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Comment: Tax exemptions for council belie transparency

Victoria city council’s proposal to award itself a one-third salary tax exemption to cover “incidental expenses” is a step backward from transparency and openness and will continue to widen the gap between the mayor and council and the citizens who e

Victoria city council’s proposal to award itself a one-third salary tax exemption to cover “incidental expenses” is a step backward from transparency and openness and will continue to widen the gap between the mayor and council and the citizens who elected them.

The fact that this could save $56,000 on a city budget of nearly $200 million fails to overcome the lack of accountability — for more than $11,000 in tax-free expenses for councillors and more than $28,000 in tax-free expenses for the mayor — implicit in this move. No records or receipts need to be kept and no accounting is ever made for these expenses.

Standards of transparency must be high if elected officials are to retain the trust of the public. This is what is driving the auditor general as well as editorial writers who are taking provincial MLAs to task for not publishing and being open about their expenses.

Concern over transparency was one of the key concerns of our citizens’ committee when we reviewed council remuneration in 2006. We heard from the public in both writing and at public hearings and presented our report to open council.

Our guiding principles were that council’s salary structure should be transparent, accountable and reasonable, with no hidden benefits or convoluted formulas.

The salary should reflect the demanding nature of the job, the high expectations of the public, as well as the fact that we elect a mayor and councillors to be stewards of one of the finest cities in the world. Councillors should be well-enough paid to attract people from all walks of life, not just those of independent means.

We reviewed the existing salary structure. It was confusing, with hidden benefits. In addition to the published base salary, we found an additional 11 per cent in lieu of benefits, an extra paycheque every eight months as compensation for acting mayor duties and the one-third tax-free allowance. We also learned of the payments received for serving on external boards and commissions, which we left outside our recommendations.

Our recommendations were based on the principles in our terms of reference. We recommended a single salary set at 75 per cent of the average full-time wage of those who work in the city plus an end to the tax-free allowance and other hidden benefits. The tax-free allowance was introduced in federal tax legislation passed in 1947 for all elected officials. It has been abolished subsequently for members of Parliament, MLAs in B.C. and in some other “big city” municipalities such as Vancouver.

We also recommended that councillors and the mayor should file claims with receipts for legitimate expenses, the same as other city employees in management ranks. This seemed only reasonable.

We considered that a $28,000-plus tax-free allowance to cover “incidental expenses” for the mayor and $11,000-plus to cover “incidental expenses” for councillors was not reasonable when they continued to claim travel and other receipted expenses from the city. For the mayor, this is an amount well above the basic income of a pensioner and gives him $110 per work day for “incidentals.” For councillors, it provides more than $45 per work day.

What incidentals could reasonably cost so much?

The element of fairness was another important factor. It did not seem fair that this tax-free benefit should be available to mayor and council but to none of the citizens who elected them. Further, it didn’t seem fair that the take-home benefit wasn’t equal for all councillors, because the full benefit of the tax-free allowance depended on which tax bracket the councillor was in at income-tax-filing time. The higher the tax bracket, the greater the benefit.

The total cost of all our recommendations — giving a pay raise to reflect the demanding work, setting a single transparent salary and abolishing the tax-free benefit — amounted to 0.001 per cent of the total city budget. We and the council of the day thought it was money well spent.

The current council proposal would reinstate receipt-free “incidental” expenses, thus giving a tax benefit not available to anyone else and providing different benefits to different councillors, depending on their outside incomes.

This runs counter to the basic principles that our committee recommended should be the basis for remuneration for the mayor and councillors. It represents a return to a regime of hidden and special benefits.

When it is combined with council’s already-announced salary freeze, it becomes part of a convoluted formula. It violates transparency and requires no accountability.

We hope that council withdraws this proposal and considers the money spent to be a small price to pay for the benefits in transparency and citizen trust.

 

Margaret Lucas, John Fryer and Irwin Henderson were appointed by Victoria city council as the Citizen’s Committee on Council Remuneration in 2006. Their report and recommendations on salaries, expenses and reporting were implemented shortly after.

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