Corporation of the Municipality of Brockton

Transcription

1 Corporation of the Municipality of Brockton Report to Council Report Title: Prepared By: Department: Council Remuneration 2019 to 2022 Term Trish Serratore, CFO Finance Date: May 14, 2018 Report Number: FIN File Number: C11FIN Attachments: Report FIN Council Remuneration Recommendation: That the Council of the Municipality of Brockton hereby receives Report Number FIN prepared by Trish Serratore, CFO and approves the following Council remuneration for the 2019 to 2022 Council Term: Position Year Year Year Year Mayor $27,537 $28,225 $28,931 $29,654 Deputy Mayor $16,529 $16,942 $17,366 $17,800 Councillor (5) $13,777 $14,118 $14,471 $14,833 Plus cost of living, should it exceed the 1.5% In addition, Council approves Option for the upcoming remuneration and direct staff to bring forward the appropriate by-law. Report: Background: With the impending election, Council felt that it was important for them to set the upcoming remuneration rates to be fair and consistent in comparison with other local municipalities. With that in mind, a Council Remuneration Review Committee was established. The chair of the Council Remuneration Review Committee, Tim Mancell, presented the Committee s recommendations to Council on December 11, On January 22, 2018, Council reviewed Report FIN Council Remuneration and approved Resolution and directed staff to bring back an updated Council Reimbursement Policy and Council Conventions:

2 Resolution Moved by B. Bell Seconded by C. Peabody That the Council of the Municipality of Brockton hereby receives for information Report # CFO Council Remuneration prepared by Trish Serratore, CFO and approves Option #2 in setting Council remuneration for and authorizes a By-Law coming forward; And further that the companion program registration fee for conferences and that mileage for meeting attendance within the municipality be excluded from the current policies related to Council Remuneration and that the appropriate by-laws be brought forward for consideration. Carried. Analysis: Section 255 of the former Municipal Act, R.S.O provided that one-third of the salary paid to an elected member of council was deemed to be for expenses incurred in the discharge of the member s duties. As such, this portion of a Councillor s salary is not subject to income tax. Section 283(7) of the Municipal Act requires that each Council review the option to exempt one-third of the salary at least once during each four-year term of Council after a regular election. Currently, the Council of the Municipality of Brockton are under the provision with one-third of their remuneration being treated as expenses related to carrying out their duties (a tax-free allowance), and two-thirds of their council remuneration remains taxable. In March 2017 the Federal Government announced through its budget that it would be removing the tax exemptions for expense allowances paid to municipal councillors effective January 1, The measure affects elected members of provincial and territorial legislatures, as well as municipalities. Elected officials of municipal utility boards, commissions and corporates will also be subject to the rule, as well as members of school boards. The 2017 Federal Budget eliminates the councillor tax exemption: 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 officeholders, and provides an advantage that other Canadians do not enjoy. Further detail in the 2017 Federal Budget states: 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 nonaccountable allowance for which an individual does not have to provide details or submit receipts to justify amounts paid is generally a taxable benefit. Municipal 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. The reimbursement of employment expenses will remain a non-taxable benefit to the recipient.

3 To provide affected organizations more time to adjust their compensation schemes, this measure will apply to the 2019 and subsequent taxation years. This federal tax exemption has been in place since 1947 under the Income Tax Act. The Association of Municipalities of Ontario is lobbying the federal government to reconsider removing this exemption. There will be an increased cost to municipalities whether elected officials maintain their same net or gross pay through mandated employer contributions to the Canada Pension Plan and Employer Health Tax. Also, the Municipality is currently eligible to receive a GST/HST rebate on one-third of the remuneration paid as these are considered expenses and not salaries. This rebate will no longer be available to the Municipality and would be an increased cost due to the loss of GST/HST rebate. Staff have prepared an analysis on the financial impacts of the changes to Council remuneration. We felt it prudent to bring forward the following options before adopting the remuneration schedule based on the removal of the 1/3 tax-free allowance. To be able to compare the effects of these changes, we have the current, (2018) Council net remuneration followed by the 2019 remuneration with two options. Option one being fully taxable, no change in gross pay and option two fully taxable and adjust gross pay to maintain the same net pay. Current, 2018 net remuneration: 1/3 Tax Exempt Status Quo Annual Remuneration (2018) $13,438 $16,125 $26,865 Taxable Earnings $8,959 $10,750 $17,910 Non Taxable Earnings $4,479 $5,375 $8,955 Income Tax -$891 -$1,070 -$1,782 CPP -$270 -$359 -$713 Net Pay $12,276 $14,697 $24,370 The following illustrates what the net compensation would be for Council, based on the current 1/3 tax-free allowance and the recommendation of the committee: 1/3 Tax Exempt Status Quo Annual Remuneration (2019) $13,777 $16,529 $27,537 Grossed up Amount Total Remuneration $13,777 $16,529 $27,537 Taxable Earnings $9,185 $11,019 $18,358 Non Taxable Earnings $4,592 $5,510 $9,179 Income Tax -$914 -$1,096 -$1,827 CPP -$281 -$372 -$735 Net Pay $12,582 $15,060 $24,975 As illustrated above, without upcoming legislative changes to council s remuneration, there would be a net increase for all council members.

4 However, with the changes being made in 2019, Council of the Municipality of Brockton have the following two options: 1. Fully Taxable - No change in gross pay proposed for 2019 Option 1 Fully Taxable - No Salary Change Annual Remuneration (2019) $ 13,777 $ 16,529 $ 27,537 Grossed up Amount Total Remuneration $ 13,777 $ 16,529 $ 27,537 Taxable Earnings $ 13,777 $ 16,529 $ 27,537 Non Taxable Earnings Income Tax -$ 1,371 -$ 1,645 -$ 2,740 CPP -$ 509 -$ 645 -$ 1,190 Net Pay $ 11,897 $ 14,239 $ 23,607 Option 1 would have the following effects on Council s net pay: Decrease from 2018 net pay $ 379 $ 458 $ 763 Decrease in proposed 2019 net pay $ 685 $ 821 $ 1,368 And also, there would be the following increased costs to the Municipality: Budgetary Impact Option 1 Councillor (5) Deputy Mayor Mayor Salary $ - $ - $ - CPP $ 1,137 $ 273 $ 454 EHT $ 448 $ 107 $ 179 Total Additional Costs $ 1,584 $ 380 $ 633 Additional Costs to Municipality: $ 2,598 Add: Forgone HST on 1/3 exempt portion $ 3,651 Total Additional Costs to Municipality $ 6,249 As indicated, Option 1 illustrates a reduction in the council member s remuneration for 2019 with an operational increase in the municipality s expenses of $6, Fully Taxable Grossed up Option 2 Fully Taxable - Grossed Up Annual Remuneration (2019) $ 13,777 $ 16,529 $ 27,537 Grossed up Amount $ 804 $ 965 $ 1,607 Total Remuneration $ 14,581 $ 17,494 $ 29,144 Taxable Earnings $ 14,581 $ 17,494 $ 29,144 Non Taxable Earnings Income Tax -$ 1,451 -$ 1,741 -$ 2,900 CPP -$ 549 -$ 693 -$ 1,269 Net Pay $ 12,582 $ 15,060 $ 24,975

5 As illustrated, there is no effect on Council s net pay. However as noted below there is an increased cost to the municipality. Which has the following budgetary impact: Budgetary Impact Option 2 Councilors (5) Deputy Mayor Mayor Salary $ 4,020 $ 965 $ 1,607 CPP $ 1,336 $ 320 $ 534 EHT $ 526 $ 126 $ 210 Total Additional Costs $ 5,882 $ 1,411 $ 2,351 Additional Costs to Municipality: $ 9,644 Add: Forgone HST on 1/3 exempt portion $ 3,651 Total Additional Costs to Municipality $ 13,295 As illustrated, option 2 allows Council to receive the same net pay. However, there is an operational increase in the municipal expenses of $13,295 using 2019 rates that would be included in the 2019 budget. Sustainability Checklist: What aspect of the Brockton Sustainable Strategic Plan does the content/recommendations in this report help advance? Do the recommendations help move the Municipality closer to its Vision? N/A Do the recommendations contribute to achieving Cultural Vibrancy? N/A Do the recommendations contribute to achieving Economic Prosperity? N/A Do the recommendations contribute to Environmental Integrity? N/A Do the recommendations contribute to the Social Equity? N/A Financial Impacts/Source of Funding: Do the recommendations represent a sound financial investment from a sustainability perspective? Yes Based on the options presented above, the municipality would be looking at increased costs from approximately $6,249 - $13,295 for 2019 depending on which option council chooses. Respectfully Submitted by: Trish Serratore, CFO

6 Reviewed By: CAO/Clerk