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Report To: Joint General Government and Planning and Development Committee
Date of Meeting: December 10, 2018
Report Number: COD-029-18 Resolution: JC-048-18, JC-050-18
File Number: By-law Number: 2018-103
Report Subject: Elimination of 1/3 Tax Free Allowance for Council Compensation
Recommendations:
That Report COD-029-18 be received;
2. That the Comprehensive Compensation By-law for Members of Council,
By-law 2011-005, as amended, be further amended as follows:
a. Section B.
Remove reference to the provision of the 1/3 tax free exemption, and the
automatic adjustment to maintain the net compensation equivalent value
effective January 1, 2019; and
b. Section D 3.
Subsection 2. Remove reference to the OMERS equivalent pension
contribution paid on current remuneration effective January 1, 2019; and
Subsection 3. Amend OMERS deductions stop at age 71, in accordance
with changed OMERS criteria; and
3. That the draft by-law amending By-law 2011-005, Attachment 5 to Report COD-016-18,
be approved.
Municipality of Clarington
Resort COD-029-18
Report Overview
Page 2
In March 2017 the federal budget eliminated the one-third tax free exemption for Municipal
elected officials beginning in 2019. This report informs Council of that decision, and
confirms that the existing comprehensive compensation by-law accommodates the
elimination of the exemption and maintains the same net compensation value as an
automatic adjustment.
1. Background
Municipal Act and Existing By-law #2011-005 and #2014-123
1.1 The Municipal Act, 2001 Subsections 283(5) and (7) provide that if one-third of the
remuneration paid to elected Council Members is continued, Council must review the
by-law provisions at least once during the four-year term of office.
1.2 Clarington's comprehensive By-law #2011-005 for compensation policies section B
(Attachment #1) sets out the tax free declaration, allowing 1/3 of compensation to be tax
exempt. The required review for the current term of Council is set out in the amending
By-law #2014-123 (Attachment #2).
1.3 By-law 2011-005 provides that Council's compensation would not be negatively affected
if the one-third exemption was to be eliminated, by providing for an automatic
adjustment to maintain the same net compensation value.
2. 2017 Federal Budget — Eliminating the 1/3 Exemption
2.1 In March 2017 the federal budget eliminated the 1/3 tax free exemption for Municipal
officials beginning in 2019. The AMO notice to all municipalities (Attachment #3)
advises that the course of action be identified now for incoming Council after the fall
election. The CRA website notice (Attachment #4) also notes the impact on the Council
Members' income and T4 slip.
2.2 The existing By-law 2011-005 provides for an automatic adjustment, and as such there
is no action required by Council, other than to remove the related references from the
By-law. The net compensation value of the incoming Council, beginning in 2019, will be
maintained. The OMERS equivalent payment that pays a pension value on the 1/3
exempt portion that does not have an OMERS contribution/deduction applicable will be
discontinued because the adjusted compensation will all be taxable and pensionable.
Municipality of Clarington
Resort COD-029-18
3. Financial Implication — 2019 Budget
Page 3
3.1 The individual Council member's net salary will remain the same, however there is a
Municipal budget impact related to the Federal decision to remove the 1/3 tax free
exemption. The Municipality will pay approximately $92,848 (Mayor $47,573, and
Councillors $45,275) based on 2018 salaries (full year) to provide that Council Members
are able to take home the same compensation, net of applicable statutory deductions.
The Director of Finance will include the appropriate amount in the 2019 budget as a
non -controllable expense.
Area Municipalities Status:
Municipality
1 /3 Tax
Free Status
Previously
2019
Adjustment to Provide Same Net Compensation
Implemented
Ajax
Yes
Yes
Oshawa
Unknown at this time what action will be taken
Pending Decision
Pickering
J
No official plan at this time
Pending Decision
Whitby
By-law requires automatic adjustment
Proceeding
Region
Adjusted in
2004
Adjusted to provide same net compensation and
adjusted to reflect 75t" percentile of comparators.
Implemented in
2004
Municipality of Clarington
Resort COD-029-18
2019 Rates for Mayor and Councillor
Page 4
Municipality
Increase
Percent
2019 Rate
for Mayor
2019 Rate
for Councillor
Oshawa
1.95%
$98,338
$40,491
Pickering
1.50%
$87,407
$36,420
Whitby
Averaged
not calcuated yet
Ajax
Averaged
not calcuated yet
Clarington
1.75%
$93,124
1 $37,250
Note: All rate increases are based on 2018 salary only. Whitby's and Ajax's current by-law
are based on the averages of comparators in the local area.
4. Concurrence
Not applicable.
5. Conclusion
It is respectfully recommended the report be received, and the appropriate action be
taken to comply with the existing By-law provisions to accommodate the elimination of the
1/3 tax free allowance, with appropriate amendments to update the By-law.
Submitted by Reviewed by:
ane Marano, H.B. Sc., C.M.O., Andrew C. Allison, B. Comm, LL.B
Director of Corporate Services CAO
Staff Contact: Marie Marano, Director, 905-623-3379 ext. 2201 or mmarano@clarington.net
Attachments:
Attachment # 1 By-law #2011-005 Comprehensive Compensation for Members of Council
Attachment # 2 By-law # 2014-123 Amending By-law for By-law 2011-005 re 1/3 Tax Free
Attachment # 3 AMO Notice Regarding Elimination of the One -Third Tax Free Allowance
Attachment # 4 Government of Canada Bulletin — Municipal Officers Expense Allowance
Attachment # 5 2018 Draft Amending By-law for By-law # 2011-005
There are no interested parties to be notified of Council's decision.
Attachment #1 Report COD-029-18
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
BY-LAW # 2011 — 005
Being a by-law to update the prevailing compensation policies applicable to the Mayor
and Members of Council, and to repeal by-law# 2007-097.
WHEREAS Section 283-1 of the Municipal Act 2001 provides that a municipality may
pass by laws for paying remuneration to the Members of Council;
WHEREAS On March 19, 2007 the Council of the Municipality of Clarington ratified
report ADM-002-07 Mayors Compensation Review-2007, authorizing staff to bring
forward a comprehensive by-law to consolidate the compensation practices for the
Mayor and Members of Council, which was set out in By -Law 2007-097 and now
requires updating for compliance;
NOW THEREFORE BE IT ENACTED AS FOLLOWS:
A. ANNUAL REMUNERATION
Mayor and Council - Amount as set out in prevailing by-laws for particular year in
accordance with the following:
Provisions:
1. Future increase to annual remuneration will be the percent applicable to
the Non -Affiliated Employees salary for the same period of time, applied
on January 16t of the applicable year, or as otherwise stated.
2. There is no additional compensation applicable to any prevailing Deputy
Mayor position.
2. Councillor remuneration is set at 40% of the Mayor's salary.
3. Remuneration continues until the end of the term of Council.
4. Regional remuneration - Clarington Council endorsed single stream
payment of the Regional portion of compensation through the local level
by approval of Report COD-65-04.
The Region approved single stream payment by By -Law 01-2005 and 08-
2004, and is considered the Employer for Region compensation
purposes.
B. 113 TAX FREE DECLARATION
B.1. In each term Council is required by the Municipal Act S283 (7) to confirm its
intention to retain the 113 tax free allowance as provided for in the Municipal Act;
Council hereby confirms 113 tax free allowance applied to the local level
remuneration for the prevailing term from December 2010 to December
2014.
B.2. The tax free portion of remuneration is currently exempt from reporting
requirements under the Public Sector Salary Disclosure Act, and remuneration
will continue to be reported as required under the prevailing Act.
B.3. Council maintains the commitment to adjust future compensation to maintain an
equivalent net compensation value should the Municipal Act be amended or
repealed and replaced with provisions that in effect prohibit an income tax free
allowance. Compensation will be automatically adjusted to maintain the same
net compensation level.
C. TRAVEL ALLOWANCE & REIMBURSEMENT GUIDELINES
C.1. Monthly Flat Rate Allowance
Mayor, Deputy Mayor, Councillor — as set out in prevailing by-laws for particular
year in accordance with the following:
Provisions:
1. Monthly flat rate allowance will be paid to compensate for travel related to
Municipal business within Municipal boundaries.
2. Allowance shall be paid through payroll with statutory deductions applied.
3. The allowance shall be paid on an automatic basis unless any Member of
Council elects not to be reimbursed and provides written notice to Payroll
of the effective date of cancellation.
4. Future increases will be the percent applicable to the general non-
affiliated grid increase, applied to the total monthly allowance, in each
year, unless Council amends otherwise. Increase will be applied at the
date of the change to the employee grid.
5. If any travel is reimbursed for travel outside of the Municipal boundaries
over and above the monthly allowance, it will be at the prevailing
employee kilometre rate, in accordance with the guidelines below.
C.2. Travel & Expense Reimbursement Guidelines
C.2.1 Municipal Business
Municipal business will be considered to include the following:
i. Travel to and from any meetings of Boards Commissions or
Authorities or other groups to which Council members are appointed
or delegated provided they are held outside the municipal
boundaries and travel expenses are not paid by the aforementioned
agencies;
Travel to and from any event sponsored by the Corporation towards
the promotion of the Municipality where Council attendance is
required or requested outside the Municipality;
iii. Accommodation, meals, kilometre reimbursement for travel outside
of municipal boundaries, parking, registration and other
miscellaneous charges related to municipal business which may
include among other things attendance at any seminar, conference,
events or convention approved by Council and attended as a
Council representative or as provided for through the current budget
allocation;
iv. Travelling to and from the Municipal Administrative Centre will NOT
be considered to be Municipal business in the following instances:
a) Attendance at all General Purpose and Administration
Committee meetings and Council meetings.
b) Meetings with Town Staff.
c) Picking up of agendas.
d) Constituent meetings.
C.2.2 Expense Claims and Approvals
V. All claims for payment shall be documented using the prevailing
expense claim sheet and where possible supported with receipts.
vi. M_ gy r: Expense claims for reimbursement of expenses by the
Mayor shall be submitted as soon as possible after the month end
and approved for payment by the Chief Administrative Officer or in
the alternative, by the Director of Finance.
vii. Members of Council: all expense claims for reimbursement of
expenses for Members of Council shall be submitted as soon as
possible after month end to the Mayor for approval. In the absence
of the Mayor, the Chief Administrative Officer, or in the alternative,
the Director of Finance shall approve the expense claims for
payment.
C.2.3 Annual Report to Council
All expense claims and compensation, severance, etc., shall be
categorized and included in the annual remuneration report to Council in
accordance with the prevailing Municipal Act requirements.
C.2.4 Special Events Expenses
There are occasions throughout the year where the Corporation may host
special events to promote the Municipality. The following guidelines apply
to such events:
Payment of expenses as it relates to the hosting of government
officials industrial prospects or other groups visiting the Municipality of
Clarington or the hosting of receptions for same within the Municipality
will require the submission of an expense claim indicating the number
of people hosted and the date as well as the specific amount of
expenditure. Such claims must be supported by the applicable
receipts or documentation.
it All claims for payment or expenses related to special events shall be
submitted as soon as possible after the month end to the Mayor for
approval. In the absence of the Mayor the Chief Administrative Officer
or, in the alternative, the Director of Finance shall approve the claims
for payment
D. BENEFITS PROVIDED FOR CURRENT SITTING MEMBERS
General Application
1. Family or Single Coverage
2. Any member may choose not to receive any benefit by advising Payroll in
writing.
3. All benefits are limited to provisions set out by the prevailing carrier.
4. All benefits cease at age 65 unless expressly identified even if the
member is currently on Council.
D.1 Health & Dental
Generally, as applicable to Non -Affiliated Employees for
Health, Dental and Travel Benefits, excluding any self funded provisions.
D.2 Life Insurance and Accidental Death & Dismemberment (_ADD)
Prevailing policy generally as applicable to Non -Affiliated
Employees; Reduced at age 65 to 50%, and at age 70 to
$25,000 or amount set out in prevailing carrier plan.
D.3 OMERS
1. Mandatory participation and individual contribution as set out by OMERS.
2. Per ADM-03-02, an "OMERS equivalent" Retirement Pension contribution
of 7.5% of the portion of the current remuneration that is not eligible for
OMERS contribution is established for all Members of Council effective
January 1, 2002.
3. All OMERS deductions stop at age 69 in accordance with OMERS
criteria.
DA Sick Leave Benefits
Short Term or Long Term Disability (LTD) benefits are not
provided to Members of Council.
D.5 Other
Communication tools such as cell phones or blackberries are as provided
for in the annual operating budget. Usage of such equipment is governed
by prevailing corporate policies.
E. TUITION ASSISTANCE & MEMBERSHIP FEES POLICY
In accordance with Report ADMIN.16-2000, the following policy applies unless
otherwise specifically approved by Council resolution:
The Municipality will not pay for any educational courses to any
Member of Council, including any membership fee of any
professional association. The only exception is orientation
seminars offered to new Members of Council by the Ministry of
Municipal Affairs and Housing.
F. CREDIT CARDS
The Mayor is provided with a credit card for the purpose of Municipal business
expenses, as noted in report ADMIN 9-94. Statements are submitted to the CAO
for processing of payment, or in the alternative, to the Director of Finance for
processing of payments.
G.SEVERANCE
Payment of severance remuneration to current and future members of Council is
upon the following terms and conditions:
G.1 Definitions:
a) "annual remuneration" of the member means the annual amount of remuneration
paid to the member for the discharge of all duties as a member of Council
including both the tax exempt and taxable portions calculated as at the date of
severance;
b) "member' means any person who is or becomes a member of Council on or after
the 19th day of January 2004;
c) "service" shall mean any period of continuous service as a member and shall
include any member's period of service occurring prior to the 191" day of January
2004
d) Retroactivity — there is no severance applied to years of broken service.
G.2.1 Eligibility:
Upon application by the member or his or her personal representative a member
is entitled to receive severance remuneration upon ceasing to be a member by
reason of:
a) election defeat;
b) resignation;
c) leaving office; or
d) dying while in office if the member is 65 years of age or over and not
eligible to receive benefits under the Municipality's group life insurance
program.
G.2.2 Ineligibility:
No member shall be entitled to receive severance remuneration who ceases to
be a member by reason of or by resignation which is a result of or given in
anticipation of:
a) removal from office by judicial process; or
b) disqualification under or operation of any Act of the Parliament of Canada
or the Legislature of the Province of Ontario
G.3 _Remuneration:
Severance remuneration shall be equal to one -twelfth (1112) the annual
remuneration of the member times the number of years service of the member
pro -rated for part years of service to a maximum amount payable of eighteen
(18) months remuneration.
GA Payment:
Payment of severance amount may be split and paid over a maximum of 3 years;
and is subject to all applicable statutory deductions.
G.5 Claim:
A written request for severance remuneration must be received by the Municipal
Clerk within six (6) calendar months of a member ceasing to be a member
otherwise any entitlement to severance remuneration shall be forfeited.
REPEAL BY-LAWS
The following By -Law is hereby repealed; #2007-097.
EFFECTIVE DATE: This By law shall come into force on the date of passage.
By-law read a first and second time this 17"' day of January, 2011
By-law read a third time and finally passed this 17"
e Municipal Clerk
Attachment #2 Report COD-029-18
THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
BY-LAW NO. 2014-123
Being a By-law to retain the 1/3 tax free allowance for
Members of Council for 2014-2018 Term of Council
WHEREAS Section 283 (1) of the Municipal Act, 2001 provides that a
municipality may pass by-laws for paying remuneration to the members of
Council;
AND WHEREAS Council enacted By -Law 2011-005 confirming 1/3 tax free
allowance applied to the local level remuneration in accordance with Section
283(5) of the Municipal Act, 2001; and
WHEREAS Section 283 (7) requires Council to review the by-law passed in
accordance with Section 283 (5) at least once during the four-year period
corresponding to the term of office of its members after a regular election;
NOW THEREFORE BE IT ENACTED AS FOLLOWS-
1 . By-law 2011-005 be amended to deleted Section B.1; and
2. Council hereby confirms 1/3 tax free allowance applied to the local level
remuneration for the prevailing term from December 2014 to December
2018.
BY-LAW passed in open session this 15t" day of December, 2014.
C. Anne Greentree, Municipal Clerk
Attachment # 3 Report COD-029-18
AMOAssociAnof
Municipalities Ontario POLICYUPDATE
March 27, 2018
One -Third Tax Free Exemption for Municipal Officials
In March 2017, the federal budget announced the government's intention to eliminate the one-third
tax free exemption for municipal elected officials beginning in 2019. The 2018 federal budget
delivered last month did not signal any change from that plan.
AMO's Board of Directors passed a resolution last June seeking the involvement of the Federation of
Canadian Municipalities (FCM) on this matter. FCM has advised they have been raising this issue
with federal officials over the past months but again, there have been no signs to suggest a change
of plan for 2019.
While 2019 is nine months away, a municipal government may want to begin considering what
course of action to take or at least to note it as a matter for the incoming council after the fall's
municipal election.
AMO would also like to thank the 144 municipal treasurers who took part in our salary survey. Over
90%.of survey respondents indicated their municipality uses the exemption. This information was
provided to FCM in support of their advocacy efforts.
Here are some examples from the survey which illustrate the impact of this change in 2019:
-The cost increase for a central Ontario municipality with a council of nine and a population of
30,000 will be at least $28,000.
-The cost increase for an eastern Ontario county council of seventeen and a population of 77,000
will be at least $74,000.
-The cost increase for a southwestern Ontario municipality with a council of seven and a population
of 24,000 will be at least $14,000.
For almost half of Ontario's municipal governments, a one per cent property tax increase raises only
$50,000.
Also available for member municipal governments is 2017 survey results on council salaries. Use
your AMO login to access the salary survey information available on the Dashboard. If you have
forgotten your login details, please email amo@amo.on.ca.
200 University Ave., Suite 801 Toronto ON M5H 3C6 Canada I Tel: 416.971.9856 1 Fax: 416.971.6191 1 Toll -Free in Ontario: 1.877.426.65271 amo@amo.on.ca
Municipal officer's expense allowance - Canada.ca
Attachment #4 Report COD-029-18
Government Gouvernement
of Canada du Canada
Home -+ Taxes ♦ Payroll ♦ Benefits and allowances
Municipal officer's expense allowance
A municipal corporation or board may pay a non -accountable expense allowance to an
elected officer to perform the duties of that office.
If the expense allowance is more than one-third of the officer's salary and allowances,
the excess amount is a taxable benefit. Enter it in box 14, "Employment income," and in
the "Other information" area under code 40 at the bottom of the employee's T4 slip.
If the expense allowance is not more than one-third of the officer's salary and
allowances do not include this amount in box 14, "Employment income," or in the "Other
information" area under code 40 at the bottom of the employee's T4 slip.
In either of the above situations, you have to identify the non-taxable share of the
allowance by entering the corresponding amount in the "Other information" area under
code 70 at the bottom of the employee's T4 slip.
For more information, see Interpretation Bulletin IT292, Taxation of Elected Officers of
_Incorporated Municipalities, School Boards, Municipal Commissions and Similar Bodies.
Note
For 2019 and later tax years, non -accountable allowances paid to elected officers will
be included in their income. This change was stated in the 2017 federal budget, which
received royal assent on June 22, 2017 (Bill C 44).
Date modified:
2017-12-15
https://wwvvv.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/benefits-... 10/30/2018
In addition, Budget 2017 confirms that the First -Time Donor's Super Credit will be
allowed to expire in 2017 as planned, due to its low take-up, small average
amounts donated, and the overall generosity of existing tax assistance for
charitable donations.
Providing Greater Consistency
Budget 2017 also makes changes to improve consistency in the treatment of
similar kinds of income and the consistency of tax measures with other priorities
of the Government and current economic conditions.
Employee Benefits and Allowances
In today's workforce, many Canadians receive benefits —such as a daily food
allowance or transit fare —which are counted as taxable income. Yet certain tax
measures allow some individuals to pay less than their fair share of taxes on such
benefits. These measures are unfair and they lack a strong policy rationale. To
improve consistency, Budget 2017 proposes to:
• Eliminate the deduction in respect of employee home relocation loans.
Evidence suggests that this deduction disproportionately benefits the
wealthy, and does little to help the middle class and those working hard to
join it.
• Remove the tax exemptions for non -accountable expense allowances paid
to members of provincial and territorial legislative assemblies and to certain
municipal office -holders. This exemption is only available to certain provincial,
territorial and municipal office holders, and provides an advantage that
other Canadians do not enjoy.
Fossil Fuel Subsidies
The Government has a strong plan to invest in clean growth that will help create
middle class jobs and get the country on the path to a low -carbon economy.
Consistent with this plan, Canada has made a commitment with its partners in
the G20 and Asia -Pacific Economic Cooperation to phase out inefficient fossil
fuel subsidies. Such subsidies can encourage wasteful consumption, impede
investment in clean energy sources, and undermine efforts to combat the threat
of climate change.
Attachment #5 Report COD-029-18
The Corporation of the Municipality of Clarington
By-law No. 2018-XX
Being a By-law to update the compensation applicable to Mayor and Members of
Council to amend By-law No. 2011-005 to remove reference to the 1/3 tax free
allowance for Members of Council
WHEREAS Section 283(1) of the Municipal Act, 2001 provides that a municipality
may pass by-laws for paying remuneration to the members of Council; and
AND WHEREAS the 2017 Federal Budget eliminated the 1/3 tax free allowance,
and because By-law No. 2011-005 which provides 1/3 tax free allowance applied
to the local level remuneration in accordance with Section 283(5) of the Municipal
Act, 2001 By-law 2011-005 requires an amendment to remove reference to the
allowance going forward.
NOW THEREFORE BE IT ENACTED:
1. By-law 2011-005 be amended as follows:
a) Section B
Remove reference to the provision of the 1/3 tax free exemption, and the
automatic adjustment to maintain the net compensation equivalent value
effective January 1, 2019;
b) Section D 3
Subsection 2. Remove reference to the OMERS equivalent pension
contribution paid on current remuneration effective January 1, 2019; and
Subsection 3. Amend OMERS deduction stop at age 71, in accordance
with OMERS criteria.
2. This By-law shall be effective January 1, 2019.
By-law passed in open session this 17t" day of December, 2018.
Adrian Foster, Mayor
C. Anne Greentree, Municipal Clerk