Concerned Taxpayers of Duval County, Inc. (“CTDC”) was founded in 1987 with the mission of opposing and exposing local governmental waste and abuse in Jacksonville. Ever since, its officers, directors and members - all volunteers – have acted with those missions in mind.
Once it became clear that political deals over the last generation had changed the Jacksonville Police and Fire Pension Fund (“PFPF”) into an irresponsible and poorly run independent entity, with its arbitrary powers based upon contracts which are illegal under Florida law both as to scope and duration, members of CTDC began attempting to cause reforms. The PFPF was extremely resistant to those efforts, wasted hundreds of thousands of dollars on litigation under the Public Records Act, and otherwise repeatedly acted contrary to the best interests of Jacksonville taxpayers. The CTDC realized that modest reforms of the PFPF as it now exists would not materially help Jacksonville’s taxpayers, either in the short or long term. Consequently, CTDC has advocated, among other things, that the PFPF’s governing body, the PFPF Board of Trustees, be abolished, and that the PFPF be co-managed along with the other two public employee pension plans that are managed by the Jacksonville Retirement System (“JRS”).
Mayor Brown, in response to the wretched financial status of the PFPF, and in response to the fact that the PFPF was consuming a growing and excessive part of the budget of the City of Jacksonville (“COJ”), appointed a Retirement Reform Task Force (“RRTF”). We were most disappointed that the RRTF, despite having few attendees interested in making public comments at public meetings, severely limited outside input, particularly public comment.
The Final Report of the RRTF has now been issued, and each of the signatories has read it. We are unanimously disappointed with two fundamental flaws of the Final Report: (1) It fails to recommend a transition away from traditional defined benefit plan retirement benefits for employees of the Jacksonville Fire and Rescue Department (“JFRD”), and the Jacksonville Sheriff’s Office (“JSO”), and (2) It totally ignores our recommendations concerning abolition of the PFPF Board and Trustees, and management of the PFPF by the JRS.
Our comments, and our recommendation that the Final Report of the RRTF be rejected (i.e., not enacted), are set forth and explained below. Please note that it is our intent to issue a short response. Therefore, we are not discussing every flaw associated with the RRTF and its Final Report.
I. There is no need or cause to raise taxes.
There is no federal, state or local law that requires that a local government – sponsored defined benefit pension plan must have (or quickly achieve) any particular funded ratio such as the 80% funded ratio recommended by the RRTF. Clearly, the 39% funded ratio recently experienced by the PFPF (which has increased to about 43%) is of great concern, but the law only requires that the actuarially required contribution be made by the government. Still, we share the concerns of the RRTF about
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what is clearly a rotten fiscal status quo. We think however that the PFPF’s financial disgrace merits
more fundamental and aggressive responses to protect, rather than harm, taxpayers.
It is interesting to note that cries of crisis have been somewhat belied by the fact that equity
investors last year generally enjoyed double digit returns. Because of this, the PFPF’s funded ratio
increased as described above, and further, the expected increases in the PFPF’s actuarially required
contributions will be minor in the coming fiscal year (from about $148 million/year to about $153
million/yr – or about a 3% increase). Additionally, the PFPF’s reduction of the assumed rate of return
to 7% - less than what the Florida Retirement System uses – will make it easier for the funded ratios for
the PFPF to continue such increases even should the PFPF continue to earn somewhat less than the JRS
earns on its investments, net of costs.
Jacksonville, and Duval County, must be very careful before raising taxes where not legally
required. Surrounding counties generally have lower property taxes, and none have an effective sales
tax rate of 7.5% as the RRTF seeks to effectuate. In fact, the ten Florida counties with a rate this high
are home to less than 5% of the population, and Florida’s only city of over 100,000 included is
Tallahassee. Individuals and businesses can easily move to surrounding counties, or shop in other
counties.
The city administration’s, and the RRTF’s, references to the bond rating agencies’ desire for
retirement reform should not be accepted without quantification. Minor gradations in bond ratings
can have minor costs, and only prospective costs. We ask that the administration quantify its
concerns, before taxpayers are rushed into paying the extra $50 million/year as the RRTF would
suggest.
As a moral matter, another tax increase is most unfair to Jacksonville taxpayers, because they
have already suffered a 14% increase in property tax rates, mostly attributable to increasing pension –
related costs.
The Final Report and its supporters discuss fairness, but fail to address the fundamental
question – why should current local taxpayers have to pay extra, when not legally required, to redress
mistakes and events that occurred in past years? We all now know that the COJ in the past made
huge mistakes – principally, in granting excessive benefits through the PFPF, in assuming that
investment returns net of costs would continue to be at least 8.5% per annum, and in failing to adjust
to new financial realities promptly. The blame for these mistakes lies principally with past mayors,
past City Councils, the PFPF Board of Trustees and officials, and the labor unions for JSO and JFRD
employees. We ask that they pay up, but recognize that they won’t. Even if the responsible
individual policy makers wanted to, they could not afford to fully compensate taxpayers for their
misdeeds. Since those at fault won’t pay up, we should not double up on the pain caused to current
taxpayers, most of whom are innocent bystanders in the mess created by others.
We have another observation about the Final Report’s idea that property taxes be raised first,
with voters then being given the option to keep the ad valorem tax increase, or have the sales tax
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increased instead. The devil here will be in the details, but the general concept strikes us as both suspect and coercive.
II. The Final Report’s recommendation means that taxpayers would sacrifice at about 10 times the rate that public employees “sacrifice”.
The Final Report announced a laudable principle of shared sacrifice, but conveniently failed to do the math. And, the Final Report failed to recognize that Jacksonville taxpayers have already started to sacrifice as a result of the many mistakes associated with the PFPF. Property tax rates have already risen by 14% in just this year.
Even ignoring these problems, the extra $50 million/year that the Final Report wants to extract from taxpayers, above and beyond what the law requires, dwarfs the additional contributions to the PFPF that it seeks from JSO and JFRD employees. Those employees, over time, are asked to contribute an additional 3% of base pay towards their PFPF benefits – eventually raising an additional $5 million per year. Several years from now, that extra $5 million per year will increase slightly, as (and if) payrolls increase. But, that is a big “if” – payrolls may not increase, as we discuss in III below.
It is just, and necessary, that the greater burden of future sacrifices, if any are to be made, must be borne by public employees. The average person who has retired from JSO and JFRD currently receives an annual pension of about $56,000, and that pension has historically commenced at age 49. If the Final Report were enacted without change, the average annual pension would, after 30 years, and assuming no inflation or other intervening changes, decline by about 6%, to about $53,000. Plus, after 30 years, the average retiree might commence his or her retirement at 52, rather than the long – term average PFPF retiree commencement age of 49. These changes are helpful, but not very substantial, and are, indeed, likely to have less than anticipated savings.
Contrast the modest impacts of what the Final Report suggests with Social Security statistics. No one can commence Social Security benefits prior to age 62, except in the event of disability. Moreover, the current average Social Security benefit is about $15,500/year.
Even if the proposed changes to PFPF benefits go into effect, the average PFPF retiree will still receive benefits that are more than 3 times as great as those received by Social Security recipients, and further, will receive them for at least 10 years longer. Further, the average PFPF retiree will receive pension benefits that exceed the average annual wage in Jacksonville (approximately $47,000).
It is fundamentally unjust for taxpayers to have their taxes increased in order to perpetuate a system wherein public employees on average receive lifetime pensions that substantially exceed the total annual wages earned by those taxpayers.
CTDC will vigorously oppose Retirement Reform unless most of the costs are borne by employees of the JFRD and JSO. The fact that even under the RRTF proposals, the average PFPF retiree will receive close to $2 million while retired, shows that public safety employees not only can afford additional reductions in benefits, but that it is fair and just that this should occur.
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III. The Final Report ignores 3 major trends.
The RRTF, in its Final Report, ignores three major nationwide trends that will affect Jacksonville, the PFPF, and taxpayers generally. These three trends undercut the fundamental objectives, and conclusions, of the RRTF and the Final Report
(1) Continued increases in life expectancies. One major factor behind the increase in government pension - related costs has been the inexorable increases in American life expectancies. There is nothing to suggest that such increases will slow down or end. Because of this, the slow increase in average retirement commencement ages that the Final Report likely will encourage, will be largely or entirely undone by increasing life expectancies. This is a huge, and unaddressed, problem associated with the Final Report.
(2) Continued efforts to terminate or phase out defined benefit pension plans for public employees. Recently, many states and localities have terminated the use of defined benefit pension plans for some or all newly hired public employees. Similar efforts have been made, so far without success, in Florida. These efforts around the United States show no signs of ceasing, and the costs associated with longer life expectancies and constraints on governmental funding assure that this will be the case. The Final Report relies heavily on the fact that the PFPF benefits are comparable to other benefits offered to public safety employees elsewhere in Florida. However, for reasons stated above, this is unlikely to continue. It cannot continue, especially since Florida, via its Constitution, has no state income tax, and has various limits respecting property taxes. As these trends are adopted statewide, the theoretical harm to the COJ’s ability to attract and retain employees resulting from retirement reform will disappear. The import of the RRTF ignoring such trends is that the RRTF has proposed inadequate reductions in benefits via the PFPF.
(3) The RRTF’s assumption of no changes in the number of JSO and JFRD employees could well be flawed. One of the biggest long – term trends in America is the growing public acceptance of the idea that all or part of the marijuana business should be legalized. The effect of this, and long term demographic changes, is likely to be reduced JSO employment in the future. Fewer crimes, fewer arrests, fewer prosecutions. Also, the growing push to use civil citations will result in reduced incarcerations, and thus also reduce JSO employment.
In conclusion, these factors establish that the PFPF “crisis” is overstated.
IV. Other objections to the Final Report; further suggestions
This Response by CTDC has further objections to the Final Report, including but not limited to the following:
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(1) The Final Report envisages a 10 year or longer “fix” that, depending on the details, may be illegal. CTDC has, for years, contended that the “30 year agreement” is illegal, and yet the Final Report proposes to modify that agreement. We await details, if any are provided, but are disappointed at the implicit acceptance by the RRTF of this illegal agreement.
(2) If the Mayor and City Council agree that the RRTF Final Report is too heavily tilted against taxpayers, as we at CTDC know to be the case, the CTDC asks the Mayor and Council to consider these simple reforms respecting future service by current and future JSO and JFRD employees:
 No commencement of benefits prior to age 62, except in cases of disability – to parallel Social Security.
 Reduce the benefit formula maximum from the proposed 75% of final average salary, to something more reasonable, such as 50%.
 Cap pensions at $50,000 or $60,000/year, not the $100,000/year that the Final Report proposes. This would do much to reduce the public cynicism fostered by obscene public employee pensions.
 Require retirees to purchase any survivor pensions, as is common respecting other defined benefit pension plans. Currently, local taxpayers can easily be “on the hook” for 50 or 75 years, if a PFPF retiree has a younger spouse, and dies after surviving for 30 or 40 years as a retiree.
CONCLUSION
We, the undersigned officers and directors of Concerned Taxpayers of Duval County, Inc., oppose the Final Report of the Retirement Reform Task Force, and ask that the Jacksonville City Council defeat all efforts to implement that report via legislation.
John Winkler, President and Director, CTDC
Curtis Lee, Vice President and Director, CTDC (principal author of this document)
Joseph Andrews, Treasurer and Director, CTDC
Conrad Markle, Secretary and Director, CTDC
Connie Benham, Director, CTDC
Durwin Davis, Director, CTDC
Dan Carr, Director, CTDC
Lynne Price, Director, CTDC

Submitted By D. Davis Government Watch Action Team