Jan 12, 2019
Here’s the short of it. Yes, I voted for pay increases for councillors at a time of financial challenges for the city—for a couple of reasons.
Federal income tax changes that begin in 2019 have removed a tax exemption for all municipal councillors. The effect of this change is a decrease of 10.4% in take home pay. The increase in pay is meant, in part, to offset the tax changes. (But for some councillors, me for example, the effect of the changes meant my net pay would have increased.)
It always looks bad for councillors to set their own pay. Part of the motion included direction to develop a policy to determine, in a more impartial way, what we should make. I thought this was important for council to create. Of course, a policy to govern council pay should have been created years ago, but there is no time like the present to get started.
Personally, I have declined the increase. While I think the pay is reasonable the principle of council deciding what they should get paid is problematic. So until a policy is in place, that I support, I will not be accepting any increases and will remain at the salary I was elected under. I also know that not all of us are so lucky—to be able to change our pay when tax changes affect us. Many are at the mercy of governments and can’t so easily adjust incomes. That’s a valid criticism I have taken to heart. Councillors salaries increased from $34,750 to $43,150. I’ll be donating the increase I was set to receive back to the City of Medicine Hat, deducted on every paycheck. I quit my job to do this full-time, so this is my only source of income.
Here’s the long of it.
What should municipal councillors be paid?
Let’s start with what I make right now. Here is my year-end payslip for 2018.
Somethings to highlight:
My total compensation is $34,750. (the bi-weekly pay periods don’t exactly line up with the calendar year so my pay stub shows slightly less than this amount under my total earnings.) This is made up of my base salary of $23,150 (‘Regular Earnings’ on my pay stub) and a $11,600 general expense allowance (‘Elected Official General’ on my pay stub). More on what this general expense allowance is later, but the sum of these two numbers is my total compensation.
My listed hourly wage is $12.10. This figure calculated at 36 hours per week (72 over two weeks on my pay stub) over a year is $22,080—roughly my base salary. Though the hours I put in are irrelevant. This is a salaried position based on the job I do, not the hours I put in. An experienced councillor might spend half the time that I do because they’re not learning everything from scratch.
You might notice I have a lot of banked sick hours (433 hours). These are all from my previous job at the Medicine Hat Public Library. Although MHPL is an independent organization, the City handles payroll for them, hence I was already in the system before I quit my job at the library to focus on this job full time. I’m lucky that I rarely get sick and I accumulated these hours over five years. I don’t think there’s anyway to make use of these banked hours anymore or cash them out. I don’t receive any sick time/pay as a councillor.
The Medicine Hat News ran a story on council remuneration. It stated that councillors receive $25,000 in additional benefits. This figure is accurate, though misleading. If I used every benefit that was available to me (vision, dental, prescriptions, physical therapy, etc) that would total this amount, however, some benefits are not applicable to me. For example, I have dental benefits for orthodontics, but only for children under 18. I don't have any children, but if I did, and if those children received orthodontics this would contribute towards to the maximum figure. What I actually charge to Alberta Blue Cross and what the city pays to provide these benefits to me are different numbers. The total cost of the health benefits to me covered by you, the taxpayer, is $5,466.85—indicated on my pay stub.
Other benefits to council include travel insurance and a $30,000 life insurance policy. Again these benefits are part of the benefit package shared with all other city employees.
The city also offers councillors an optional savings plan as part of a retirement plan. The city will match up to 7.5% of my paycheck. I contribute $66.77 every paycheck, which the city matches. There is approximately a cost of $1,500 annually for this.
Changes to the Income Tax Act
On April 11, 2017, the Federal Government introduced Bill C-44, “An Act to Implement Certain Provisions of the Budget Tabled in Parliament on March 22, 2017 and Other Measures.” One of the measures was to “remove the tax exemptions for non-accountable expense allowances paid to members of provincial and territorial legislative assemblies and to certain municipal office holders. This exemption is only available to certain provincial, territorial and municipal office holders, and provides an advantage that other Canadians do not enjoy.”
Bill C-44’s rationale continues. “The reimbursement of expenses incurred in the course of carrying out the duties of an office or employment is generally not a taxable benefit to the recipient. By contrast, a non-accountable allowance for which an individual does not have to provide details or submit receipts to justify amounts paid is generally a taxable benefit.”
“Certain officials, may, however, receive non-accountable allowances for work expenses that are not included in computing income for tax purposes. Budget 2017 proposes to require that non-accountable allowances paid to these officials be included in income.”
“In order to provide affected organizations more time to adjust their compensation schemes, this measure will apply to the 2019 and subsequent taxation years.”
Historical City Council Compensation Practice
The roots of this issue trace back to 1999 when the council of the day adopted a new pay scheme for councillors. Two-thirds of the total annual compensation would be paid to council members as a base salary and one-third of our salary paid as a general expense allowance. The base salary ($23,150) was “an all inclusive amount provided to Council Members for their time and service carrying out their duties, including preparing for, attending and following up on meetings.” The general expense allowance ($11,600) on the other hand was “a non-taxable allowance to offset costs incurred as an elected official.”
Taken from council’s compensation policy.
A non-taxable general expense allowance is an odd way to compensate councillors. Though not a unique way since most municipalities changed their compensation schemes based on this tax change. And I can see the merit in changing the tax act to harmonize it better.
Since the general expense allowance would now be taxable that would result in a 10.4% decrease in take home pay for councillors and a 12.8% decrease for the mayor position.
Compensation Changes
I voted in favour of these two changes to council compensation.
The only way to compensate for these tax changes was to increase our salary. Since councillors no longer have a general expense allowance our base salary was increased from $23,150 to $43,150. That looks like a doubling of our salary, but it’s actually increasing $8,400—since remember our total compensation right now is $34,750. (But this increase is more than what I would lose with the tax changes. Though other councillors with full time jobs may not see any net increase I would have seen an increase.)
Our savings plan changed. Right now the city will match up to 7.5% of my contributions to a RRSP or a Tax Free Savings Account. This amount would increase to a maximum of 12%. This increase is unrelated to the tax changes.
Why I voted in favour
We might disagree on what a councillor should make, but we should agree that councillors should be paid something. Otherwise this job would only be available to the rich. $43k for this position is reasonable. (As it is retirees or those close to retirement are disproportionately represented historically on council. That indicates that financial security are important considerations in pursuing this job. Something that younger people have less of. If we want to make this a realistic option for younger people we need to increase councillor pay.)
Considering the long term sustainability of the city hinges on the decisions council makes our salary does not cover the responsibility of the job. But I don’t expect it to.
Why I declined the pay increase
Perception matters. We live in a political environment where the reputation of politicians is low. The margin of error even for new untarnished politicians is slim. I’d like to preserve as much trust in the community as I can. I’m making an honest effort to carry out the duties of this office with as much care and diligence as I can. This includes guarding against the perception of self-dealing.
It is always awkward when the people who make the rules decide what they get paid. Our pay should be decided by policy that builds trust that council is deciding our compensation in a fair manner. Until we have a policy in place that accomplishes this I’ll remain at the same salary that I was elected under. The salary increase will be deducted on my paychecks.
How should council pay be decided?
A policy that has the blessing of the Medicine Hat Chamber of Commerce and the Canadian Union of Public Employees seems a good place to start. Both of those groups have an interest in ensuring fair compensation.
Benchmarking with other municipalities
Grande Prairie studied council compensation in 2017 in anticipation on these tax changes. This survey of Alberta council compensation is from their final report. The survey lists a Medicine Hat councillor salary with benefits as totalling $43,625. That number is close, but not accurate. Nonetheless, this survey gives you a rough idea of how other municipalities compensate their councils.
I spent a bit of time searching for the top mid-sized municipalities by population size and what they pay their councillors. I left off Edmonton and Calgary since they are too different to be a helpful comparison. The figures just include salaries, not the cost of benefits.
We could either:
use what other similar sized municipalities pay their councils to set our pay.
or we could think about what a council is worth to Medicine Hat and create an independent rubric to set compensation.
Regardless of which approach we take there should be an important caveat. The ‘Living Wage’ changes from city to city. Medicine Hat’s living wage is about $15.00/hour considerably lower than Red Deer for instance at $17.74/hour.
That means that our wages go about 18% further in Medicine Hat. The Living Wage should be factored in when comparing salaries.
The council savings plan in the new compensation scheme is on the high end for municipalities. It ranges from zero in some cities, like Lethbridge, that have no savings plan for councillors. To a high in Edmonton of a matching 12%, like we now have. The reason for a savings plan is to help councillors save for a retirement since we’re prohibited from participating in other public services pensions.
Obstacles to running for council
Whether our current system of compensation will attract the best candidates to run for municipal office is a related question.
We can only vote for the people that actually run. There is a great selection of talented Hatters, but if they don’t run we don’t have the opportunity to elect them. I’ve talked to a lot of people, encouraging them to run in the next election, but there are a number of reasons people hesitate. We might attract better candidates with more money, but not necessarily.
1. Time Commitment
Adding a full time council job to your life, on top of your regular job and kids and your life seems overwhelming to most.
2. Stress
I walked into this job having watched council work for three years and so I came in with my eyes open. Even so, there’s nothing like being in the job to experience what it’s like. You are elected to make difficult decisions. Knowing that at the end of four years many people will not only disagree with your decisions, but may vehemently dislike you (even if your votes are taken with care and seriousness) is not an appealing thought for anyone.
3. Career Interruption
Even if we moved to full-time councillors (and paying them as such) many candidates would have to interrupt their careers. And since many former councillors say it takes the first term just to learn the system, you’d need at least two terms (8 years) to be effective. That’s losing years of career progress in the prime years of your career. Again my example. I left a secure job, of which they aren’t many, for a job with no job security. If I wanted to return to work as a librarian at the end of my council term there’s no guarantee I could return to my previous job or find a job in my field in Medicine Hat.
Time commitment, stress and a career interruption are real costs and impediments of which money will only partly compensate for.
Is this the right time to deal with council compensation?
No, the timing is terrible. We are asking this city for a lot of help in solving our challenges. To give ourselves a raise now, council has lost some trust during a period when we need the community’s trust more than ever.
We could have done a better job handling this issue. As Collin Gallant points out in his thoughtful column on this issue, it is council’s job to help the community navigate difficult topics. But the subject of council compensation does have to be dealt with. Considering the challenges facing the city it’s a perfect time to talk about leadership and if we’re getting what we need from council. If we’re continually disappointed with council, perhaps we need to rethink recruitment. And compensation is a part of that discussion.
For my part. I’ll say this to other young people. Safira and I started thinking and planning three years before the last election. 2021 is three years away. Start thinking and planning.
A year in and I’ll say—this is the best job I’ve ever had. Even on the bad days. Everyone has such a low opinion of government, yet we need this institution to tackle the many problems facing our city, province and country. Can we make government work well? Can we increase the trust of citizens in government? That is a major task for our generation. Until we find a better system of governance we’ll need good councillors. There are big puzzles to solve and we need our best and brightest trying to solve them. 2021 is coming.