JACKSONVILLE, Fla. -- The city will soon refinance up to $72 million in borrowed debt. With an excellent credit rating the city stands to save almost $5 million in interest charges.
But a national company that gives out bond ratings warns the city should do something about high pension costs or else risk a lower credit rating.
Jacksonville City Hall will borrow $14 million to buy the Jake Godbod city hall annex rather than continuing to pay rent for the public defender's office. The city will refinance $58 million in bonds and get a savings of $4.5 million, a 7.4 percent reduction in total interest costs.
The reduction is due in part to the AA+ credit rating. But Fitch Ratings warns in its ratings report that
"A large unfunded pension liability and repidly rising contributions remain a key credit concern. Tentative agreements on pension reform have been reached that, pending city council approval , are expected to stabilize the city's pension burden over the long term," according to a Fitch Ratings press release.
The city council has yet to pass the reform deal and leaders promise they are going to take a close look to make sure it is the right way to go for the city, so that is by no means a done deal.
Fitch warns a delay in implementing pension reforms threatens the city's excellent bond rating.
City treasurer Joey Greive says a reduction in the credit rating a notch or two could costs the city hundreds of thousands of dollars more when it borrows money.
"Just like your mortgage, if you had a terrible credit score you would get a high rating or high cost of debt,. If you had a high credit score you would get a very favorable cost of debt so that is what we are up against right now," Greive said.
Greive says the AA+ rating is about the highest a city can get. AA is the next highest followed by AA-, A+, and A-.
Downtown businessman Maurice Baker says the issue of credit score shows the importance of the city working out pension reform as soon as possible.
"Being a great city that we are, we need to fix that, we need to come together as a council, as the mayor and fix the problem," Baker said.
Ron Chamblin, owner of Chamblin's Uptown Books downtown, said the threat of a lower credit score means the city needs to get on the ball and get this thing solved.
"That should give people more focus on getting done what we need to do on the pension fund to get that money, so we can continue to borrow the money cheaper," Chamblin said.
Joey Greive says if the city's credit rating drops a notch or two, it could cost the city $300,000 more in interest on a $100 million loan.
Meanwhile the mayor's office is urging the council to pass the pension reform deal it has worked out.
If not, Mayor Alvin Browns budget he announces next Monday, could see a 14 percent cut from last year's budget, more than 800 city employees could face layoffs or furloughs, and the closing of libraries, fire stations and city recreation facilities.
First Coast News