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Calgary needs to scale back generous pension for city council members

Author: Colin Craig 2018/06/21

If you add up all the tax dollars spent by the City of Edmonton, Ottawa and Vancouver on their city council pensions over the past decade, Calgary spent more than all three of those cities combined.

In fact, Canadian Taxpayers Federation research also suggests Calgary is the only major city in Canada that provides two pensions to its mayor.

Despite these dubious facts, some members of Calgary’s city council have essentially been telling the public there’s nothing to worry about.

Well, there is something to worry about — council’s pension is way too generous and it needs to be fixed.

Just ask Coun. Jeromy Farkas. He’s only city councillor who has publicly refused to accept the golden pension. Farkas’s rationale: it’s too “lucrative.”

And with that decision last year, Farkas literally said goodbye to hundreds of thousands of dollars in benefits.

Note that after just four years on council, a city councillor will receive an estimated $290,000 in pension benefits if they live to 85.

To be clear, the current council didn’t create the problem.

None of them were on council when the pension plans were set up in 1989 and 1999. Very few were on council in 2007 when the plans were modified.

While this current council didn’t cause the problem, it needs to fix it.

When you look at Edmonton’s council pension costs from 2007-2016, it’s consistent from year to year.

The City of Edmonton contributes the equivalent of 12 per cent of a council member’s salary towards their pension. When they retire, council members then receive their share of whatever the fund generates. There’s no guaranteed payments, so if the fund drops in value due to a recession or poor investment decisions, council members have to make do.

Over the same period, Calgary’s council pensions cost taxpayers five times what Edmonton spent. The difference can be attributed to two problems.

First, the City of Calgary contributes the equivalent of 18.64 per cent of a council member’s earnings into the council pension instead of Edmonton’s 12 per cent.

Second, the City of Calgary guarantees a payout to council members when they retire, no matter how long they live.

You can see how this approach is risky.

If councillors live longer than expected, where will the fund get the extra money to make the extra guaranteed payments?

If the pension’s investments falter, who makes up the difference?

If inflation is higher than expected, who pays the tab?

You guessed it: taxpayers.

Several times over the past couple of decades, the plan ran into problems and the city simply dumped piles of extra taxpayer cash into the pension — every few years there seems to be a large spike in spending.

Some council members don’t like counting these extra payments. But that’s akin to saying we can only count money going into a council member’s left pocket and not their right.

Going forward, it would be reasonable for council to keep the benefits they’ve already earned, but begin earning benefits at the same rate as Edmonton’s council.

Try asking your councillor what they think about this option. If they balk and refuse to take action, you’ll know that they’re now part of the problem.

This column was published in the June 21, 2018 edition of the Calgary Sun


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