A fresh round of number-crunching on Jacksonville’s evolving approach to pension reform indicates the city could save $1.33 billion over 30 years through a combination of benefit cuts and front-loading several hundred million dollars of extra money into the Police and Fire Pension Fund.
Previously, a preliminary analysis in early December pegged the savings at about $1.25 billion, but the city’s finance department updated the spreadsheet to show a higher amount of savings.
The bulk of the savings would occur in the later years because most of the proposed benefit changes are for new hires.
Even so, Jacksonville City Hall would stand to save almost $167 million in the first decade, compared to what it will cost the city if nothing is changed in the pension system for police and firefighters, according to the spreadsheet.
The new numbers come as the Police and Fire Pension Fund board convenes in a special meeting Monday morning to debate whether it will accept, reject or modify pension legislation approved Dec. 9 by the City Council.
The five-member board will meet at 8:30 a.m. and pick up where it left off at its last meeting in December when board members were going through the City Council’s pension legislation piece by piece.
Rejection would kill the deal outright. Modifying it would require the City Council to agree to changes made by the pension fund board.
Even if the City Council and the Police and the Fire Pension Fund board reach agreement on benefit changes, nothing would take effect unless the city determines how it will accelerate paying down its roughly $1.6 billion debt to the pension fund.
The mayor’s office has been working with business executive Charlie Appleby and former City Councilman Matt Carlucci to come up with a financing plan that doesn’t involve a tax or fee increase.
“The concern has always been how the city can afford this,” Appleby said. “Plenty of people have said the right thing to do is to go out and raise taxes. That’s certainly one way to do it.”
But he and Carlucci said the financial analysis shows raising taxes or fees isn’t necessary to get on top of the funding problem.
“If you compare it to a golf game, our city is like a golf ball stuck in the rough,” Carlucci said. “This plan allows us to get out of the weeds, get the ball out of the rough and onto the fairway without having to burden the taxpayer with any additional taxes, and start hitting the ball down the fairway and hopefully to the green.”
Appleby said he’s hopeful the JEA board will take up its role in the funding plan at its meeting later the month. If the JEA board agrees, it could join the mayor in bringing legislation to the City Council for the financing.
The proposal would front-load an extra $300 million to the Police and Fire Pension Fund so it has more money to invest and thereby generate additional income for paying pension obligations.
The plan would use $61 million from pension fund reserve accounts, another $120 million coming from money borrowed by the city, and finally $120 million from JEA, the city-owned utility.
The financial advantage to the city is that by putting in extra money up-front, it would strengthen the pension fund’s financial health and thereby reduce how much the city must contribute annually in future years. Still, the city would have to repay its $120 million over a 10-year period. In addition, JEA wants to get a substantial reduction in its annual contributions to the city’s budget in return for providing the financial assistance.
The city’s finance department’s bottom-line figure takes into account all those financial benefits and costs, resulting in projected net savings of $1.33 billion.
“I feel very comfortable with these numbers,” city Treasurer Joey Grieve said. “We feel really good about it.”
The city updated its prior, preliminary report after getting a report by Milliman, an actuarial firm advising the city, in December that calculates the city’s pension costs based on the benefit changes approved by the City Council and the impact of the Appleby-Carlucci financing plan. Milliman’s report does not break down how much of the city’s projected savings stem from changing cost-of-living adjustments that current police and firefighters with less than 20 years of service will get on their pensions.
Instead of getting 3 percent COLAs on their pensions in retirement, those current employees would get zero to 4 percent COLAs for benefits earned after a new pension agreement takes effect, according to the version of pension reform approved by the City Council. The amount of COLA would be tied to Social Security’s cost-of-living increases.
The pension fund board is expected to give a hard look Monday at whether it would agree to that change in COLA for current employees.
David Bauerlein: (904) 359-4581
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