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- 2014 - January - 30th -
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JEA board Chair Mike Hightower and CEO Paul McElroy address members of the Jacksonville Retirement Reform Task Force.

JEA says extra money would be risk

By David Chapman, Staff Writer

Last week, Mayor Alvin Brown presented a retirement reform group with a plan calling for JEA to chip in an extra $40 million per year to help solve the city's pension woes.

Because JEA hadn't been told the amount beforehand, it couldn't respond immediately to the mayor's proposal.

On Wednesday, it was the utility's turn to talk to the group.

"If you're asking for money, there is a formal process," said Mike Hightower, JEA's board chair. "This is not the first time someone has come to JEA and wanted to partner."

Hightower and the utility's CEO Paul McElroy went before the Jacksonville Retirement Reform Task Force to discuss the state of JEA's revenue, debt and top monetary risks — which now includes the proposal of 14 years of additional payments totaling $560 million.

Flat revenue "for the foreseeable future," continuing a financial plan to reduce debt and looming environmental compliance potentially amounting to $1 billion in added costs are just some factors in any discussion about additional contributions, from JEA's perspective.

Brown's administration submitted its proposal and figures to JEA senior staff Jan. 21 after the mayor unveiled the proposal to the task force.

One idea floated was that JEA could switch its employees from the General Employees' Pension Plan for savings that could then help the city's unfunded liability.

In a follow-up email sent to JEA leadership Tuesday, Chris Hand, Brown's chief of staff, again brought up the pension plan switch for the utility and said an actuary would run scenarios to determine those possible JEA savings.

Again, he also asked the JEA team for other ideas on how the city could help JEA's bottom line.

Hightower said it is not incumbent upon the JEA to come up with ideas — its responsibilities are to ratepayers and credit agencies.

JEA is projected to contribute $110 million this year to the city general fund. As part of an agreement signed in 2008 that runs through 2016, the contribution increases $2.5 million each year.

But, JEA is scheduled to provide $233 million in "total government transfers," comprising that annual contribution, franchise fees and public service taxes.

Being saddled with an extra $40 million could cause rating agencies to take notice.

"While the annual transfer amount has thus far been manageable for JEA, any meaningful escalation beyond 2016 resulting from the mounting pressure to address the city's large unfunded liability would be viewed negatively," according to Fitch Ratings.

The opinion, along with ones from Standard & Poor's and Moody's Investor Service, were part of JEA's presentation.

Brown said he is confident his administration and JEA officials "are going to make a lot of progress" in the coming weeks on the issue and wanted to analyze the utility's numbers and work through its process.

Bill Scheu, the retirement task force's chair, said the JEA portion of the mayor's plan could be included as part of the group's recommendation, but time constraints likely would mean it couldn't be evaluated.

The task force will meet Feb. 12 and has scheduled an additional meeting Feb. 17 as it begins to put together recommendations on plan design and governance for Brown and City Council.

On Wednesday, the governance side of the issue was further addressed.

How the fifth member of the Police and Fire Pension Fund board is selected has been a point of contention for years, but the task force took a stance that the mayor should select and council confirms the board member.

Currently, the fifth member of the five-member board is chosen by the other four, consisting of two appointed officials and one member elected by police officers, another by firefighters.

The task force's decision is contrary to Florida statute, said John Keane, fund administrator. "That's just not going to work," he said.

The task force also decided to eliminate term limits for the pension fund board, including those appointed by the mayor.

Keane said he'll provide an update to the fund board at its next meeting Feb. 21, but that no action likely would be taken until the task force completes its final recommendations.

dchapman@baileypub.com

@writerchapman

(904) 356-2466

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