(Bloomberg) — A civic task force recommends that Jacksonville raise taxes to meet soaring retirement costs that have left a pension fund in Florida’s most populous city with 39 percent of what it needs to cover promised benefits.
The city of 836,500 in northeast Florida should also reduce benefits offered to new employees and change current employee benefits, the panel named by Mayor Alvin Brown said yesterday in a report.
Jacksonville, the 12th biggest U.S. city by population, ranks behind only Chicago and Philadelphia among the 25 largest cities in pension underfunding, Morningstar Inc. said in November. Municipal pensions across the U.S. face at least $1 trillion in deficits, according to the Nelson A. Rockefeller Institute of Government in Albany, N.Y.
The tax increase would add 0.5 percent to the current 7 percent combined city and state sales tax, producing $68 million a year in revenue, the task force report said. The panel proposed putting $50 million annually into the least-funded pension, for firefighters and police, bringing it to 80 percent by 2028, and allocating the rest for other employees.
Brown, a 52-year-old Democrat who has said he opposes a tax increase, has proposed taking $40 million in annual payments from the city-owned water and electricity utility to pay down pension costs. Task force members said they couldn’t endorse that plan, since terms are still being negotiated.
Moody’s Investors Service put Jacksonville’s credit under review Jan. 15 for a downgrade of one or two steps from Aa1, second-highest, pointing to the growing pension costs as a drain on the city’s finances.
Jacksonville sales tax revenue bonds maturing in 2025 sold March 18 with an average yield of 3.36 percent, or 0.64 percentage point above benchmark debt.