A.G. Gancarski
The question going into Wednesday’s “Committee of the Whole” meeting of the Jacksonville City Council was a two-parter.
Would committee members vote on the bills as part of the four-hour committee proceedings? And would anyone dare vote against Lenny Curry‘s pension reform plan?
On the first 11 bills, which will implement collective bargaining deals if passed by the full body next week, the votes were quick as soon as the discussion ended — and unanimous to boot.
On the bills instituting the sales tax, and reforming the pension plans for new hires, the process slowed down, with members of the City Council raising detail questions.
But all three bills carried 16-0 also, setting a glide path for the official vote at a special Jacksonville City Council meeting Monday afternoon.
____
Curry, armed with a poll that shows his own approval and that of the plan over 70 percent, has pushed the plan with the urgency of someone who knows that the near-term future of the city’s general fund is predicated on the $141M in immediate budgetary relief pension reform would bring.
If the plan, which closes current pension plans and backs up the repayment with the future assets from a 1/2 cent sales tax, is closed, the pension hit in FY 2018 is $218M; if reform fails, the hit is $360M (up from $290M next year).
As CFO Mike Weinstein has said of late, the savings add up to “$1.4B less out of the general fund over the next 15 years,” and “without that revenue” from the half-cent sales tax, the city would have “difficulty matching revenue to expenses.”
Members who had privately voiced qualms told us that they were leaning toward voting for the legislation — after all, said one, there wasn’t really a Plan B.
The new insight to be gleaned during Wednesday’s meeting: review and comments from Kyle Billy, the Council Auditor.
He diagnosed no real issues with the proposed legislation, clearing the way for unanimous Council “committee of the whole” votes on 11 collective bargaining agreements.
____
After introductory remarks from Council President Lori Boyer, members of the Lenny Curry administration (CAO Sam Mousa and CFO Mike Weinstein) spoke up.
Mousa asserted that the administration had answered all questions from Council members and had a number of meetings with the Council Auditor.
Weinstein provided an update: a new chart delineating retroactive compensation for JEA bargaining units, and a discussion of comments from the Police and Fire Pension Fund, which outlined “considerable challenges” in administering the pension plan if these reforms go through.
Weinstein quoted the PFPF as being willing to administer whatever pension plan the council enacts, and “recognizes that the city has given us both a plan and revenue stream to pay our debts to members and retirees.”
The PFPF perspective, said Weinstein, is to “enhance their interests” — and in that vein, recommendations were offered.
Weinstein noted the unprecedented nature of the five-year liquidity floor in the Curry pension reform plan, before saying the PFPF wanted a seven-year liquidity guarantee.
The PFPF also wants more in a minimum contribution from the city. The city’s proposal: $110M, even though that’s “more than adequate” to handle the closed defined benefit plan.
Sales tax growth assumptions (held by the city to be 4.25% YOY), were also questioned by the PFPF. Weinstein noted the yearly review of that growth rate, noting that adjustments could be made.
And Weinstein also noted that governance reforms, implemented in 2015, remain in the 2017 reform package.
Weinstein urged caution in any changes: “everything you do tweaks something else … that’s what was so challenging about this.”
PFPF Liaison Anna Brosche asserted that the PFPF thought the liquidity floor was “discretionary.” Weinstein told her that wasn’t the case.
Weinstein also discounted the potential of a Dallas-styled “run” on the pension fund, noting that the formula is based on assumed payouts versus assets.
Weinstein also asserted that general fund growth will absorb the impact of future raises, which add up to $120M per annum across the city workforce by FY 2020.
___
Soon enough, the Council Auditor said his piece. And there was no major divergence from the Curry Administration’s take.
Billy’s take: no amendments were needed to the collective bargaining agreements, but there was cleanup needed on the three implementing ordinances — and a substitute on 2017-258, legislation affecting general employees and correctional officers.
The Auditor asserted that payroll growth and mortality tables accorded with state law.
Regarding sales tax growth, Billy went back before the Better Jacksonville Plan — and deemed 4.25 percent “reasonable.”
Billy noted that there would not be “unknown costs” related to new hires, but added that savings on pension would be “offset” by the costs of new hires.
In year four of the plan, $71M of general fund revenue will be needed — and he recommended “planning” from the legislators to mitigate that hit. [For his part, Mousa said a proposal, worked out with auditors, will be advanced as part of the budget rollout this summer].
“The city cannot unilaterally alter public safety benefits for ten years,” Billy said, noting that as long as ad valorem growth is over 2.5 percent and pension asset growth is within one percent of the assumed rate of return, the city can’t tweak benefits.
Meanwhile, said Billy, effects on workforce attrition in the future were “unknown,” given the unprecedented nature of the Curry plan.
Also of note: collective bargaining up until now has dealt with wages and benefits. Expect re-openers within the next year to deal with other components for all city unions.
Billy also recommended that the City Council make preparations for the problematic fourth year of the plan.
There was a bit of disconnect when the Council Auditor mentioned that the review was performed in “haste,” but when Council President Lori Boyer asked for clarification, he said that he indeed was comfortable.
____
Council members had questions, including Councilman Aaron Bowman, who worried about the long-term effect on raises in terms of hiring new employees for a city expected to continue growing rapidly.
Mousa noted that all departmental directors believe they are shorthanded, and reminded Mousa of the process: the Mayor proposes the budget, and the City Council decides.
After some crosstalk, Bowman still expressed a lack of comfort about the uncertainty.
“The future — you’ll be talking about $2B budgets,” Mousa said. “It’s a matter of year to year — what you spend, and what your priorities are.”
The late 2030s and 2040s may require additional dollars, and Weinstein recommended adjusting the amortization period around then.
However, that’s “many, many years” from now.
In response to another council question, Weinstein also noted that DC plan members may be eligible for Social Security — an option foreclosed to them in the current defined benefit plans.
If that were to happen, the 25 percent city contribution would have to be renegotiated.
“I don’t see it happening between now and three years.”
___
The Office of General Counsel had its take also.
Regarding a lawsuit questioning the language of the pension referendum, there is a status conference this week ahead of a May trial date.
The OGC is “very confident” in the city’s position, regarding a challenge to the ballot language and the constitutionality of the initiative itself.
Stakes are high: if the decision goes against the city, and legislation has been passed, renegotiation would have to be necessary.
However, that would be after lump-sum payments and pension plan restructuring.
Gabriel, in response to a councilor’s question, asserted that the proposed 2017 agreements are “pure traditional standard collective bargaining agreements” that jibe with the 2015 pension reform.
Amendments were discussed also, but these were minor, largely clarifications of nebulous terms and fixes of scrivener’s errors.
Even in the most worked over bill, the OGC representative said there was no financial change resulting.
The most major change: allowing hires between now and October 2017 to switch between defined benefit and defined contribution plans in certain circumstances, in what was called a “five-year back and forth.”
The Council Auditor concurred that there would be no financial impact from this move.
____
Discussions wrapped, and then the committee of the whole moved through legislation.
First up, the 11 collective bargaining agreements, affecting JEA and all city employees.
They moved through, in a matter of minutes, all via identical 16-0 votes.
Discussions of the big three bills took a little more time.
____
On 2017-257, the bill establishing the half-penny sales tax extension, an additional provision was suggested, capping the sales tax growth rate at 4.25 percent, with a supermajority required to waive it.
Discussion was robust on this point, with objection from Council VP John Crescimbeni to the supermajority requirement.
But the supermajority carried. And the amended bill carried 16-0.
2017-258, which changes the plans for general employees and corrections, passed 16-0.
As did 2017-259, which adjusts plans for police and fire.
