Pensions Front Page in Waterloo

July 30, 2012
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Critics warn that rising staff pension contributions will challenge municipal budgets

  • Paige Desmond, Record staff
  • Fri Jul 27 2012

WATERLOO REGION — Waterloo Region taxpayers are paying more and more for the pensions of city staff, with a $5 million increase in 2011.

Critics say cities are headed for financial ruin, but city officials say the issue’s being blown out of proportion.

Last year, tax dollars paid for $36.7 million in pension contributions for municipal employees in Cambridge, Kitchener, Waterloo and the Region of Waterloo as part of the Ontario Municipal Employees Retirement fund (OMERS.)

The year before, taxpayers in the four municipalities had paid $31.5 million to the pension fund.

The OMERS fund was established in 1962 for local government employees in Ontario. Municipalities cost-share pension contributions with employees on a 50-50 basis.

Kitchener paid $6.2 million for staff pensions in 2010, which rose to $7.3 million last year and the cost expected to hit about $8 million in 2012.

The fund has a shortfall of $7.3 billion. The pension agency announced in February that this shortfall had grown about $3 million since last year.

Bill Tufts, of activist group Fair Pensions for All, did an estimate of the shortfall for Kitchener.

By dividing the provincial fund’s shortfall of $7.3 billion by 263,000 employees in the plan, he said the average shortfall per employee in Ontario would be about $27,750.

With its 1,490 employees, Kitchener’s shortfall would be $41.3 million.

“There’s only a shortfall here if all of the employees that were in OMERS decided to retire today,” Kitchener Mayor Carl Zehr said.

“The (Fair Pensions for All) organization is scare mongering,” Zehr said.

Zehr said increased pension funding had impacted taxes in the past but the shortfall would be made up over time with both employer and employee contributions.

In 2011, regional tax dollar contributions climbed about $3 million to $22.5 million.

Regional Chair Ken Seiling acknowledged the pension pressure.

“They’ve been boosting the rates for OMERS, which increases the cost to both the employee and the employer,” Seiling said. “That’s put pressure on our budget for the last couple years.”

The OMERS pension fund dictates what cities pay as part of the agreement. In 2010, the pension fund announced a three-year plan for increased contributions at an average of one per cent.

This year, the increases were expected to cost the region about $1.8 million more in contributions.

Seiling said there are few options for change.

“It’s not within the power of municipalities to make change because it’s a centralized plan,” Seiling said.

Waterloo taxpayers paid $3.4 million last year — an approximate $300,000 increase — while costs climbed $600,000 in Cambridge to $3.5 million.

The OMERS shortfall impacts cities across the province, prompting involvement by the Association of Municipalities of Ontario, which advocates for cities.

It’s getting involved in a provincial consultation on legislation announced in the Liberals’ budget speech to make sure measures to increase funding for these types of pension plans do not add to employer and taxpayer expense beyond what was already agreed to.

“I don’t know why the councillors can’t have a more active approach to it,” Tufts said of the review.

Waterloo Coun. Karen Scian said the city did not have a firm number on its liability, but was aware there were challenges.

“It’s a very daunting number,” Scian said. “It’s a huge problem.”

 

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