FOLIO
A watershed moment for the American economy came at the close of October: the end of the latest round of quantitative easing, started in the last few months of the Bush administration in response to the economic crisis of 2008. Its success, coupled with an inflation of the money supply, has fueled what looks like economic recovery, at least if you don’t look too closely.
But end it must, and we’ll feel the effects over the next few years, a gradual trickle-down that will eventually make its way to the city of Jacksonville, which so happens to be dealing with both a pension crisis and a combative mayoral campaign. And there are, or should be, real concerns about how the change in Federal Reserve policy will impact the city’s unfunded liabilities.
For Mayor Alvin Brown’s critics — including Lenny Curry, his most formidable opponent, at least in terms of fundraising — the problems with his proposed pension fix are legion, and quite easily distilled.
“The mayor’s plan proposes $40 million [a year] over 10 years, and he can’t tell us how he’ll pay for it,” Curry told me a few weeks ago. Further, “the mayor has no credibility at this point,” and the plan, as presently constituted, is “irresponsible,” like “buying a home with a 10-year mortgage and only having the money to pay a year and a
half.” There is “no way anyone would take [this plan] seriously without a dedicated revenue source.”
On the level most voters understand, Curry has some legs to stand on. The recent Fitch downgrade of new debt incurred by the city seemed purposely timed, just days before a $101 million bond issue to refinance older debt. While Fitch still sees Jacksonville debt as investment-grade, the rating company also sees issues with Jacksonville’s very high pension burden, as well as the failure of the City Council and the mayor’s office to work out a concrete strategy to fix it. If it weren’t for the lingering pension crisis, insiders say, Jacksonville could have a AAA rating — which would mean lower interest rates for the city and more savings for taxpayers. The longer this goes unresolved, the more it will hurt.
But that’s not for lack of trying on the part of the Brown administration, which has put forth a plan that passed muster with the Pew Charitable Trusts a few months back (though last week Pew announced it will re-examine the mayor’s proposal after the Times-Union questioned how much it would really save). In the end, however, the real sticking point is paying for it. A reduction of benefits for new police and fire employees appears certain, as do increased contributions from employees. Beyond that, the mayor’s office is looking to JEA for help finding the $40 million a year it needs. In short, the city wants to have JEA spin off its employees — now a part of the city’s general pension plan, which has unfunded liability issues of its own — into a separate pension plan, which would produce the cost savings that the utility could then give back to the city. To date, the utility has sounded skeptical, but its board is supposed to consider it this month. (If the JEA plan falls through, the city has other options: Brown’s plan leaves the $40 million ball in Council’s court every year, so a tax hike or funding cuts or some other scheme isn’t out of the realm of possibility.)
David DeCamp, Brown’s communications director, in a conversation with me, lauded the “productive partnership” City Hall has with JEA. He seemed optimistic that an accord would be struck — and given that it’s the issue upon which his boss’ re-election is predicated, he’d better be.
The mayor’s office is getting some traction in Council, even bipartisan support, but the question is, as ever: Where is the incentive for the Council’s Republicans to break ranks and work in a bipartisan way? There isn’t much space, rhetorically, between candidate Curry and Council President Clay Yarborough. People want easy answers. There are none to be found. Curry’s question — “How is the mayor going to pay for this?” — resonates.
The mayor’s office has been able to avoid hard choices, for the most part, up until now because of the aforementioned QE boost — the choices that poison the well from which low-information voters drink. Needing a decisive political win on this issue, with conditions deteriorating, the open question remains: Does Brown have the juice to pull off a bipartisan solution in an explicitly partisan environment? The bully pulpit is there for the taking. Does he want to step up to the mic?
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