A city commission established to act as an advisory body for fiscal issues is unanimously against the proposal to allow JEA to contribute $120 million to the unfunded liability of the Police and Fire Pension Fund.
The commission took the action “for a variety of reasons,” wrote Patti Anania, chair of the Taxation, Revenue and Utilization of Expenditures Commission, in a letter sent March 9 to Mayor Alvin Brown and City Council members.
The group is against the one-time $120 million payment from JEA and the associated concessions the utility would receive from the city if the agreement is enacted.
Chris Hand, Brown’s chief of staff, emailed Anania on March 13 to express surprise the commission voted against the bills “apparently without inviting us to discuss them with you.”
Hand also said he’s sure JEA and the “community leaders who fathered the plan” – former council president Matt Carlucci and retired business executive Charlie Appleby — also would have appreciated the opportunity.
“There was no reason for us to ask Chris Hand to come in and talk to us about it,” Anania said. “It’s what we saw.”
Proposed changes in the existing arrangement include a reduction in the annual contribution to the city general fund from JEA; allowing the municipal not-for-profit utility to establish its own retirement plan and withdraw its employees and retirees from the city’s General Employees’ Pension Plan; and allowing JEA to retain independent legal services rather than through the city Office of General Counsel.
The letter states that property tax revenue “is not nearly enough to run the city, which relies, in part, on JEA’s substantial annual contributions.”
The utility is contributing $106 million to the city’s $1 billion budget for 2015-16.
The commission said if JEA’s annual contribution is reduced, other revenue streams would have to be increased. How an increase would be implemented has not been explained.
As to retaining counsel other than city attorneys, the letter states that feature “undermines the principles of consolidated government” and could signal to other independent authorities that they too could hire their own lawyers.
Allowing JEA to remove its pension members from the city general employee plan as a “quid pro quo” is “imprudent” because the action would reduce contributions to the employees’ plan, which also is underfunded, according to the commission.
“The TRUE Commission questions the wisdom of harming one under-funded pension plan to fix another,” the letter states.
The commission also voiced its opposition to the existing negotiated agreement between the city and the pension fund on the grounds it is the product of collective bargaining and would extend longer than the three years permitted by state law.
The commission further questions the validity of the original agreement struck in the 1990s and subsequent extensions approved on the basis the negotiations violated open government laws and therefore should be void.
“Amending a void agreement results in a void agreement,” the letter states.
Using bond funds to cover the $120 million also was questioned by the commission. The letter points out bonds may be used for capital improvements, but not for operational expenses, which would include paying down the unfunded pension liability.
Improving the financial position of the pension fund is not a capital improvement, “and therefore appears to be an illegal use of bond funds,” said the commission.
Council President Clay Yarborough said Wednesday the commission is “another set of eyes” that looks at issues facing the city. He said the content of the letter will be evaluated and each council member will decide how much weight the commission’s position will carry.
With less than a week before council is expected to vote on pension reform, Yarborough still has questions.
He’s sure the JEA contribution proposal is in the utility’s best interest, but he’s not sure adopting the plan is in the best interest of the taxpayers.
“I’m a layman when it comes to finance, but I know you don’t borrow your way out of debt,” said Yarborough.
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