Councillors Look at Making Pay More Transparent, Drop Tax-Free Portion

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Hamilton City Councillors will consider dropping the 0ne-third tax-free portion of their current salaries to make it clearer exactly what they are paid in comparison to fully taxable salaries.

At present, City Councillors are paid $72,640.80 per year, and the Mayor is paid $127,284.56 with the first third tax-free.

Due to their tax-free portion, their take home pay is equivalent to $90,385.76 or $171,441.92 for a person paying tax on their full earnings.

The tax-free portion is a loss revenue to the provincial and federal governments, and not paid by the City.

Prior to 2003, it was common practice across Ontario municipalities for elected officials to receive one-third of their salary tax free.

The Municipal Act was amended in 2003 to allow municipalities to decide to eliminate the tax-free provision to make salaries more transparent by being the same as nearly all other salaries.

The Act requires Councils to vote every term on continuing the tax-free exemption.

This term, Council gave staff direction to provide a report on the cost of eliminating the exception.

Staff are recommending the exception be ended and that Councillors pay be changed to $90,385.76 and the Mayor to $171,441.92.

The change will impact Councillors pensions, which are calculated the same as staff pensions under the Ontario Municipalities Employees Retirement System, by increasing the amount of taxable earnings used to calculate pensions.

The change will result in an increase of $1,453 to the annual petition of a Councillor for each year of service, and $3,074 for each year of service for the Mayor. (A Mayor’s pension upon retiring after a Council career is calculated upon the average salary during their final five years)

City staff state the change will cost $434,245 annually.

Councillors will vote on this at Committee on August 6, and it will go to full Council in September.

 

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