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Jacksonville Councilman Richard Clark eyes tax increase to fix pension

Also says he has a plan to plug irresponsible budget gaps

Posted: August 2, 2014 - 7:59pm  |  Updated: August 3, 2014 - 9:17am
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City council member Richard Clark talks with members of the media in 2013.  Bob.Self@jacksonville.com
Bob.Self@jacksonville.com
City council member Richard Clark talks with members of the media in 2013.

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Just before Jacksonville City Council members will meet Monday morning to set the tentative property tax rate, Councilman Richard Clark is planning an eleventh-hour move to propose a property tax hike aimed at resolving a looming pension-reform question facing City Hall.

Clark, a veteran councilman who chairs the powerful finance committee, also has a plan to plug what he says are irresponsible holes in Mayor Alvin Brown’s budget. Acknowledging that he faces a tough sell with his colleagues, Clark, unwavering, says his plan offers the chance to, in one fell swoop, address dual problems.

“We’ve got to roll up our sleeves and figure it out,” he told the Times-Union on Saturday. “We’ve passed the buck so many times.”

Clark’s proposal is likely to be one of several last-minute moves: other council members are also considering proposals to introduce Monday. But details about other possible proposals haven't been made public.

And it quickly became clear that, although Clark’s idea received rave reviews from many of the city’s prominent business executives Saturday, several of his colleagues were cool to his plan.

“I’m not voting for a millage rate increase,” said Councilman Matt Schellenberg. “I think the citizens of Jacksonville are tired of city government not living within their budget. How they can argue that they need additional monies is disrespectful.”

Several council members, including some of the most vocal members, echoed similar concerns.

And the mayor, who has been unequivocal in his stand against raising taxes, will not be among Clark’s allies.

Brown’s office pushed back against Clark’s suggestion that the budget is in need of repair. The mayor’s proposed budget, which would cover the fiscal year starting Oct. 1, has come under fire from several council members and been heavily scrutinized by Council Auditor Kirk Sherman.

“We also stand behind the balanced budget that Mayor Brown proposed last month — a budget that proposes to make critical investments in job creation, downtown revitalization, public safety, and quality of life,” Chief of Staff Chris Hand said in a written statement. “These investments will help grow our City’s revenue base and achieve key community goals.”

CLARK’S MOVE

Clark’s proposal has two key facets:

■ Boost the property tax rate by .8226 mills, enough to raise $40 million. That would be a dedicated funding source to more quickly pay down the city’s $1.65 billion debt to the Police and Fire Pension Fund, a goal the city and pension fund agreed to in negotiations earlier this summer.

But where to find the extra $40 million a year — above and beyond the minimum contribution required by state law — has been a nagging question in City Hall.

After negotiations with the pension fund, Brown filed reform legislation that includes the $40 million annual commitment for the next 10 years, along with several other changes. Although Brown opposes tax increases and has offered a proposal to have JEA pick up the $40 million tab each year, a pension-reform task force Brown created advocated for a tax increase while others have heavily criticized the mayor’s JEA idea.

Under Clark’s proposal, the property tax rate would jump to 12.2626 mills, up from 11.44 now. The owner of a $150,000 house with a $50,000 homestead exemption would pay about $82 extra each year. The tax rate would be adjusted each year to collect $40 million. So if property values rise, the rate would decrease since fewer mills could collect the $40 million.

If Brown’s pension-reform legislation does not pass in September, the property tax rate would not increase, Clark said.

A vote Monday to increase the tentative tax rate would not bind the council to that higher rate. But it gives the council the flexibility to pursue that option.

■ Clark also wants to use $61 million in pension fund reserves to address some $55 million in expenses that the Council Auditor’s Office has flagged for scrutiny.

During negotiations with Brown, the Police and Fire Pension Fund agreed to transfer $61 million from pension fund reserve accounts to City Hall to cover the first 1 1/2 years of the commitment for the annual $40 million in funding.

But with a dedicated funding source in place — via the higher tax rate — Clark wants to use the $61 million to address what he says are problematic issues in Brown’s budget. For starters, he said, the city would not have to use nearly $17 million from its operating reserves to balance the budget, as Brown proposed to the frustration of several council members.

Clark said he spoke with John Keane, the executive director of the pension fund, and the two agreed this proposal was workable.

“One of the stumbling blocks last year in mayor Brown’s pension proposal is the identification of the source of money for funding the liability. That was the issue again in this current bill,” Keane said. “That was the riddle: where the money is coming from. They have devised a way to identify future funding.”

However, Hand’s written statement said that under Brown’s reform legislation, the $61 million transfer would give “the mayor, City Council, and community the time needed to determine a long-term funding plan to pay down our unfunded pension liability.

“We stand behind the retirement reform agreement that Mayor Brown reached with the Police and Fire Pension Fund and introduced to the City Council in early June. That agreement contains at least $1.5 billion in taxpayer savings, was approved by the Police and Fire Pension Fund Board of Trustees in late June, and is now pending before the City Council.”

ALLIES

Clark is not alone in pushing for a tax increase to address the city’s massive unfunded pension liability.

“The proposal offered by Council member Richard Clark provides the most direct solution to the pension funding challenges we have been grappling with for years,” said Jeanne M. Miller, executive director of the Jacksonville Civic Council, a group of influential Jacksonville business executives.

Steve Halverson, the Civic Council’s chairman and president and CEO of The Haskell Company, said the group urges the City Council to “lead the way for Jacksonville to a stable financial future by approval of Council Finance Chairman Clark’s proposal on Monday morning.”

“Anything less results in Jacksonville moving backward and as Jacksonville’s business and civic leaders, that is unacceptable.”

Bill Scheu, who was chairman of Brown’s pension-reform task force, said it was “courageous” of Clark to offer the proposal.

That task force recommended earlier this summer that the City Council approve a property tax increase for the budget year starting Oct. 1. The city then would conduct a referendum to see whether voters want to replace the property tax increase with a half-cent sales tax, which would generate $68 million annually.

Clark said his idea leaves open the possibility that the council can pursue the sales tax option in the future.

COUNCIL REACTION

Council President Clay Yarborough said he expects other last minute proposals to come in Monday, and he needs to see all his options before deciding how he’ll vote.

“I need to know what’s all on the table,” Yarborough said. “I like the purpose for why it’s being offered, but I don’t think it’s the only option. There could be another amendment, so I can’t indicate supporting or not supporting it.”

Several other members reached Saturday said they were hesitant, and in some cases opposed, to raising taxes again after last year’s increase.

“If you’re philosophically against raising the property tax, why would you vote to tentatively raise it?” said Councilman Bill Gulliford. “I just don’t think I see a scenario or situation where I change my position on this.”

Gulliford also said he doesn’t believe property owners should be carrying the burden alone and would like to use a sales tax to fund an increased contribution. Clark said repeatedly his proposal would not prevent the council from using a sales tax increase to replace the property tax hike down the road.

Councilman Jim Love said he’s spoken with some constituents about raising property taxes, and most of them were opposed to it.

“We raised it last time, and I think two years in a row is a little much for a lot of folks,” Love said.

Councilman John Crescimbeni said after a 14 percent tax increase last year, he’s not sure if another tax increase is a wise decision. He also plans on introducing a proposal Monday but would not elaborate Saturday.

“We went to the well last year. I’m just not sure that’s a terrific idea to levy an increase millage rate a second year in a row,” Crescimbeni said.

Councilman Bill Bishop, who has filed to run for mayor in 2015, said the $61 million from the pension fund shouldn’t be used on anything other than the unfunded liability.

“That’s in a sense raiding the pension fund of 61 million bucks. That’s going backwards. We cannot continue that type of behavior,” he said.

Nate Monroe: (904) 359-4289

Christopher Hong: (904) 359-4272

Comments (19)

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Bubba
773
Points
Bubba 08/03/14 - 10:52 pm
0
0
Premium Member

Welfare- The Government will

Welfare- The Government will pay you if you don't work.
Glorified Welfare- 2005-1007
How is our illegal purchase of two water taxis 2014-412 by the Executive Branch (Mayor) conspiring to defraud the Legislative Branch (city council) coming along?
The Public Trust continues to be totally crushed in this community.
We are so broke.
So let's have a mileage increase and then borrow $200 plus million from the Banking Fund.
Is everyone aware that the new CRA/DIA 20 plus square mile zone will no longer be under a city council district? Please correct me if I'm wrong with that understanding.
Will the city council vote for the property tax increase? Yes
So for that Yes city council vote and maybe it has been shown but what dollar amount (lollipop money) was promised for each 14 city council district?
Then what is the amount for this new DIA zone?
Also what would be the additional tax burden on the people of Jacksonville if the library special taxing district happens?

partypooper
149
Points
partypooper 08/03/14 - 02:46 pm
0
0

Jaxguy, government employees

Jaxguy, government employees have a 457 which is similar to a 401K. However they don't get an employee match like you used to get or are getting now. Do you realize that police/fire don't get social security when they retire? How do you suppose they support themselves after they retire? Do you want a 64 year old firefighter whose had two knee replacements trying to drag your mom out of that burning house b/c he has to wait until 65 to draw his pension or social security?

traincompbox
1094
Points
traincompbox 08/03/14 - 02:20 pm
0
0

Councilman Clark is planning

Councilman Clark is planning to propose some interesting legislation. Although it is responsible, it should be a higher millage rate. Using the numbers he provided, the applying an annual payment of $40M to the $1.65B debt results in a payoff after 40+ years (assuming no interest is applied to the debt).

Mayor Brown's plan is even worse...pay $40M/yr for 10 years...and then what? My guess would be that he has no concerns about it. He would be long gone and forgotten by then anyway.

Don't misunderstand me, I hate having other folks reach into my pocket. What I hate even more is having a debt over my head. The only way to get rid of debt is to pay it down, and do it quick as possible.

jaxguy111
3225
Points
jaxguy111 08/03/14 - 01:48 pm
0
0

@pooper "Police and Fire have

@pooper
"Police and Fire have NEVER gotten a match on their 401K."

Since when do they have a 401k?

"If you think it's such a gravy train being a police/fireman....sign up, they're hiring."

If the wages and benefits of being a police/fireman are so awful, find a different job.

Pensions are antiquated. They gots to go.

dashing dan
140
Points
dashing dan 08/03/14 - 11:32 am
0
0

Sales tax is extremely

Sales tax is extremely regressive in that it hits lower incomes at a higher percentage of their income than it does higher incomes. Here's how: Let's say 2 people pay $1,000 annually in sales tax based on a 7% sales tax. One has an income of $40K, the other $80K. The $1K is 2.5% of the lower income but only 1.2% of the higher income.

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