
Thanks for the comment, Chris. I agree that this report lends credence to the idea that JEA is capable of producing more returns for the city. It's looking more and more to be the case. But that wasn't the only issue with that plan.
In my opinion, the real issue with the plan was that it was essentially taking an up front payment from JEA of $120 million (or whatever it was), but allowing JEA to reduce its annual contribution to the city. It traded long-term revenue for a short term sum. This was a good deal for JEA, as it would save a lot more than $120 million in the long run, but it's not a hit the city's annual budget could take.
Thanks, Tachachale. This MAEVA study primarily addressed he first plan Mayor Brown proposed: JEA providing an additional $40 million per year in exchange for some financial flexibility such as the ability to have its own pension plan separate from the General Employees Pension Plan (GEPP). The City's GEPP actuary ran an analysis which showed that JEA could realize significant savings over time with pension autonomy, even if whatever changes it made affected only future employees. We also offered to work with JEA and find other ways to help it generate revenue or reduce expenses.
When JEA opposed that plan, former Council President Matt Carlucci and long-time CEO and community leader Charlie Appleby gave generously of their time and crafted an innovative compromise proposal that addressed the City's need for an up-front pension funding source while also addressing some of what JEA presented as its long-term financial and administrative needs. Yours was a concern we certainly heard in the process, but we felt that on balance and based on what we knew at the time, the proposed agreement was in the best interests of both the COJ and JEA.
While City Council ultimately withdrew the Carlucci/Appleby Plan, I suspect a number of the subjects contained in it will re-emerge as part of the Gulliford Committee's review and ultimate resolution of the JEA contract renewal. But I feel certain that the numbers will change from that plan, especially in light of this MAEVA analysis.
Thanks very much for responding. This kind of back and forth is why I really appreciate Metro Jacksonville.
Where is this JEA revenue coming from?
Savings from lower energy costs? What happens if energy prices go back up? Bond holders will not sacrifice.
MAEVA Group is a corporate restructuring and turn around company who was recently advising Radio Shack. The CEO was the one who advised the US Government on the GM and Chrysler bailouts. He has extensive history on restructuring distressed assets.
Im not saying this is bad, just trying to understand how the situation was approached.
Engaging a firm who restructures distressed assets makes the situation appear worse than it was, even if it isnt.
Quote from: spuwho on October 06, 2015, 05:03:16 PM
Where is this JEA revenue coming from?
Savings from lower energy costs? What happens if energy prices go back up? Bond holders will not sacrifice.
MAEVA Group is a corporate restructuring and turn around company who was recently advising Radio Shack. The CEO was the one who advised the US Government on the GM and Chrysler bailouts. He has extensive history on restructuring distressed assets.
Im not saying this is bad, just trying to understand how the situation was approached.
Engaging a firm who restructures distressed assets makes the situation appear worse than it was, even if it isnt.
David Chapman's article in today's
Financial News and Daily Record provides some of the information you seek. I can also supply a copy of the report itself since that would probably help answer your questions. Please just let me know how to transmit it to you.
The article is here: https://www.jaxdailyrecord.com/showstory.php?Story_id=546276
Quote from: Chris Hand on October 06, 2015, 10:07:54 PM
Quote from: spuwho on October 06, 2015, 05:03:16 PM
Where is this JEA revenue coming from?
Savings from lower energy costs? What happens if energy prices go back up? Bond holders will not sacrifice.
MAEVA Group is a corporate restructuring and turn around company who was recently advising Radio Shack. The CEO was the one who advised the US Government on the GM and Chrysler bailouts. He has extensive history on restructuring distressed assets.
Im not saying this is bad, just trying to understand how the situation was approached.
Engaging a firm who restructures distressed assets makes the situation appear worse than it was, even if it isnt.
David Chapman's article in today's Financial News and Daily Record provides some of the information you seek. I can also supply a copy of the report itself since that would probably help answer your questions. Please just let me know how to transmit it to you.
The article is here: https://www.jaxdailyrecord.com/showstory.php?Story_id=546276
I sent a PM with the email account to send it over. Thanks Chris for offering. I would love to read it.
If the concern is that JEA isn't pulling its fair weight, the plan as it went forward wouldn't have helped. It would have decreased JEA's annual contribution in exchange for a one-time lump sum. In other words, it would allow JEA to put less money in the city's coffers for the future in exchange for a pension fix that could be funded by other sources (i.e., taxes).
That said, it does sound like JEA needs some cleanup. If they're not towing their weight, they need to be made to.
How do you figure they are only paying 25% of what they should?
I read the MAEVA report on the pension funding relative to JEA.
- They classify the pension fund as "distressed"
- They assume the funding shortfall can be made up on the electric side of JEA
- The assumption is based on improving JEA operating ratios
While they don't provide any specifics on what should be done in JEA to improve the ratios, they only refer to a "restructuring".
To raise a utilities operating ratio, you have to cut expenses. Not fuel costs, but operational expenses.
MAEVA says that a restructuring will provide additional dollars to the pension fund and make for a better run utility in the long term.
This was made by what the firm called a "first look". I am assuming that specifics would come out of a contracted agreement of some kind.
This reports says "no new taxes will be needed to generate this new revenue".
I will branch out here and assume everyone is on their tip toes and being abstract about this is because one way to improve a operating ratio is to cut jobs, cut benefits or reduce facility expense (like used in a HQ). If word got around that to prop up the pension fund they would need to reduce headcount on the electric side of JEA, it might cause some political issues.
I might be wrong about this, but this report works at a high level, so the improvement of operating ratios might come in other areas.