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City Council members say tentative pension deal has hole in how city will pay for a $40 million a year pledge

Posted: May 22, 2014 - 9:47pm  |  Updated: May 22, 2014 - 10:07pm
John Keane, Executive Director/Administrator of the Police and Fire Pension Fund during a recent meeting at City Hall.   Bob.Self@jacksonville.com
Bob.Self@jacksonville.com
John Keane, Executive Director/Administrator of the Police and Fire Pension Fund during a recent meeting at City Hall.

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Some City Council members said Thursday a tentative pension reform deal is flawed because it lacks any certainty about how the city would live up to a pledge of paying an extra $40 million a year to the Police and Fire Pension Fund.

“I don’t think the council will go anywhere without the mayor having a full description of how that’s going to happen and without his 100 percent support,” City Councilman John Crescimbeni said. “I think it’s going to be an uphill battle.”

The extra $40 million a year is part of a “shared sacrifice” framework in which taxpayers would boost their annual contributions to the pension fund while current police and firefighters bear some changes to their pension plans.

The agreement reached Wednesday by Mayor Alvin Brown and the Police and Fire Pension Fund would require a special committee to meet in public each June and recommend to City Council what financial resources would be tapped to pay the $40 million, which would be above and beyond the minimum payment required by law.

This year’s minimum payment, for instance, was $144 million. The city expects to have a year-by-year breakdown next week of the minimum annual payments that will be required in future years if City Council approves the pension deal.

The extra $40 million would pay down faster the $1.65 billion debt the city owes to the pension fund for future pension obligations.

The tentative pension agreement spotlights some potential sources for rounding up that $40 million, such as “innovative” budget savings, growth in property tax collections and state revenue sharing, and contributions from JEA to City Hall.

Councilman Warren Jones said the city needs to resolve the pension issue as soon as possible, but he has a major concern about how the city would come up with the additional money.

“I don’t see how we can do that without a millage increase or some sort of tax increase,” Jones said.

City Council President Bill Gulliford said it would be tough to convince residents that a tax increase is justified when current police and firefighters will still be receiving 3 percent cost-of-living adjustments on their pensions in retirement.

“I certainly suspect there would be a lot of pushback on that,” Gulliford said, adding a pension task force report emphasized “shared sacrifice” by taxpayers and employees. “Does this really share the sacrifice?”

The Police and Fire Pension Fund board is scheduled to vote Tuesday on the agreement reached this week by Brown and John Keane, executive director of the Police and Fire Pension Fund.

Then the City Council will take it up. Last June, it voted 11-7 to reject a previous pension agreement reached by Brown and the Police and Fire Pension Fund.

Chris Hand, chief of staff for Brown, said the best way to approach the new agreement is to assess and vote on it “as an entire package.” He said it’s the result of the give-and-take involved in any negotiation.

“While the city did not prevail on every proposal we made, we reached a strong retirement reform agreement that comprehensively addresses the city’s public safety pension challenges,” Hand said.

He said if the City Council were to amend the agreement during its review, any changes would have to get approval by the Police and Fire Pension Fund board.

Gulliford said there’s no telling how fast a final decision will come.

Council members will change leadership posts and committee assignments July 1, and Gulliford said he’s not sure the committees will decide whether to back the agreement before then.

“You can’t take it out of committee consideration,” he said. “If it continues into the next president’s term, we’re just going to have to live with that. ... I’m not going to push it.”

City Councilman Stephen Joost, who voted against last year’s agreement, said he likes what he’s heard about the new proposal.

He said boosting the paycheck contribution by current police and firefighters, and modifying the Deferred Retirement Option Program so interest earnings on employee accounts rise and fall with the pension fund’s actual investments are signs of “good progress.”

He said it’s “just unrealistic” to expect that pension benefits that built up over a 25-year period can be rolled back for current employees in one fell swoop.

“I’ll look at the totality of the agreement,” he said. “There are going to be some good things in there, and some things I don’t necessarily agree with. At the end of the day, if the pluses outweigh the minuses, you’ve got to take the deal.”

City Councilman Ray Holt, who backed last year’s deal, said if the new version “is an improvement from the city’s standpoint, I will be likely to support it.”

Jones said keeping the COLA at 3 percent for current employees isn’t a deal-killer for him. He said the pension fund’s agreement to give City Hall about $28 million that could otherwise be used for enhanced pension benefits is a sign of shared sacrifice. He said the longer the city takes to enact pension reform, the higher the toll of pension obligations becomes.

“Each day we hire a new police officer or firefighter, we’re adding to the problem,” he said.

But City Councilman Matt Schellenberg said he’ll oppose the tentative deal, calling it a “huge disappointment.” He wanted the COLA reduced for current employees and he said the lack of specifics about the city’s $40 million contribution is troubling.

“To actually commit to something and not have any revenue source is sophomoric,” he said. “I’m incredibly disappointed.”

“That, I think, is a big missing link,” said City Councilman Bill Bishop. “It is the administration’s job to put forward a proposal.”

He said he doesn’t believe the agreement was much of a shared sacrifice on the pension fund’s behalf, and it would be a “very difficult sell” to raise taxes to cover the city’s increased pledge.

 

david.bauerlein@jacksonville.com: (904) 359-4581

christopher.hong@jacksonville.com: (904) 359-4272

Comments (9)

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johnctaughtme
13566
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johnctaughtme 05/23/14 - 02:11 pm
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Premium Member

It is a bit paradoxical to

It is a bit paradoxical to see people who don't like "the unions", and blame "the unions", specifically police and fire for this problem, seemingly join the chorus for the pensions to be negotiated by the unions, rather than the pension fund.

The fact is, that Pension Fund Administrator John Keane, and "the unions" have been fine distractors from the original cause for having a settlement agreement in the first place.

Max mutt
9250
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Max mutt 05/23/14 - 11:48 am
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Premium Member

Sorry Crusader, I do know a

Sorry Crusader, I do know a little.
Iknow tha when that pension deal was made in 2001 both the city government and John Keane sold the Jacksonville taxpayer down the river.
Sure, he has an obligation to fight for what he can get for union members but both he and the City council knew their retirement formula was way off as has been well documented by corrections in 2009 and 2012.
Also the idea that you could depend on an 8.5% annual return for thirty years - come on - that is ridiculous as has also been illustrated by interval events.
But to me it is Keane's separate and guaranteed retirement pension deal that was quite clearly not going to take the same "risk" that he was putting union members through that seals the deal.
He would not participate in the same arrangement because he knew the city would never be able to meet those obligations.
So John Keane has been good for John Keane, good on paper for his unions but not in actuality at least as of that stupid 2001 pie in the sky thirty year deal and has screwed with the Jax taxpayer.
The city has done even worse.

RetiredJSO
515
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RetiredJSO 05/23/14 - 08:27 am
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Snakepilot ---- They do not

Snakepilot ---- They do not mention the age requirement because it does not fit their agenda. When I decided to Retire, I contacted the Pension Fund to make sure I met the requirements. The first thing the asked me was my age, when I asked why, I as told that officers could not retire until they were 52 years old. I was past 52 so I met that requirement. Then they started checking my records and verifying everything. I had enough time in, I did not do the drop which would have meant I would have to wait 5 more years.

The Police and Fire Pension Fund is in the news all the time, but the city has 2 other pension funds that are treated the same way. The city illegally kept qualified people out of those pensions and did not pay into Social Security for those people. Which means that the people the city denied a pension to, will not even qualify for social security. There are several law suites in progress for this right now. The News does not report I because it does not fit their agenda.

Snakepilot
1694
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Snakepilot 05/23/14 - 07:33 am
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Premium Member

Ditto johnctaughtme No

Ditto johnctaughtme

No mention of increasing the age requirement for retirement for current and future plan members. No one should be allowed to retire unless vested and 55 years of age.
The independence of the annual actuarial report( that determines % of payroll to be contributed to the fund annually )is not spelled out.
Extra money to help the fund go from current 44 % of funding to 80% is fine but not from increased City revenues. The annual city budget will have to be cut in other areas ( payroll ? ) to find the extra $40 million. the new $150 million of annual contribution from the City will be a stark reminder to everyone of the importance of fiduciary responsibility.

Crusader II
262
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Crusader II 05/23/14 - 04:45 am
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Premium Member

Max Mutt you don't know what

Max Mutt you don't know what you are talking about. If Mr Keane had not served as a pension board member, starting in the 1970's and later elected administrator, the police and firefighters would not have had a decent pension. At the time Mr Keane got involved with the pension the city had the pension funds in passbook savings accounts. How big do you think the city's short fall would be now if this had continued. If the city had paid into the pension fund each year as agreed we would not have this large short fall.
All the City Council (Mayor want a bees) do not wish to have the pension issue settled. They want to blame Mayor Brown for the problem at election time.

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