BRADENTON, Fla. A task force appointed by Jacksonville, Fla. Mayor Alvin Brown won’t use up to $1 billion of pension obligation bonds to help alleviate the city’s $1.68 billion of unfunded police and fire obligations.
Pension bonds were among recommendations consultants made to the 17-member Jacksonville Retirement Reform Task Force, along with changing to a 401(k)-style retirement plan for police and firefighters.
Both were rejected by the panel on Dec. 3.
The task force is still considering a property tax millage dedicated to pension funding, creating a hybrid plan for new employees, and lowering cost-of-living adjustments, according to the Jacksonville Business Journal.
A final report is due to Brown and City Council in late January.
Jacksonville runs or participates in three pension plans - the Jacksonville Police and Fire Pension Fund, the Jacksonville General Employees Retirement System, and the Florida Retirement System.
Of those, the Police and Fire Pension Fund is the most underfunded, according to the Pew Charitable Trust, which is assisting the task force.
In August, Fitch Ratings revised its outlook to negative on the city’s double-A ratings due to “uncertainty as to how the city will resolve a large unfunded pension liability and rapidly rising pension contributions.”
Fitch and other rating agencies noted that the City Council and the mayor have not agreed on how to deal with rising pensions costs.
The council refused to enact tentative agreements on pension reform reached with the majority of the city’s labor units earlier this year.
“This decision raises additional questions as to the efficiency of internal decision-making and cooperation level between administrative and legislative officials,” Fitch said, adding that the city’s pension burden is considered high, particularly for its AA-plus implied unlimited tax general obligation bond rating.
Moody’s Investors Service affirmed Jacksonville’s Aa1 issuer rating and stable outlook in August reflecting the city’s large and diverse economy, and a consistently strong financial position “albeit with looming pension pressures which officials are attempting to address.”
Despite contributing 100% of the annual required pension contribution, the funded ratio for the police and fire pension plans are 46.1% and 42.9%, respectively, while the general employees plan is 71.4% funded, according to Moody’s.
Pension costs as a percent of general fund expenditures increased from 11.8% in fiscal 2011 to 16.2% in fiscal 2013 partly due to market losses and outdated assumptions, which have since been changed, Moody’s said. Pension costs are projected to increase to 17.5% in fiscal 2017.