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Taxpayers Fund Video Screens as Jacksonville’s Pensions Hurt

July 28 (Bloomberg) -- If you went to Jacksonville and covered all 21,720 square feet of the world’s largest video screens with $100 bills, you’d have about 1 percent of what Florida’s most populous city needs to pay for its pension shortfall.

While taxpayers helped finance the $26.5 million screens and other upgrades at the city’s National Football League stadium, Jacksonville struggles to find money for less glitzy amenities -- new roads, parks and street signs -- blocks away. Pension costs are gobbling up most new revenue, jeopardizing Mayor Alvin Brown’s plans for redevelopment.

“The pension is by far a very serious elephant-in-the-room problem that we have to deal with,” said John Crescimbeni, one of several city council members threatening to block Brown’s infrastructure plan. “We can’t afford to do new projects when we are facing all these uncontrollable costs.”

Jacksonville, which has $1.7 billion in liabilities for retirement benefits, is one of several U.S. cities that renovated or built stadiums even as pension gaps widened. Improvements to streets and sewers have suffered too, with cities from San Jose to Detroit delaying or abandoning redevelopment plans to address pension shortfalls totaling $1 trillion across the U.S., according to the Nelson A. Rockefeller Institute of Government in Albany, New York.

Targeted Tax

In cities such as Jacksonville, a community of about 840,000 on the St. Johns River where the U.S. Navy is the largest employer, stadium subsidies and pension costs come from two separate pots of money, said Chris Hand, chief of staff for Brown. The hotel taxes that funded the video screens are legally restricted and can’t be used for other purposes. Shad Khan, billionaire owner of the Jacksonville Jaguars, also contributed $20 million of the $63 million renovation costs.

The high-definition displays stretch more than 360 feet long and are 60 feet tall, allowing direct views from any of the stadium’s 67,000 seats, according to Daktronics, the Brookings, South Dakota, manufacturer that built them. They’re capable of showing multiple images and highlights simultaneously, while also broadcasting statistics, animations and advertising messages.

The devices, whose metric measurements are 2,018 square meters, are built to withstand heat, rain and snow, according to Daktronics.

Balky Council

Jacksonville’s council, which approved the subsidy to help erect them at the city-owned stadium in November, last week threatened to block the mayor’s 2015 budget proposal because it includes $230 million in borrowing and draws down at least $17 million from reserves.

Council members pointed to the pension, which is the third-most underfunded among the 25 largest U.S. cities. Only Chicago and Philadelphia are in worse shape, according to Morningstar Inc.

An agreement with police officers and firefighters to scale back benefits will reduce the liability during the next 15 years, Brown has said. The city will pay an extra $40 million annually for a decade to shore up the retirement system. It’s not clear where that money will come from.

“Rising pension costs force difficult decisions” for cities, including those where revenue has begun to rebound, said Thomas Aaron, a Moody’s Investors Service analyst in Chicago. Moody’s cited Jacksonville’s pension burden in downgrading the its credit rating last month to Aa2, the third-highest ranking.

Squirmy Things

Pensions are a “gigantic financial tapeworm,” Warren Buffett, the 83-year-old chairman of Berkshire Hathaway, said in a March 1 annual report to shareholders. In a growing number of cities, they’ve become more like boa constrictors, restraining officials as they try to emerge from the recession that ended five years ago.

Long Beach, California, has seen two consecutive years of surpluses after more than a decade of shortfalls. Yet former Mayor Bob Foster this month opted against using any extra revenue to restore services or fund postponed projects. The money should be put away to cover pension costs, which are on pace to push the city back into deficit territory by 2017, Foster said before leaving office July 15.

Ambitious Plans

Pittsburgh, among the first U.S. cities to recover all the jobs lost during the recession, faces its first operating deficit since 2005 due to pension costs. The $50 million in bonds the city approved this month “won’t be enough” to pay for a long list of delayed infrastructure projects, said Tim McNulty, a spokesman for Mayor Bill Peduto.

In San Jose, which has more than $1 billion in unfunded infrastructure needs, retirement costs will absorb almost all of next year’s increase in revenue, city records show.

As for Jacksonville, Brown’s plan for renovating downtown is facing similar constraints.

His budget proposal for next year includes redeveloping a downtown shopping plaza, cleaning up the river and designing an amphitheater near EverBank Field, home to the record-sized video screens, which hover above the end zones.

The plan also calls for projects across the metropolis, which at 875 square miles (2,270 square kilometers) trails only Anchorage, Alaska, among the largest U.S. cities by size.

Most money would come from new debt, as pension costs will sap more than half the surplus revenue next year. Retirement costs for Jacksonville’s police and firefighters have more than doubled since 2006 and account for more than 15 percent of the $1 billion budget.

Rejection Slip

The council delayed a vote on the proposal last week, opting to take time before setting the maximum tax rate for next year. Hearings on the budget are to begin next month.

“I would like to give it back to the administration and say, ‘Please balance this budget properly’,” said Councilman Bill Gulliford.

Brown has defended the plan, calling the projects “essential investments” in making Jacksonville an international destination.

The city council was more agreeable when Brown and the Jaguars proposed the stadium deal last year. It approved $43 million in funding for the upgrades to EverBank Field. In addition to the two video screens, the facility features wireless Internet, swimming pools behind one of the end zones and even poolside cabanas with fancy furniture and special refreshments.

The resolution approving the spending said the video screens would help make the stadium a “world-class facility.”

“Everybody’s got to be famous for something,” said Tom Majdanics, who runs a charter-school nonprofit in Jacksonville and planned to visit the stadium.

“Jacksonville’s turning the corner,” he said in an e-mail. “But our growing pension problem is an anchor, holding us back from achieving our full potential.”

To contact the reporter on this story: Toluse Olorunnipa in Tallahassee, Florida at tolorunnipa@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Schoifet

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