With the passage of Mayor Lenny Curry’s pension plan that continues to use the half-cent sales tax that is funding Better Jacksonville Plan (BJP) projects until 2030, a major funding source has been found to provide for the city’s pension liability but only after the BJP ends. However, as passed, the city doesn’t make any major additional contribution to the fund for the next 13 years but pays a “minimum payment” based on new actuarial analysis. These minimum payments along with the delayed payments from the ½ penny will add considerable interest expense to the Unfunded Liability. Future generations are looking at paying an estimated $4.5 billion in added costs when the pension is fully funded by 2060. “The number one concern that I received as a Council Member is that we, current taxpayers are not paying our fair-share and are kicking the can down the road to our children and grandchildren for them to pay this enormous debt in the future”, explained CM Becton. “No one likes the idea of raising taxes but as revenue in the future grows, the responsible thing to do is to take part of those increased revenues and help pay down our debt.”
On April 25, 2017, District 11 Council Member Danny Becton, officially filed legislation 2017-348 that commits the idea of an “annual” payment for an “extra contribution” based on a percentage of future revenues that the city will receive as compared to the 2016-2017 baseline amount of $1,088,466,862. This annual extra contribution would be paid each year on growing revenues only, prior to those funds being allocated to new projects or expensed to the growth and cost of government. This annual extra contribution payment would end upon the sales tax being implemented in 2031.
Projections show that property values and new construction of homes and businesses will increase the general fund each year. Becton’s bill sets aside a percentage of this natural growth devoted to making payments to the pension. Based on the annual increase from this source, a set portion of new funds will be used to make additional pension fund payments.
Over the next 13 years, revenue projected by the administration using a 3% growth model ends with the city receiving annually, $1,598,450,283. As stated by CFO, Mike Weinstein, when questioned by CM Becton as to the probably of that estimate, Weinstein noted that it was a very conservative estimate. Property taxes in 2017-2018 are estimated to be trending much higher making our $32 million amount, already low.
As monies are raised through increased property values, state sales taxes, JEA franchise fees and all other sources of revenue the city receives to augment pension fund payments during the next 13 years, this bill will only take from future increases without having to raise millage rates and will reduce the funding responsibility future generations will face.
For example, let’s suppose when passed that it is decided that 10 percent of the annual new funds will be used for pension payments. Say that for fiscal year 2017-18 the city has $40 million additional dollars compared to fiscal year 2016-2017. That would provide $4 million to be paid to the pension fund and create a recurrence for the remaining years. The next year, let’s say there’s an additional $30 million, now $3 million more can be paid and again create a recurrence for the remaining years now totaling $7 million for the 2018-19 payment. This extra annual general fund payment will increase or decrease based on year after year growth of new money provided because of the city’s financial success. This would continue until fiscal year 2029-30 when the half-cent sales tax would become the funding source as a replacement.
By making additional pension payments now, the cost and time frame of funding the pension could be cut considerably when compared to doing nothing and saddling future taxpayers with a multi-billion dollar pension bill caused by interest accrued from now until 2030. It would improve our credit rating reducing current and future borrowing costs and just like any payroll deduction that we all take for retirement, if it’s taken out first before we have a chance to spend it, we’ll never miss it.
CM Becton’s bill takes a fiscally responsible approach to attacking pension costs. It partners with Mayor Curry’s historic reformed retirement plan and provides another funding source to allow the pension burden to be addressed in a more equitable fashion by current and future Jacksonville taxpayers.
Bill 2017-348 will be introduced at the Council Meeting of May 9th, 2017.
Important Dates to Remember:
June 5th - Noticed Meeting (12 noon - 1pm) Bill Presentation
Lynwood Roberts Room, City Hall
June 7th - (9am) Finance Committee, takes up the Bill
June 13th - (5pm) City Council take up bill, if voted out of committee
City Council Chambers, City Hall
2017-348 Bill As Filed
Illustration(s) for 15 Percent Contribution v5
Illustration(s) for 10 Percent Contribution v5
Moodys Jacksonville FL Pension Reforms Finalized
FTU - Editorial - Council is Ready to Push Pension Bill to the Kids
FTU - Bond-Rating Agency Gives Mixed Reviews on Pension Reform
FTU - Editorial - Add Moody’s to Critics of Curry’s Pension Plan
Actuarial Analysis Based on Current Pension Reform
Actuarial Impact Statement JAX PFPF - Pension Reform By GRS
Actuarial Impact Statement COJ CORP - Pension Reform By Segal
Actuarial Impact Statement COJ GERP - Pension Reform By Segal
Posted on Mon, April 24, 2017
by Carol D'Onofrio