It's coming up to that time of the year again. I heard that Councillors are going to be setting aside Saturdays for budget review. Last year, committees of Council worked hard to try to keep our taxes low. They did not succeed as much as they had hoped. Here is part of the speech I gave to Council at the start of its budget deliberations that helps explain why they were not as successful as they had hoped:
There is a "taxing" authority in the Province that can download its costs to municipalities, and that can throw your budget deliberations out the window with the stroke of a pen---as it did in Windsor and in many other cities and towns throughout Ontario last year.
Its power is supreme and exclusive. You must deal with it. You have no appeal from its decisions. You must pay if it says so and in whatever amount it determines and however it determines it. That body is Ontario Municipal Employees Retirement System (OMERS). It is a huge and powerful Pension Plan that serves and supports over 355,000 members, employer groups and retirees throughout the province.
And that remark in the headline, it's not my language but that of Frederick Biro, OMERS' Chair.
And here is what OMERS has said about the contributions that it requires for 2006:
- The OMERS Board has asked the Ontario government to approve a plan contribution increase for both employers and employees that will come into effect the first full pay in January 2006.
The contribution rate will be increased by an average of 0.6% of a member’s annual earnings, which works out to an increase of about 9% in the actual dollar amounts a member and employer would contribute. In other words, a member contributing $100 per pay today would pay about $109 per pay in 2006.
OMERS EXCLUSIVITY
9. (1) An employer shall not make a contribution for the provision of a pension to an employee unless the contribution is made,
under this Act
11. The contributions of the employers who participate in the System shall be such an amount as is required, in addition to the contributions of the members and the interest earned by the Fund, to provide for the payment of the benefits and the expenses under the regulations.
We know of OMERS in Windsor since we are in the position of helping to fund DRTP. (as one Councillor stated: "it is galling that the city’s contributions to OMERS are being used against us and causing us to duke it out with the free-spending DRTP.") But I am not here to debate the value of DRTP. Rather I am here to suggest that I believe that Council and its Unions must consider alternatives to OMERS for the benefit of workers and taxpayers in the City. After all, it is taxpayers who fund the contributions directly and also indirectly through the payment of wages to workers.
And the amounts are considerable. Over $30 million is taken out of the Windsor economy by OMERS in contributions by the City and its employees each year!
As you know, when I was General Counsel of STOPDRTP, we wrote a letter to the Minister of Finance demanding an inquiry into OMERS after they had a pension loss of $2.2 billion in 2002 and reported that for 2003 it was writing down $600 million in assets. Its Chair said its $10 billion surplus was reducing rapidly as well. As at December 31, 2004, they have an actuarial funding deficit of $963 million. As OMERS amortizes the losses and gains of investment returns over five years (known as actuarial smoothing), the deficit is expected to be about $2.5 billion by year-end 2005.
I have a concern about OMERS as was set out in our complaint to the Minister. And my concern increases as they may well have a new governance model that Association of Municipalities of Ontario President Roger Anderson warned may mean higher costs for municipalities, municipal employees and property tax payers
I believe that now that the union contracts are ratified, the City and its unions as well as taxpayers need a better approach to retirement financing. I am trying to develop such an approach. I hope to be able to address the appropriate group within the City once my work is completed.
The object is to give certainty in budgetting and contribution amounts while at the same time enhancing the benefits for workers and giving them more control over their money.
The pension system we have now demands a fresh approach. While I am certain that what I will propose may be considered controversial and will require a change in established thinking, I am also confident that people will see the advantages in it.
NOTE: Eddie must have listened. Here is what the Star reported on his remarks at the annual conference of the Association of Municipalities of Ontario:
"One example of downloading on Francis's mind is the potential devolution of the Ontario Municipal Employees Retirement System (OMERS), which handles the pensions of municipal workers. In June, Queen's Park announced a bill that would shift responsibility for the OMERS plan from the provincial government to a stakeholder-based sponsors corporation.
"Let me tell you, this OMERS issue, as was characterized in the conference, is a sleeping giant. It will have a significant impact on all municipalities," Francis said.
Francis estimated that in Windsor alone the bill could cost the city $6.5 million annually. "That's $6.5 million that we would have to find, that would otherwise be put to services to properties. (That's) $6.5 million less we will have available to deliver services to our residents."
Francis said he and the mayors of other urban centres will reconvene in September to prepare a case for returning to the province some of the services that have been downloaded thus far, and to brace for debate on the OMERS bill.
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