Pension fix only issue on Mayor Lenny Curry's agenda

[TheCat]

If benefits aren't touched, it seems like the best way to trudge through this is to just stick with our annual obligation as it is.

Getting weird with it, as Curry is proposing, just sets us up for more failure. Vote No.

I'm hoping field or tacachale will respond with a different understanding of the numbers. As of now, I'm not seeing a runaway pension I'm seeing something difficult but not impossible.

[TheCat]

And, we probably need to have the hard conversation about whether benefits are too high. Is the COLA too much, for instance?

[TheCat]

^maybe Curry's attempt to hijack bjp is a good thing, assuming he fails.

I don't know that I want Curry developing a 30 year visionary plan.

[TheCat]

Before we got lost in an unnecessary argument.

I think it is relevant to look at our other pension obligations because, I think, Curry's plan does attempt to address all of our pensions. Again, I stress, that I think his bill attempts to address all three pensions!

I need to go back and read the bill...it's as mind numbing as you might imagine.

Still, without looking at those numbers, I would be surprised if we are venturing anywhere near 50 percent of our budget.

[Tacachale]

I haven't had a chance to dig too deeply into that report, Cat, maybe Mike can provide some thoughts at that end. And I have no clue what the percentage of the budget it is. I can tell you that $150 million a year (and growing) out of the general budget every year is not sustainable. No one in the government or the finance field will say that it is. We could do a lot more with that money every year, than just paying down our own debts.

1) There isn't a proposed tax increase. Curry is not being bold by suggesting a new tax. He's being bold by assuming we won't need better jacksonville plans funds for infrastructure, when this cycle is over. He's suggesting switching a dedicated pot of money to another pot. For those who love dedicated pots of money that cannot be redistributed on a political whim, you will lose that funding for infrastructure. I wish Curry was moving towards passing, by referrendum, a BJP2.

We can argue whether this is a tax increase or not (Curry says it isn't). But either way, the fact is that the BJP tax has a built in sunset. It goes away in 2030 and can't be replaced without another referendum. Whether this is a new tax or an "extension", it's not switching a dedicated pot of money.

2. I guess the numbers are going to be important. Maybe, some clarification is in order because I'm not seeing how we are getting to a pension obligation that will reach 60% of our budget...not even close.

Using this link I looked up our operating revenues since 2010: http://www.coj.net/departments/finance/budget.aspx

2010: $1.06 billion
2011: $1.07 billion
2012: $1.04 billion
2013: $1.03 billion
2014: $1.07 billion
2015: $1.10 billion
2016: $1.15 billion (budgeted)

Looking at this chart from the TU (which they put together using the acturial study I linked to earlier), I'm not seeing how we're predcting the pension taking anymore than 18 percent of our operating budget.



Based on the chart this is what I am seeing:

In 2016, our pension obligation was $157 million or 13% of our budget.

Our annual obligation is expected gradually increase until we reach around $200 million in 2027, which equates to around 18% of our budget (assuming our operating revenues are at $1.10 billion - an average of the last three years).

Then, our payments gradually decrease and bounce around $150 million or 8% of our budget until 2043. In 2043 our payments drop to $50 million or .045% of our budget.

What is it that I am missing? Where is the 35% - 65% of the budget number coming from?

As I say, I don't know what the percentage of the budget is, but its pretty clear if you look at the budgets that spending $150 million (and growing) out of the general fund each year is straining our ability to run the government effectively. There's a lot of opportunity cost to missing out on those funds. Saving even part of it would go a long way.

3. If we stick to what we are doing now, we will be 98 percent caught up and we'll have the ability to have a BJP2. If we do it Lenny's way, we're going to be paying more money in the long run, for a longer period of time and be only a little over half way in covering our oligation. This seems like a bad refinancing deal.

We pay the obligation down over a longer period of time, but we have more in each budget year to put toward actual city services. Much of what cripples us now is the strain on the annual budget. The major problem with the current funding schedule is there's no way we can actually keep it up until 2045. Something will have to give: if it's not this or another tax providing new revenue, it's MAJOR cuts, or bankruptcy.

What I don't understand from that graph is that it shows Curry's plans increasing to current levels and higher in 2040. My understanding was that it would remain at the lower level for a longer period of time. Not saying it's wrong, necessarily, but it's not my understanding.

4. The TU is saying that we can expet $4 billion over 30 years for the pension sales tax, which works out to be $133million per year. How is this enough to cover our obligation, especially after underpaying for next 5 years. No one has said that the sales tax will be the sole source for the pension obligation. It seems possible that we may still need to pull from our operating budget.

Yeah, there will still be money coming from other sources behinds the tax. Just hopefully at a more manageable level.

5. The overlooked portion of this deal is

To get immediate credit for that half-cent sales tax money, Curry is asking the Legislature to let Jacksonville count that as an asset right of the bat by converting it into a lower "present day" value for accounting purposes.

By having that asset on the books, the city would be able to lower its annual contribution in the years until the sales tax actually starts pouring in.

But the actuarial report by Mlliman, a firm that has worked for the city over the years analyzing pension concepts, warns that Governmental Accounting Standards Board standards might prevent Jacksonville from counting future sales tax revenue as a current asset.

"That's a legitimate comment because this is new territory and nobody knows for sure if this can be done," Weinstein said.

So, the solution is an accounting trick that the GASB may or may not find acceptable? Someone give me a pizza version of what's happening here?

On the whole, this plan makes 0.00 sense to me but I am open to being convinced.

My understanding was that this was resolved some time ago. We'll be able to factor the future revenue stream in our current payments. The reason is that the payment schedule doesn't look at just this year, it looks decades ahead. Seeing that dedicated money will be coming in (and can't be changed) will reduce the amount we need to put in now.

[Charles Hunter]

What growth rate are they projecting for the sales tax? I recall that part of the reason we didn't get as much out of BJP as sold to us, was that sales tax revenue was much less than projected.

(Another reason was the project costs were absurdly lowball )

[TheCat]

What growth rate are they projecting for the sales tax? I recall that part of the reason we didn't get as much out of BJP as sold to us, was that sales tax revenue was much less than projected.

(Another reason was the project costs were absurdly lowball )

I believe the projected rate of growth is 2 percent.

You know, there is a need to analyze BJP results.

[TheCat]

Taca, thanks for the response. 

I haven't had a chance to dig too deeply into that report, Cat, maybe Mike can provide some thoughts at that end. And I have no clue what the percentage of the budget it is. I can tell you that $150 million a year (and growing) out of the general budget every year is not sustainable. No one in the government or the finance field will say that it is. We could do a lot more with that money every year, than just paying down our own debts.

The repeated mantra by all of us, including me, is that these payments are unsustainable. We keep hearing and saying that the amount we owe will grow and grow until it becomes a killer tomato and ransacks our city. I'm not so confident that is true, anymore.

What is the actual point of unsustainability? I don't think it is 8 percent or even 20 percent of the budget but who cares what I think?

We should have some real models, and maybe we do, as to what happens if we "bite the bullet" and pay our obligation without some gimmick. If the "extra" cash is just another way of building out the stadium; well, you can probably guess where I stand with that.

I doubt our libraries are going to get an influx of cash or that we'll suddenly have neglected better-looking parks. It's also doubtful that our medians will be maintained more regularly as a result of Curry's plan.

How will the "extra" dollars be spent? I want to know now that information before I vote.

We can argue whether this is a tax increase or not (Curry says it isn't). But either way, the fact is that the BJP tax has a built in sunset. It goes away in 2030 and can't be replaced without another referendum. Whether this is a new tax or an "extension", it's not switching a dedicated pot of money.

Yes and no. BJP2 talks were happening. Curry is managing to destroy a tax that has a lot of goodwill in this city. Goodwill that was created by Mayor Delaney. I would give Delaney mad props about creating a tax that has goodwill, but I have a feeling that he has probably played more than a small part in developing Curry's pension proposal.

I tend to think that fiscally conservative voters in this city will balk at this plan once it becomes clearer as to what he wants to do. Although I'm barely beginning to understand his plan, I'm feeling a sense of outrage.

Let's be clear, Lenny Curry wants to spend present day pension dollars on "who knows what", based on a tax that will only begin to be collected in 2030. How is this okay with Jacksonville's conservatives?

As I say, I don't know what the percentage of the budget is, but its pretty clear if you look at the budgets that spending $150 million (and growing) out of the general fund each year is straining our ability to run the government effectively. There's a lot of opportunity cost to missing out on those funds. Saving even part of it would go a long way.

Unless I'm missing something we're paying 8 percent now and we'll top off at below 20 percent.

As a voter, I will need to know how our government is strained by the pension. It's not enough to say public safety.

We're not saving anything. If this money goes into a piggy bank, let's have that conversation. If it's going to parks. Let's talk about that.

I'm not willing to use the "saved" money, which should be going to pay off debt, to make more debt.  Somehow or other, I think we'll use the extra money to fund an additional and unnecessary project.  We'll  issue bonds...yadda yadda yadda, we have more debt.

Yeah, there will still be money coming from other sources behinds the tax. Just hopefully at a more manageable level.

Right, so the sales tax is not even a real hero.

We may end up in a position where we're even more screwed with this approach.

What if we don't have the extra funds to pad the sales tax? By 2030, we may have obligated our pension "savings". Let's not get stuck in a predicament where we have to pad the pension sales tax with a significant portion of our operating budget. That would be so terrible. If we don't make the right decision this year, it is likely that we will end up in that kind of a predicament.

This plan is way too risky and too many people are going along with it because "we don't have a choice." We do have a choice. We pay it off.

Maybe, we should pretend that Brown proposed this plan. Then, I think we would see that it's asinine.

[mtraininjax]

Maybe, we should pretend that Brown proposed this plan. Then, I think we would see that it's asinine.

Raiding JEA as the only solution was truly asinine, and its his lack of thinking about bigger picture that cost Brown a 2nd term.

[strider]

2. I guess the numbers are going to be important. Maybe, some clarification is in order because I'm not seeing how we are getting to a pension obligation that will reach 60% of our budget...not even close.

Using this link I looked up our operating revenues since 2010: http://www.coj.net/departments/finance/budget.aspx

2010: $1.06 billion
2011: $1.07 billion
2012: $1.04 billion
2013: $1.03 billion
2014: $1.07 billion
2015: $1.10 billion
2016: $1.15 billion (budgeted)

Looking at this chart from the TU (which they put together using the acturial study I linked to earlier), I'm not seeing how we're predcting the pension taking anymore than 18 percent of our operating budget.



Based on the chart this is what I am seeing:

In 2016, our pension obligation was $157 million or 13% of our budget.

Our annual obligation is expected gradually increase until we reach around $200 million in 2027, which equates to around 18% of our budget (assuming our operating revenues are at $1.10 billion - an average of the last three years).

Then, our payments gradually decrease and bounce around $150 million or 8% of our budget until 2043. In 2043 our payments drop to $50 million or .045% of our budget.

What is it that I am missing? Where is the 35% - 65% of the budget number coming from?

If the information presented is even just mostly true and if we continue to simply pay on the pension we can be about 98% caught up by 2045 but if we do this sales tax "miracle save" we can only pay our obligations down to 58 or so percent then we are not solving anything but rather postponing the issue for the next few decades and letting someone else deal with it. That someone else will be our grand-kids and their children.

I also agree that this City and it's leadership who was found by the Feds to be incapable of handling Federal money will find a way to continue the waste and corruption we see every day. I personally fear that the real pension issue with the budget is that to simply keep paying it without freeing up funds in some way may effect the status quo enough that they won't be able to continue their business as usual. No more 50K demolitions to give to their favorite demo contractor for instance. 

Why anyone would ever think that a plan like this is our best hope when we have the Office of General Council changing the meaning of final orders, we have department directors causing $100,000.00 plus lawsuits and we have CHDO's that aren't in compliance but get a pass so that they can still get the free stuff.

When the small things in our government are this screwed up, how can they be entrusted to enact a plan like this and do so for any of the right reasons?

[TheCat]

This article from the daily record was written Feb  11, 2016 regarding the state approval process for the referendum when the bill was still in the 18 member State Affairs Committee

Highlights:

Only 2 of the 18 members voted against it.

Not everyone was on board.

Taylor [Rep. Dwayne Taylor] couldn't get there. He had sat on public safety pension boards in the past and had "major, major" concerns with the approach, saying tax funding would replace, not supplement, paying off liabilities.

"Sort of like the shell game you play with the Florida Lottery," he said, referring to funding replacing instead of enhancing education dollars.

Rep. Michael Bileca, R-Miami, likewise couldn't support the plan. He said he thought more negotiating on the benefits side of the equation was needed and "shouldn't only be on the backs of taxpayers."

https://www.jaxdailyrecord.com/showstory.php?Story_id=547028

[Tacachale]

Curry was on Melissa Ross this morning. He says the city's annual payment is actually up to $260,000,000 and it will continue to increase, rising to $300,000,000 within a few years (presumably this is the 30% figure Cat was talking about). Additionally, Curry expects the pension to be fully funded by 2060 under his plan, as it will also include collective bargaining that would require current employees to contribute 10% to their plans, with future employees being shifted to a 401k plan. In the future, the city and pension board will meet to negotiate every 3 years (which we probably should have been doing all along), so it shouldn't be as difficult to keep things at the market rate in the future.

He also talked about some of the other proposed options to help deal with the crisis. He says that trying for a sales tax that takes effect now (on top of the BJP tax) would never get through the legislature. He also said that he opposes a millage rate increase - it would take a 3 mill increase all at once (around a 30% hike) and there would be no way to tie it specifically to the pension. More than likely, the money would be re-appropriated by a future mayor, or the rate would be cut again. And certainly if it were put to a vote it would never pass.

I think what he's going to need to sell people on is what he'll do with the savings. We would have tens of millions more in the budget every year that's not just going to pay down debt c. He talked this morning (and before) about dedicating part of it for police and crime prevention. That's likely be one of the more impactful things we could put it toward, but it doesn't have the power of building something new.

[TheCat]

Thanks, Taca. I'll have to listen to the show.

The actuarial reports are showing $200m as the max obligation. I'm curious how he's coming to  $300m.

[Tacachale]

Curry was on Melissa Ross this morning. He says the city's annual payment is actually up to $260,000,000 and it will continue to increase, rising to $300,000,000 within a few years (presumably this is the 30% figure Cat was talking about). Additionally, Curry expects the pension to be fully funded by 2060 under his plan, as it will also include collective bargaining that would require current employees to contribute 10% to their plans, with future employees being shifted to a 401k plan. In the future, the city and pension board will meet to negotiate every 3 years (which we probably should have been doing all along), so it shouldn't be as difficult to keep things at the market rate in the future.

He also talked about some of the other proposed options to help deal with the crisis. He says that trying for a sales tax that takes effect now (on top of the BJP tax) would never get through the legislature. He also said that he opposes a millage rate increase - it would take a 3 mill increase all at once (around a 30% hike) and there would be no way to tie it specifically to the pension. More than likely, the money would be re-appropriated by a future mayor, or the rate would be cut again. And certainly if it were put to a vote it would never pass.

I think what he's going to need to sell people on is what he'll do with the savings. We would have tens of millions more in the budget every year that's not just going to pay down debt c. He talked this morning (and before) about dedicating part of it for police and crime prevention. That's likely be one of the more impactful things we could put it toward, but it doesn't have the power of building something new.

lol.  so only 45 years to pay it off?  wow.

It's the same time frame as the current schedule, which, again, is not sustainable.

[spuwho]

You dont raise the millage rate 30% in one shot. You phase it in.

I get the "future politicos could redirect the money", buts that is an issue every year. Pass a law to make the increase stick to pension only and cant be redirected.

By going the 30 years later, state legislature route, you are essentially saying no one in COJ today or in the future can be trusted to keep a commitment.

And that my friends is the same reason why the mobility plan was weakened, downtown has issues and JTA can't make a solid transit plan.

The problem is the leaders we elect. No commitment.