Council’s pension plan taking too much cash from taxpayers

Nenshi’s two-to-one funding claim doesn’t tell the whole story, Colin Craig writes.

Over the past year, the Canadian Taxpayers Federation has been drawing attention to the golden pensions that are provided to Calgary’s city council.

We’ve also noted very publicly that we’re not trying to blame the current council — the plan was set up and amended before most council members were elected. Our focus is on how to fix it, rather than assigning blame.

Regardless, several council members have still got their backs up and have made nonsensical claims about their pensions. Taxpayers should be aware of the facts.

To begin, at a council meeting last November, Mayor Naheed Nenshi told someone from the public (who was making a presentation at City Hall), that council’s pension was “two to one,” meaning taxpayers would put in two dollars for each dollar a council member puts in. Other members of council have repeated this claim.

Nenshi went on to say that the two-to-one funding approach was “pretty much standard for any pension.”

The mayor was quite wrong on both counts.

Note that council’s pension plan officially calls for a funding formula that is approximately two to one — taxpayers contribute 18.64 per cent of a council member’s salary each year and council members put in nine per cent. However, this funding formula only tells half the story.

The pension plan guarantees council members a payout throughout their retirement years. As a result, the plan has to be assessed regularly to determine the cost of future payouts versus how much the plan will have saved up. Several times over the years, the plan’s bean counters have concluded the plan doesn’t have enough money.

As a result, council simply dumps a large pile of extra tax dollars into the pension plan to keep it afloat.

Nenshi’s two-to-one formula doesn’t count those extra tax dollars, and Coun. Shane Keating says it skews the situation to count them.

Their position is akin to saying we should only count tax dollars going into a councillor’s left pocket, but not their right pocket. It’s nonsensical at best.

When one looks at the total amount of tax dollars spent on council’s pension between 2007 and 2016 (the most recent data available when we started our research), taxpayers paid over $5 for every $1 paid by council members.

In fact, the bill for Calgary council’s pension benefits during that period cost more than Ottawa, Vancouver and Edmonton spent on their council pensions combined. Yes, Calgary spent more than three other cities combined, and yet some council members want us to believe all is well.

Second, it is especially erroneous for Nenshi to make the twoto-one claim, as he receives two pensions from the city, and the second one is 100 per cent paid for by taxpayers. Calgary appears to be the only city in Canada that provides two pensions to its mayor.

Combined, we estimate that the mayor will receive $1.4 million in benefits from his two pensions if he lives to age 85.

As for Nenshi’s suggestion that two-to-one funding formulas are “pretty much standard,” note that most rank and file city employees belong to the Local Authorities Pension Plan. That plan’s formula peaks at about $1.10 put in by the city for every $1 put in by city employees.

To address council’s pension problem, we’ve suggested council members keep the benefits they’ve earned to date, but, going forward, they should scale back how generous their plan is.

Specifically, we’ve called on Calgary to copy Edmonton’s approach.

Edmonton’s defined-contribution pension system doesn’t require expensive bailout payments. Further, instead of an 18.64 per cent contribution, Edmonton’s contribution maxes out at 12 per cent of a council member’s earnings.

Clearly, it’s time to shut down the golden pension party at city hall. The current council may not have come up with the costly system, but they need to fix the problem.