from Staff
John Keane began his career in public safety in Jacksonville in 1962 when he was sworn in as a police officer. Since then, he has also been a member of the City’s Fire and Rescue Department and an active member of both the Fraternal Order of Police (Lodge 30) and the Jacksonville Association of Firefighters #122.
Eighteen years ago, Keane became the executive director and administrator of the Police and Fire Pension Fund (PFPF) when it became independent from the City’s retirement plan and he has served in that capacity ever since.
Wednesday morning, Keane and his eventual successor, Dick Cohee, sat down with the editorial staff at the Daily Record to talk about everything from the PFPF to the current state of the stock market.
When did you become Pension Fund administrator and what’s your background?
I became the administrator Aug. 1, 1990. Prior to that, I was a member of the Pension Fund Trustee Board. We handled the pensions of the police and firefighters and the general employees of the old county government. In 1971, I was over the firefighters union. We wanted to take the secret out of the pension fund.
I started with the government in the sheriff’s office and transferred to the fire department. I was in the first class after consolidation (in 1968). Then, the old city limits were only 33 square miles. We had good fire protection and a good staff. Out in the county, there was no structure and one guy on duty who rang the (fire) bell.
After consolidation, the department went from 400 (personnel) to 650. I was part of the first group that took the civil service test. I stayed with the fire department for 22 years after seven years with the sheriff’s office.
Does that experience lend you credibility with the police officers and firefighters and as administrator of the fund?
Oh yes. I’ve walked the walk and talked the talk. The members know me. I was the public and governmental affairs officer for the fire department. I have done thousands of TV and radio interviews. I was the government lobbyist, lobbying City Council and legislative committees about public safety issues.
You’ve been involved with City employee benefits and pensions for a long time. What are the biggest changes you’ve seen?
The main change happened in 1987 following the legislation in 1986 that created the five member board of trustees and made them responsible for administering and investing the fund. It’s made up of one police official, one firefighting official, two appointees by the City Council and one person selected by the other four. As you know, right now it’s (former Sheriff) Nat Glover.
Why such a structure? Because we didn’t want to end up like Orange County, California (which declared bankruptcy in 1994). Their treasurer, Robert Citron, was making many sophisticated security investments for municipalities in Southern California and was getting some pretty good returns until the market turned on him. With us, the City has half the say and the members have half the say.
So how does the PFPF work? You said after the board decides how the pension fund’s assets will be allocted (into real estate, stocks or bonds) it’s up to the PFPF’s actuary to make it all work and return an investment to the fund’s members.
Actuary is a fancy word for mathemetician. He figures out how old each member is and how long they are going to live, what their salary is today and when they are likely to retire. Then you start working backwards to determine what will have to be done to have enough pension benefits for every member.
What are the sources of the money the PFPF has to invest for its members?
The City puts in some, the members put in some and we get a little bit from court fines and about $10 million a year from the state. The bulk of the money we pay out – about 85 percent – comes from earnings, which is not happening right now because of the market.
Since you brought up the market, how is it affecting the PFPF?
These are very difficult times. Never before in the history of the stock market has so much money been lost in five days as in the last five days. They were talking about the bailout solving it. It hasn’t solved it, it’s getting worse.
What do you think the bail out will do for the pension fund?
It’s not going to accomplish anything for us or any other institutional investor or any individual investor. The purpose of the bail out is to get the money moving way up in the bank level so they can keep businesses going.
The pension fund is supposed to make 8.5 percent per year return on our investments to meet our long-term financial obligations. In the year that just ended Sept. 30, we did not make that 8.5 percent. We were down over 12 percent, so that’s a 20-percent swing. That’s a lot of money to have to get back just to play catch-up and get back to where we should be. Since Oct. 1, we’ve lost millions more. These are very tough economic times.
What if Pension Fund members want to cash out right now?
They can’t. They are in a defined benefit plan that pays out over the next 20 years. They could come and say, ‘I want you to write me a check today for everything owed to me’ and I would say they can’t do that.
Given the recent nationwide and worldwide economic issues, has your phone been ringing off the hook?
Oh yes. We have been in a crisis going back to last summer. The subprime mortgages started all of this. People ask, how could the subprime mortgages wreck all of this? I tell them Lehman Brothers went out of business because of greed. They were giving ‘ninja’ loans. If you didn’t have a job, didn’t have any credit and didn’t have a bank account, they would give you a mortgage anyway.
What’s your long-term predicition for the investment markets?
We recently told the mayor (John Peyton) we thought that we were halfway through this thing. We looked at a three-year time horizon and thought we were halfway through it but we don’t think that anymore. We think that it may last another three years. At least that’s what some of the top financial thinkers are saying, that it’s going to take three years for this thing to work itself out. Yesterday (Oct. 7), the stock market closed lower than it has closed since 2004. It’s a lot to overcome and it’s a lot to recover from. We’re going to continue to do all we know using every tool in our financial tool kit to maximize returns and reduce costs through innovative investment programs with the City, turning idle assets into productive assets for us.
Why should the people of Jacksonville care about the current struggles the Police and Fire Pension Fund is facing?
They should care about the long term health of the City and its pension funds because it affects the ability of the City to provide essential services. The growth of the workforce contributes to the pension obligation. So to have a financially stable pension fund and City infrastructure is in the best interest of everyone and long-term it results in lower taxes, which is what everyone wants.
You were in Washington, D.C. Tuesday. What did you go up there for?
I made a presentation in Washington on how the different pension funds operate. I talked specifically about our local real estate investments — the Laura Street Trio, the Haverty’s Building and the AOL Building. I talked about how we worked with the City to make a satisfactory rate of return. Outside investments are supposed to earn about a 20 percent rate of return. We made much less, but we were not trying to rob anybody.
How much longer will you oversee the Fund?
I plan to stay until 2012. That’s when my employee contract with the board runs out and it’s also when I’ll have 50 years with the City. That’s a long time.
Who will take over?
Dick Cohee. He was the City’s treasurer under five different mayors and the longest-tenured appointed employee. He retired 10 years ago and joined us.
How are you working with him to make the succession smooth?
Dick is the smartest numbers guy in the city. He figures out how to make projects work. He’s doing that now. He’s working on solving the immediate crisis of confidence in the system. He is doing an excellent job as always. When he was the City treasurer, by law he was associated with the Pension Fund. So, he’s the ideal person.
(to Cohee) What is your background?
The fund was 103 percent funded when I left (the City). It was a big success. I have a fair amount of background with pensions and bonds. I was involved with all the City bonds from 1980 until 1995. There wasn’t a project I didn’t know about. I was on the negotiating team for the Jaguars lease agreement. I learned the inner workings of the city under a great many number of mayors.
(to Cohee) What changes would you like to implement?
The Pension Fund operates under a separate set of rules that are very constrained compared to the rest of the state. We are looking to relax those restrictions. For example, we can only invest 10 percent in real estate. We have sponsored a J-bill the past three years (to raise that percentage) with no success. Our friends in Tallahassee have been distracted. We would like to move our international (investment cap), which is also 10 percent. Globally, the return is probably close to 20 percent.
(to Keane) What do you do to get away from everything?
I go to the Jaguars games and I enjoy my two granddaughters. One is 7 and the other is 4 and I enjoy their school activities. They are a wonderful destressor. Just seeing them and having them hug me lowers my blood pressure about 20 points.