: The Ottawa City Council is preparing their 2013 budgetary process by holding pre-budget consultations, starting next week. Fair Pensions For All is calling on the City Council to take serious measures to fix the financial problems that exist within the city. Passing the buck and deferring the difficult decisions today puts the future of Ottawa in jeopardy.
The cities finances are a mess. The total current debt and liabilities of the City of Ottawa is an alarming $2.245 Billion. This figure has risen by a staggering 146% since 2003, with no end in sight. This huge debt represents 70% of the cities total revenue, and council must act now to lower its costs and control its’ burgeoning debt. One of the most significant costs that the city must deal with is the unfunded liability in the pension fund.
The provincial government has offloaded the responsibility of the Ontario Municipal Employee Retirement System [OMERS] onto the backs of municipalities. The plan is currently $7 Billion in the red with a projected $10 Billion debt by the end of the year. Ottawa’s portion of that debt equates to $532 million and growing. The decision by the provincial government to offload this plan was shocking to say the least, but now, municipalities must make some difficult decisions on how to deal with this debt.
According to the Association of Municipalities Ontario [AMO], contribution rates to the OMERS plan have gone up by around 60% over the last five years. This is means that, each year, millions of tax dollars that should be used for services in the City of Ottawa, have been diverted and put into this failing pension plan. This simply cannot continue or else the City of Ottawa is going to be forced into perpetual tax increases, cutting of services and inevitably, a privatization of all non-essential services.
There are a number of solutions to the current problem that faces the City of Ottawa, but in order to stem the tide, Ottawa is going to need leadership, courage and conviction. First off, the employees at the city need to take significant pay reductions. This will not only ease the financial burden of today, but also the pension costs of tomorrow. Also, if the city workers take a significant pay cut, it will eliminate the need for the city to reduce or privatize services. We suspect that the city workers will refuse to take a pay cut, and therefore, not only will the city need to privatize services, but also, they will need to change the current pension plan.
Currently, workers are on a defined benefit pension plan, which, upon retirement, gives them a percentage [usually 70%] of their best 5 years salary, for life. This cash for life program is the reason that the pensions are so massively in debt. In 2013, the average employee will contribute 10.6% of their salary to their pension and expect to collect a full 70% upon retiring. So how do they think that upon retirement that they can collect 70% of their salary? The math doesn’t add up. It is time to have the OMERS plan change to a Hybrid Pension Plan, and the Ottawa city council should lead this charge. This plan would give the worker a good pension and it would also be sustainable long term.
Lastly, the city needs to stop all sick time, vacation payouts and retiree healthcare. These workers were already paid to work these days, and getting paid twice, is simply double dipping and unacceptable. By being responsible now and controlling these costs, the city will be able to fund the huge amounts required to repair its aging infrastructure.