The board of directors of JEA heard Tuesday that the fallout from one part of Mayor Alvin Brown’s pension reform proposal could adversely affect the authority’s ability to sell bonds.
JEA Chief Financial Officer Melissa Dykes said she was in New York City last week for an investors’ conference and, based on talks with bond buyers, the discussions that began immediately after the plan was made public could adversely affect future bond issues by the authority.
Dykes said the brokers indicated to her it’s easier for them to make the decision to buy bonds when the bonds don’t have “political headwinds.”
Brown proposed in January that JEA contribute an additional $40 million per year to help reduce the city’s unfunded pension plan liability.
When the authority’s board learned of Brown’s plan, members were concerned the additional contribution to the city coffers could cause an increase in utility rates. “There’s no way you can do that without JEA customers paying for that,” board Chairman Mike Hightower said then.
City Council member Bill Bishop also weighed in when he heard about Brown’s plan for JEA. Bishop is the council liaison to the authority.
He said there was “a lot of wishful thinking” in the proposal for the $40 million increase and he doubted the contribution could be increased without raising rates to JEA’s customers.
JEA is projected to contribute $110 million this year to the city general fund. An agreement signed in 2008 through 2016 mandates that the contribution increases $2.5 million each year.
It was noted in January that an extra $40 million yearly obligation 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.
Hightower said Tuesday the opinion expressed to Dykes by the brokers concerning how local politics could affect the utility’s ability to sell bonds is “a sobering moment.”
Hightower said the board and Brown’s administration have been performing in a “unique environment for the past few months” and “these are challenging times.”
He commended the board members and JEA staff for their conduct in relation to the ongoing pension plan discussion and encouraged that conduct to continue.
“We need to keep this on an even keel,” Hightower said.
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