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.
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