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Mayor Alvin Brown
Jax Daily Record Tuesday, Nov. 18, 201412:00 PM EST

12:50 update: New proposal would have JEA giving city lump sum of $120M vs. paying $40M extra per year for 14 years

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by: David Chapman

12:55 P.M. UPDATE:

A JEA board subcommittee declined giving the city an additional $40 million a year to pay down an unfunded police and fire pension liability.

But there is a possible counter offer, which is the idea of former City Council member Matt Carlucci and Charlie Appleby, the retired CEO and chairman of Advanced Disposal.

Just after the utility’s Finance and Audit Committee voted against the annual payments, CEO Paul McElroy introduced preliminary details on the proposal. Instead of giving $40 million each year, JEA would give the city a lump sum of $120 million, which the utility would have to borrow.

The money wouldn’t have to be targeted for the unfunded liability.

In return, the utility would receive several benefits.

  • Control over its employees’ portion of the General Employees’ Pension Plan, which would save JEA millions over the coming years.
  • Extending its agreement with the city through 2036, with some key changes. Slated to end in 2016, JEA annually pays the city a lump amount plus an additional $2.5 million each year that was negotiated years ago. Starting in 2017, though, the calculation would be reduced by $2.5 million each year through 2022 and then holding at a $100 million level through 2026. From there, it would be based on a formula that uses the utility’s revenue. This year, JEA gave $232 million to the city.
  • The utility would have its own legal counsel for “legal services and civil service,” similar to what the Jacksonville Aviation Authority utilizes. Currently, JEA uses the Office of General Counsel.

The $120 million lump sum would be borrowed by the utility, with the annual $2.5 million reductions helping pay that debt service back over time.

There was no discussion on how borrowing the money would impact bond ratings. But board member Peter Bower said it would not result in a rate increase.

Bower, head of the Finance Committee, said finalizing such a proposal would take months. He supports the concept, but said he wouldn’t sign off on it if the details were altered. He urged other board members to follow suit.

City Council would have to sign off on any deal. Council member Bill Bishop, the council liaison to the utility, said the offer was intriguing but preliminary.

More details and board feedback is expected when the entire JEA board meets at 1 p.m.

 

 

 

EARLIER STORY:

Paying down the police and fire pension unfunded liability likely won’t come from JEA, but another source could be revealed this week by a former City Council member.

For months, Mayor Alvin Brown has pushed his proposal for JEA to give the city an additional $40 million a year for 14 years to help pay down the pension’s $1.6 billion unfunded liability.

Calling it a “partnership,” Brown said the utility in return could spin its employees off from the city’s pension plan and have their own, saving more than $500 million over 35 years.

The additional payments for the 14 years would be $560 million.

JEA reviewed the idea for months, but it won’t work without raising rates, according to a report utility staff will present today to the JEA board. Even if rates were raised, an additional contribution to the city could threaten its bond ratings, the report went on to say.

Declining sales, upcoming regulatory compliance requirements and operational costs all were cited as current financial challenges. So, too, was the contribution level JEA already provides — it was $232 million for 2014 and automatically increases $2.5 million each year. That’s “greater than 90% of our peer utilities,” the report states.

A funding source for the additional $40 million in annual payments has been a chief concern of council members reviewing the deal Brown and Police and Fire Pension Fund leadership agreed to this year. The JEA partnership has been the only method Brown has pitched. He’s vehemently disagreed that it would have to cause JEA to raise rates.

David DeCamp, Brown’s spokesman, said in a statement that the administration continues to believe the City and JEA can partner for the benefit of taxpayers and ratepayers.

But, on the same day JEA documents showed why the option won’t work without raising rates, former council member Matt Carlucci said he has a way.

He told the council Rules Committee that he and Charlie Appleby, the retired chairman and CEO of Advanced Disposal, have figured out a funding source for the $40 million payments. But, Carlucci said he wasn’t ready to reveal the details.

Appleby was out of town, he said, and Carlucci wanted him available to present their idea this week to council.

Carlucci wasn’t the only former council member to take a stance in the pension discussion.

Former council President Kevin Hyde told the group he and several attorneys have looked at the pension deal and recent court rulings, and have concluded the negotiations between the city and the pension fund have been collective bargaining.

Under collective bargaining rules, pension benefits can’t be set for longer than three years. The deal council is reviewing has it ending in 2024, shortened from the so-called “30-year agreement” that ends in 2030.

The group of attorneys, which includes former Mayor John Delaney and former city General Counsels Rick Mullaney and Fred Franklin among others, uses the Sunshine Law case brought about by Times-Union editor Frank Denton as reasoning. Circuit Judge Waddell Wallace in his ruling on the case mentioned they were collectively bargained.

An appeals court upheld his ruling on the issue.

General Counsel Jason Gabriel told the group the deal was not collective bargaining and the Wallace ruling only spoke to Sunshine Law violations.

The Rules Committee ran out of time to take up amendments to Brown’s pension deal and has called a special meeting for 10 a.m. Monday to talk about the deal.

The council’s Finance Committee will take up the pension deal today.

The JEA board meeting, where the JEA response to Brown’s partnership idea will be reviewed, starts at 1 p.m.

[email protected]

(904) 356-2466

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