Below is the report I referred to at last night’s GED Committee meeting respecting Council compensation. Although the report is not current, I believe the principles still apply. Staff.
REPORT TO COUNCIL
Prepared by the COUNCILLORS’ COMPENSATION REVIEW PANEL July 20, 1995
SUMMARY
The Council of the City of Vancouver appointed a Committee to advise it on the compensation for members of Council, and to recommend a system to maintain that compensation in an appropriate relationship with the community. We reviewed material provided to us by staff and met as a
Committee on five occasions.
We reached a number of important conclusions:
– We believe that the work of Councillors and the Mayor is demanding and important, and that they should be appropriately compensated.
– While the hours of work are not regular and do include evening and weekend obligations, the information we received indicates that members of Council typically work more than forty hours per week, and, as such, should be compensated on the basis of a full time position.
– We believe that the system of tax-free allowances used throughout the political system is inappropriate, and leads to public cynicism about compensation for elected officials. We are
recommending that appropriate compensation be paid without a tax free component, and that expenses be reimbursed up to a fixed amount.
– We believe that Councillor compensation should be based on the average earnings of Vancouver residents who are employed full- time, and adjusted on an annual basis according to an objective
index, as reported by StatsCan.
– We believe that the present ratio between the Councillors and the Mayor s salaries should be maintained.
We have set out in the body of this report a recommended base level for 1995 salaries for Councillors and the Mayor, and a formula for their adjustment each year.
RECOMMENDATIONS
A. That Councillors should be compensated at the same rate as an average full time employee in the Vancouver area, and that this compensation should be adjusted annually, as set out in this report, to track the changes in wages as reported by Statistics Canada ($39,278 for 1995).RECOMMENDATIONS (CONT’D)
B. That the Mayor should be paid 2.27 times the rate of a Councillor ($89,154 for 1995).
C. That Councillors acting as Deputy Mayor should be paid a supplement equal to 22% of the Mayor’s monthly salary ($1,634 per month for 1995).
D. That there should be no tax free component in the compensation paid to Councillors and the Mayor.
E. That on receipt of expense claims, the City should reimburse actual expenses for members of Council and the Mayor, to a maximum of 10% of their annual wage, the ceiling to be reviewed after one full year of experience.
F. That the new compensation formula should be effective August 1, 1995.
G. That Council compensation should be adjusted on January 1, 1996, and annually thereafter to reflect current compensation levels in the community for an average full time person in the Vancouver area, as set out in this report.
H. That Council should request amendments to the Vancouver Charter so that legislation authorizing Council participation in the Municipal Plan is consistent with legislation governing the Municipal Superannuation Plan.
BACKGROUND
On February 14th, 1995, Vancouver City Council approved the creation of a Committee to review the compensation for members of Council. The Panel was to review all compensation – wage, tax free allowance and benefits – and make recommendations to Council on:
1. Compensation levels for the Mayor and Councillors for 1995
2. A system for ongoing adjustment of Council compensation
On May 16, 1995, Council approved the appointment of eight members to the Committee and terms of reference for its work. The terms of reference for the Committee are attached, as are the resumes of the Committee members as Attachments 1 and 2. In order to meet the schedule requested by Council, the Committee met on five occasions: May 23rd, June 6th, June 19th, June 26th, and July 17th 1995, to discuss research materials submitted by City staff; to request and review additional information; to discuss issues related to the level and structure of Council compensation and benefits; to
formulate our recommendations, and to review the final report.
DISCUSSION
Information Review
Prior to our first meeting, City staff circulated background information to us. This included the history of Council compensation in Vancouver over the past five years; comparative information to other cities in the region and across Canada; and a general description of Councillor duties, responsibilities, and workload. We requested additional information on the number of Councillors relative to budget and population for the City and other municipalities, and more specific information on typical hours of work for a Councillor. We also asked for information on the general level of compensation in the Vancouver area. This information is summarized in Attachments 3 – 7. We were
concerned to propose a system of compensation which would be fair and reasonable, avoiding financial barriers to those running for office, but also be seen to be fair by taxpayers.
The reasons for the tax free component of Council salaries, and the lack of fringe benefits provided to Councillors were considered. We learned that one third of Councillors salaries can be deemed tax free
to cover expenses, without the requirement that expenses be receipted
or described, and that this practice is general across Canada for municipal, provincial and federal elected officials. We also learned that Provincial legislation does not allow the payment of benefits to
Councillors beyond a modest contribution to the Municipal Superan-nuation Plan.
Compensation Levels
We spent considerable time discussing how compensation levels could be set rationally and we considered a range of options towards achieving this. We reviewed information on hours of work for a number of Councillors, and concluded that the job clearly called for a commitment of time at least equivalent to a normal full time job. We noted that members of Council were not well-compensated relative to other Councils in the region and across the country when the size of the City and the
nature of the responsibility was considered. We noted that Councillor compensation has decreased by 5% over the last five years.With this established, we concluded that setting compensation was not an issue for technical job evaluation , but rather called for a logical relationship between the compensation paid Councillors and the people for whom Councillors work — the residents of the City. We concluded that Councillors should be paid the average wage of all people working full time in the Vancouver area, as reported by Statistics Canada. We chose this basis because it was an identifiable amount developed by a neutral body, and because it clearly separates Council from the results of any compensation decision it may make specifically for City employees.
When we considered compensation for the Mayor, we had the same difficulty with any form of evaluation to establish an appropriate rate. We noted that there was a relatively consistent ratio between the compensation of Councillors and the Mayor, and elected to retain the relativity between the two rates. On this basis, the Mayor would be paid at 2.27 times the rate of a Councillor.
Correspondingly, we chose to maintain the relative value of the monthly supplementary payment made to Councillors who serve as Deputy Mayor. This compensation is equal to 22% of the Mayor’s monthly salary.
We noted also that no one in Canada but elected officials is provided with an automatic tax free allowance. We acknowledged that elected officials incur expenses, which must be recognized in any compensation system. However, we believe the tax free component of elected officials’ wages is perceived as a special benefit by many members of the public, and contributes to the growing public disaffection with the political system in Canada. It particularly benefits those who have high incomes from other sources and those who incur lower expenses. Accordingly, we feel confident recommending both that Councillors salaries be pegged to the average wage level in Vancouver, and that there be no tax free component in Councillor salaries.
We recognize that eliminating the tax free component of Councillors’ salaries and paying receiptable expenses increases the cost to the City by up to $48,000 per year, and increases income tax revenue to the federal and provincial governments. We believe however that the practice of tax free allowances is so objectionable that it should be eliminated, even at that cost, and that Vancouver should show
leadership to the entire country in this area. Further, we note this represents a tiny percentage of the City budget.
The detailed calculation is set out in Attachment 8. We have not attempted to provide comparative data on the benefit to individual Councillors, since the elimination of the tax-free component and allowance for modest expenses will affect individuals differently.
Implementation of our recommendations will increase the cost of Council compensation by approximately $75,000 in 1995, ($178,000 on a full-year basis). In a total City budget of $546 million, we believe this is an acceptable cost to provide a sensible compensation system for elected
officials.
Expenses
Since we have recommended the elimination of a tax free component in Councillor s compensation, we examined the question of expenses. We acknowledge that Councillors are required to provide their own transportation and meet many expenses out of their own pockets. We were advised that so long as there was no tax free component in the Councillor s salaries, the City could pass a bylaw to enable the payment of receipted expenses. Accordingly, we have recommended that the City compensate Councillors and the Mayor for receipted expenses incurred within the City up to a maximum of 10% of base salary. The Mayor’s car allowance should be maintained in addition to the 10% expense allowance. (We understand that out of City expenses are presently paid directly by the City, and that this will continue.)
We set this amount at a maximum of 10% to assure that expenses will be controlled, and to avoid creating a situation where the benefit to a Councillor could exceed the impact of a tax free allowance. After one year of experience, the percentage should be reviewed to determine its relative accuracy.
Benefits
We noted that the average employee in the Vancouver area would also receive at least some benefits. We were advised, however, that the Vancouver Charter did not allow the City to pay for benefits beyond participation in the Municipal Superannuation Plan, although Councillors are allowed to participate in other City benefit plans if they pay the full cost.
However, under these circumstances we could not consider benefits further.We were advised that participation in the Municipal Pension Plan is governed by Vancouver Charter provisions, which are
inconsistent with general pension legislation covering City employees and adversely affect Council members to a limited degree. We believe that Council should request amendments to the Vancouver Charter so that the legislation authorizing Council participation in the Municipal Superannuation Plan is consistent with legislation governing the Municipal Superannuation Plan.
Indexing Salary Increases
Using the basis we have set out to determine compensation for Councillors and the Mayor, adjustments can and should be readily made to keep compensation consistent with that of the community.
We propose that the Councillors’ salaries should reflect our best estimate of the average full-time employed person in Vancouver, in each year. At the time of the latest census (1990 figures), the average earnings from employment for Vancouver residents employed full-time/full-year was $33,881. In order to arrive at an estimate of average earnings from employment for 1995, this figure was inflated by the annual increase in average earnings for all British Columbians, to $39,275 (see Attachment 8). This is the base salary recommended for City Councillors in this report.
The following is proposed as a method of indexing City Councillors’ salaries on an on-going basis, as presented in detail in Attachment 8. The intent of this is to maintain the relationship between Councillors’ compensation and that of the average full-time employed Vancouver
resident. Every five years, census figures will be used to determine average earnings from full-time employment for Vancouver residents. In the interim years, the annual change in average employment earnings for all of British Columbia will be used to index Councillors’ salaries. This information is readily available, on a provincial level, from StatsCan. If these data become available for Vancouver alone, it is recommended that this be used as an index, rather than the average change in earnings for all British Columbia residents.
With all other factors of compensation a multiple of the Councillors’ salary, they will automatically be indexed. These are: the Mayor’s salary, the compensation for serving as Deputy Mayor, and the maximum allowable refunded expenses.
CONCLUSIONS
We believe that Councillors and the Mayor do an important job, which should be adequately compensated. We believe the methodology set out in this report produces a sensible, defensible basis for Council compensation. We acknowledge that there will be an increased cost to the City arising out of our recommendations. Insofar as these increase the net compensation to Councillors, we believe they do so reasonably and appropriately. To the extent these increases relate to elimination
of the tax free expense allowance under the present system we believe they are well justified by the clarity achieved and the consistency with how citizens in Vancouver are paid and taxed.