BRADENTON, Fla. — The recent rejection of Jacksonville, Fla.'s latest pension reform proposal is a credit negative, according to Moody's Investors Service.
Jacksonville, in the northeast corner of the state, has been mulling various strategies for years to deal with escalating police and fire benefits, and $1.7 billion in unfunded liabilities.
"Florida's largest city remains politically gridlocked in addressing mounting pension pressure despite wrestling with the issue for years," Moody's analyst Ted Damutz said in an April 2 report.
The latest proposed pension reform package was struck down when the City Council deadlocked on a 9-9 vote March 25. The council consists of 19 members, but one councilor stepped down recently to run for another office.
After the council rejected a previous pension proposal in 2013, Moody's downgraded the city's issuer rating to Aa2 from Aa1 primarily because of growing pension payments that negatively affected $2.4 billion dollars of debt.
While the city has historically contributed at or near the annual required contribution as required by state law, the plan's unfunded liabilities have grown substantially due to worse-than-expected investment performance, benefit increases, and actuarial factors such as the deferred recognition of asset losses when calculating actuarial funding requirements, according to Damutz.
The city's fiscal 2015 public safety ARC is about $154 million, or 15 times greater than $9.7 million in fiscal 2003. Without reform, the city's annual public safety pension contributions are projected to escalate dramatically, peaking at $469 million in fiscal 2036, he said.
"The City Council's latest rejection of proposed pension reforms marks the latest setback in a prolonged effort to implement public safety reforms," said Damutz. "The stalemate continues, despite extensive studies and various task force efforts."
A recent court ruling has thrown the pension issue further into flux.
On March 26, Circuit Judge Thomas Beverly struck down the existing benefits package for fire and police - a 30-year deal in place since 2001.
Beverly said the 2001 pension package was negotiated in private, in violation of the state's Sunshine Law requiring those meetings be held in public.
Barring an appeal, City Council President Clay Yarborough told the Florida Times-Union that the ruling puts the city in a stronger position to negotiate benefits going forward.