The task force looking at the city’s pension problems is recommending the unfunded liability be solved through a half-cent sales tax increase.
But getting there will take a few steps.
Bill Scheu, chair of the Jacksonville Retirement Reform Task Force, said the half-cent sales tax is allowed under a state law dealing with fire rescue services and facilities. He estimated the half-cent tax would bring in about $68 million per year.
The law requires the sales tax to be approved through a referendum. It also requires the city to reduce ad valorem taxes by the amount equal to the sales tax revenue year to year.
Scheu said the task force is first recommending that the City Council increase property taxes enough to cover the money the sales tax would bring in. That would mean about a 1.5 mill increase.
The council would also need to vote to put the sales tax proposal on the ballot.
If voters approve the sales tax, the property tax would be reduced back to its original rate. If voters defeat the sales tax, the property tax increase would remain in effect.
Scheu said there are “no other options” other than a tax increase to solve the $1.7 billion unfunded liability problem.
“We have to recognize that bad decisions in the past have gotten us to where we are,” he said.
Those decisions include the 30-year agreement, the cost-of-living adjustments (COLAs) and the city using reserves to make some annual contributions. Those, coupled with three years of a “market disaster,” caused the unfunded liability problems.
He estimated the tax would run 12-15 years, long enough to get the fund 80 percent funded.
“If we don’t increase the payments, there is a possibility the retirement pensions of the police and fire won’t be there when they need it,” Scheu said.
Chris Hand, chief of staff for Mayor Alvin Brown, said the mayor continues to oppose any tax increase. Instead, Hand said, the mayor believes a “partnership” with JEA is the best way to fix the unfunded liability issues.
Brown has proposed the utility contribute $40 million per year toward the pension plan, on top of the $110 million per year JEA already gives the city annually. JEA officials said the extra contribution would likely lead to a rate hike, which Brown disagrees would happen.
The mayor has offered suggestions to offset the additional contribution, including helping the utility set up its own pension plan, which Hand said would save JEA $500 million.
Hand said the mayor’s proposal is in the hands of JEA officials and Brown’s office will continue working with the utility.
Scheu said it was ironic that the amount needed to shore up the pension plan — an additional $40 million to $50 million per year — was recognized by both the mayor and the task force
He went on to the task force had to make a decision. “We can’t wait on the negotiations with the JEA,” he said. “And the community can’t wait on that.”
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