An analysis from Bloomberg released Friday asserts that Jacksonville has the highest fixed cost ratio (31.6 percent) of any city with over 250,000 residents.
This analysis is sharply disputed by the administration of Jacksonville Mayor Lenny Curry, however, which claims that Bloomberg is using old data that doesn’t take into account pension reform.
“When you measure those fixed costs against a city’s operating budget, no major city is as embattled as Jacksonville, Florida. In the city of 881,000 people, fixed costs are 31.4 percent of expenses, according to data compiled by Bloomberg. That’s driven by pensions, which made up almost 18 percent of expenses in fiscal 2016,” the report says.
Curry Administration spox Marsha Oliver has a different take, however, saying Bloomberg’s figures are “inaccurate and overstate our employer pension contributions. It appears that they have included JEA’s pension expenses in our figure. This is flawed and does not provide an accurate comparison to other cities.”
“JEA is an independent authority who pays separately into the pension system and their share is not an obligation on our general City revenues. They represent roughly half of the employer pension contributions to the General Employees Plan. If you included the local utility’s pension costs in each of the other city’s figures, very different results would occur,” Oliver notes.
“To adjust for this discrepancy,” Oliver adds, “they must back out JEA’s share and also our enterprise and grant funded positions as those are outside of our general revenues. The corrected ratio is approximately 27.3% which puts us midway through the chart they reference.”
“This is old news,” Oliver adds, saying the analysis cites “pre-reform figures from 2016.”
“Through our successful pension reform efforts which closed the pensions to new employees, replaced them with defined contribution plans, and identified a dedicated revenue source for pension costs, these figures have now been reduced for our FY 18 budget year to approximately 25.3%, which places Jacksonville toward the bottom of the chart.”
Pension has been the major issue for the city in the 21st century. While the defined-benefit plans that created the problem have been closed to new entrants since October, the unfunded liability continues to spiral.
Currently, the unfunded liability on city pension plans, not including JEA, is $3.2 billion — more than double the city’s $1.27 billion general fund budget.
Bond markets seem unconcerned; Oliver notes that the city boasts a strong AA rating, and that downgrade watches have been withdrawn by ratings agencies since pension reform happened earlier this year.
This summer’s successful sale of $147 million worth of bonds was described by Jacksonville’s chief administrative officer, Sam Mousa, in August as people “scrambling to buy” Jacksonville bonds, “a great indication of how great those bonds are.”
“The ratings agencies did well in looking at our history, stability, willingness to pay… these are good, stable bonds to invest in,” Mousa said.
Treasurer Joey Greive said in August the “bond results speak for themselves,” though later he conceded that “fixed-costs” were an issue for future concern.
And that jibes with the take of Bloomberg analyst Eric Kazatsky.
“Despite stable fund and cash balances,” Kazatsky told us Friday, “the city has been challenged by a steadily increasing fixed-cost ratio, which could put downward pressure on credit ratings and add to debt risk.”
Kazatsky adds that “the ratio, while very important, should ideally be used in conjunction with other FA data sets such as general fund balance and liquidity, as well as trends in wealth and assessed valuations.”
Curry administration members have thrown cold water on reports from Bloomberg in the past, and there is little appetite either in the mayor’s office or the City Council for being more aggressive in paying down the unfunded liability.
Councilman Danny Becton spent the better part of this year pushing a bill that would take year-over-year portions of increases in general fund revenue and apply them to the unfunded liability, with that portion eventually capping out at 15 percent of yearly revenue hikes.
Becton’s bill was shot down by two Council committees, but he didn’t pull it before the floor vote Tuesday, saying that the money put aside would be “very little … a rounding error” at first, with the set aside being expanded to $60 million by the end of next decade — at which point the 1/2 cent sales tax currently earmarked for infrastructure will be shifted toward unfunded liability.
Becton is concerned that the unfunded liability could be $10 billion with interest by 2030 — the year the tax is expected to kick in.
The bill had five of 19 votes in favor — including the council president, who was also a bill sponsor. But the Curry administration was adamantly opposed.
“We’re done with pension reform,” said more than one official.