March 23 remuneration report to Metro board

Section G To:

MVRD Board of Directors

From:

Phil Trotzuk, Chief Financial Officer

Date:

March 20, 2018

Subject:

Proposed Amendments to the Remuneration Bylaw – Amending Bylaw 1265

3.3

Meeting Date: March 23, 2018

RECOMMENDATION That the MVRD Board: a) give first, second and third reading to “Metro Vancouver Regional District Board and Committee Remuneration Amending Bylaw No. 1265, 2018”; and b) pass and finally adopt “Metro Vancouver Regional District Board and Committee Remuneration Amending Bylaw No. 1265, 2018”.

PURPOSE To seek Board consideration of amendments to the Greater Vancouver Regional District Regional Board and Committee Remuneration Bylaw Number 1057, 2007 (the “Remuneration Bylaw”) to respond to the elimination of the non-taxable status of the 1/3 non-accountable portion of elected official remuneration, and to consider a retiring allowance for directors.

BACKGROUND A review of the Remuneration Bylaw was included in the work plan of the Finance and Intergovernment Committee to respond to the changes in the 2017 Federal Budget that will directly affect elected officials with respect to non-taxable expenses. As part of that review, staff was directed to examine the practices of applying retirement allowances for elected officials retiring from office.

Staff have now completed a review of both the non-taxable expenses changes and retirement allowances practices. This report brings forward the findings of this review and proposes changes to the Remuneration Bylaw for the Board’s consideration.

ELIMINATION OF THE NON-TAXABLE STATUS The 2017 Federal Budget contained provisions that will require non-accountable allowances paid to elected officials to be brought into income for 2019 and later tax years (Attachment 1). The 2017 Federal Budget including these changes was given Royal Assent on June 22, 2017 (Bill C 44).

The changes in the 2017 Federal Budget on the non-accountable allowances impacts all local governments and some have already considered the issue. A number of municipalities in Metro Vancouver have reviewed the federal taxation changes and made adjustments to their remuneration bylaws to offset the income tax effect. The cities of Calgary, Toronto, and Victoria have also all adjusted their elected official remuneration to offset the tax impact.

For Metro Vancouver, using 2018 as the reference point for remuneration and a combined marginal tax rate of 31%, the 2019 impact is anticipated to be $131,333. If the Board approves this adjustment,

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Metro Vancouver Regional District

Proposed Amendments to the Remuneration Bylaw – Amending Bylaw 1265 MVRD Board Regular Meeting Date: March 23, 2018 Page 2 of 4

it is proposed that remuneration rates be adjusted effective January 1, 2019 with a one-time budget increase of $131,333 which would ensure that Director remuneration is not impacted by the federal taxation changes.

DIRECTOR RETIRING ALLOWANCE A second element to the Board remuneration review was examination of practices in jurisdictions to address retirement provisions. In a recent survey of member municipalities, it was found that six member municipalities identified that they had provisions within their Remuneration Policy or Bylaw for a separation or retiring allowance once a council member no longer seeks re-election or is not reelected. Further, nine local governments in other provinces, and all municipalities in Quebec, offer some form of pension or RRSP, either on their own accord or through a provincial program. At the provincial government level and the federal government level, Members of the Legislative Assembly (MLA) and Members of Parliament (MP) have employment benefits which include a pension as well as a transitional or severance allowance, and in the case of the Province a career retraining allowance.

For Metro Vancouver, if a retirement allowance was to be implemented for regional directors, it would be recommended that the payment of a retirement allowance would be applied using the Municipal Pension Plan rate of 10.2%. A retirement allowance would not be applied until the end of an elected official’s term of office when an elected official decides to retire or is not re-elected. While in office, the retirement allowance would accrue interest as earned at the Metro Vancouver internal rate of return. Using this approach, it would be considered a ‘Supplemental Executive Retirement Plan’ by the Canada Revenue Agency, and although it would be accruing through the service to Metro Vancouver, the benefit would not be taxable until paid to the recipient. If the Board supported a change to the Remuneration Bylaw to implement the allowance, a retroactive provision dating back to January 1, 2007 may wish to be considered to recognize long service. A retroactive period back to 2007 at the formula proposed would be valued at approximately $498,000 in retroactive retirement earnings.

PROPOSED BYLAW AMENDMENTS The Board’s Remuneration Bylaw establishes the authority for the payment of remuneration. The proposed changes to the Remuneration Bylaw -- to include a provision to address the elimination of the non-taxable status of remuneration, and to address a retirement allowance – are summarized below (and included in Attachment 2).

Schedule A (Salary Remuneration) In Schedule A of the Remuneration Bylaw, the calculation of salary remuneration is set out based on a four-year cycle. To accommodate the elimination of the non-taxable status of the 1/3 nonaccountable portion of elected official remuneration, it is proposed that a one-time increase to the remuneration rate be included in the Bylaw for 2019 only.

Schedule D (Payment of Expenses) In Schedule D of the Remuneration Bylaw, provisions for the repayment of expenses are outlined.

Since it is proposed to increase remuneration to respond to the elimination of the 1/3 non-taxable status of remuneration, reference to the 1/3 amount should be removed while still acknowledging that remuneration includes an allowance for incidental expenses.

Metro Vancouver Regional District

Proposed Amendments to the Remuneration Bylaw – Amending Bylaw 1265 MVRD Board Regular Meeting Date: March 23, 2018 Page 3 of 4

Schedule E (Retiring Allowance for Board Directors) In the new Schedule E of the Remuneration Bylaw, provisions for a retiring allowance are set out for Board directors. It is proposed that this provision be limited to Board directors only, and that the allowance be calculated using rates equivalent to those used for employees, and that it will earn interest compounded annually.

The proposed Bylaw also sets out that the Board director is eligible to receive the allowance when the director ceases to be an elected official on the regional district board and on the council of which they sit as a councillor. It is proposed that the allowance be retroactive to 2007.

ALTERNATIVES 1. That the MVRD Board: a) give first, second and third reading to “Metro Vancouver Regional District Board and Committee Remuneration Amending Bylaw No. 1265, 2018”; and b) pass and finally adopt “Metro Vancouver Regional District Board and Committee Remuneration Amending Bylaw No. 1265, 2018”.

2. That the MVRD Board receive for information the report dated March 20, 2018, titled “Proposed Amendments to the Remuneration Bylaw – Amending Bylaw 1265” and provide alternate direction.

FINANCIAL IMPLICATIONS If the Board approves alternative one, the elimination of the non-taxable status will result in a financial impact in 2019 of approximately $130,000 to maintain Directors at the same level of remuneration as was in place prior to the Federal Government changes. The implementation of the Directors Retiring Allowance, retroactive to January 1, 2007, would be approximately $498,000.

Going forward, it is anticipated that the annual financial impact will be approximately $62,500 per year which will be funded through the General Government budget.

If the Board approves alternative 2, staff would review the financial implications based on the alternative provided.

SUMMARY / CONCLUSION As part of the Finance and Intergovernment Committee annual work plan, staff reviewed the impact of changes in the 2017 Federal Budget that directly affect elected officials as a result of the elimination of non-taxable expense allowances. This review also examined the practices of applying retirement allowances for elected officials retiring from office. An amending bylaw has been prepared for consideration that, if adopted, would amend Board Director remuneration with a one-time adjustment in 2019 to offset the tax impact. A second bylaw amendment proposes to include a retiring allowance for Board directors. This amendment would implement changes that are consistent with practices for provincial MLAs and federal MPs, practices in other provinces that apply to local governments, and some local governments within the Metro Vancouver region. For the Board’s consideration, staff have prepared amendments to the Remuneration Bylaw that would enact these changes and are presented under Alternative 1.

Metro Vancouver Regional District

Proposed Amendments to the Remuneration Bylaw – Amending Bylaw 1265 MVRD Board Regular Meeting Date: March 23, 2018 Page 4 of 4

Attachment 1. Excerpt from the “Tax Measures: Supplementary Information to the Budget – Allowances for Members of Legislative Assemblies and Certain Municipal Officers” 2. Metro Vancouver Regional District Board and Committee Remuneration Amending Bylaw Number 1265, 2018 References 1. Members of Parliament Retiring Allowances Act 2. Members' Remuneration and Pensions Act 24916911

Metro Vancouver Regional District

A A

E CE P O HE A EASU ES: SUPPLE EN A IN O A ION O HE BUD E ALLOWANCES FOR MEMBERS OF LEGISLATIVE ASSEMBLIES AND CERTAIN MUNICIPAL OFFICERS The reimbursement of expenses incurred in the course of carrying out the duties of an office or employment is generally not a taxable benefit to the recipient. By contrast, a non-accountable allowance for which an individual does not have to provide details or submit receipts to justify amounts paid is generally a taxable benefit.

Certain officials may, however, receive non-accountable allowances for work expenses that are not included in computing income for tax purposes. These officials are: • • •

elected members of provincial and territorial legislative assemblies and officers of incorporated municipalities; elected officers of municipal utilities boards, commissions, corporations or similar bodies; and members of public or separate school boards or of similar bodies governing a school district.

The excluded amount is limited to half of the official’s salary or other remuneration received in that capacity in the year.

Budget 2017 proposes to require that non-accountable allowances paid to these officials be included in income. The reimbursement of employment expenses will remain a non-taxable benefit to the recipient.

In order to provide affected organizations more time to adjust their compensation schemes, this measure will apply to the 2019 and subsequent taxation years.

Metro Vancouver Regional District

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A A METRO VANCOUVER REGIONAL DISTRICT BYLAW NUMBER 1265, 2018 A Bylaw to Amend Greater Vancouver Regional District Regional Board and Committee Remuneration Bylaw Number 1057, 2007 WHEREAS the Board of Directors of the Greater Vancouver Regional District has adopted "Greater Vancouver Regional District Regional Board and Committee Remuneration Bylaw Number 1057, 2007"; and WHEREAS the Board of Directors of the Metro Vancouver Regional District wishes to amend "Greater Vancouver Regional District Regional Board and Committee Remuneration Bylaw Number 1057, 2007"; NOW THEREFORE the Board of Directors of the Metro Vancouver Regional District, in open meeting, enacts as follows: 1. "Greater Vancouver Regional District Regional Board and Committee Remuneration Bylaw Number 1057, 2007" is hereby amended as follows: a) Section 6 of the bylaw is renumbered to Section 7. b) By inserting the following as a new Section 6: Retiring Allowance for Board Directors 6. The MVRD Board will pay a retiring allowance for Board directors as set out in Schedule E to this bylaw. c) In Schedule A (Salary Remuneration), in General Provisions Section 2, by striking the phrase “the 1/3 non-taxable allowance”. d) In Schedule A (Salary Remuneration), Section 6 is renumbered to Section 7. e) In Schedule A (Salary Remuneration), by inserting the following as a new Section 6: 6.

For 2019 only, an additional 15% increase will be applied to the 2018 adjusted median gross salary and the rates adjusted accordingly.

f) In Schedule D (Payment of Expenses), in Section 4 (Payment for expenses for Board members), by striking the phrase “1/3 of payments will be paid as” and replacing it with the phrase “Remuneration paid includes”. g) By adding as Schedule E the Schedule which is attached to and forms part of this bylaw.

2. This bylaw shall be cited as “Metro Vancouver Regional District Board and Committee Remuneration Amending Bylaw Number 1265, 2018”.

Metro Vancouver Regional District Board and Committee Remuneration Amending Bylaw Number 1265, 2018 Page 1 of 3 Metro Vancouver Regional District

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READ A FIRST, SECOND AND THIRD TIME this ________ of ____________________, 2018.

PASSED AND FINALLY ADOPTED this ________ of ____________________, 2018.

______________________________________ Greg Moore, Chair

______________________________________ Chris Plagnol, Corporate Officer

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Schedule E to Greater Vancouver Regional District Regional Board and Committee Remuneration Bylaw Number 1057, 2007

Retiring Allowance for Board Directors

MVRD will pay Board directors a retiring allowance in accordance with the provisions set out in this Schedule E. 1. For the purposes of this Schedule E “Board director” means any person who has been appointed to the Board of the MVRD, but does not include an alternate director.

2. A Board director’s retiring allowance will be equivalent to the contribution that MVRD would have made to the BC Municipal Pension Plan on behalf of that Board director as if the Board director were an employee of MVRD. 3. The retiring allowance will be held by MVRD and will earn interest calculated using MVRD’s internal rate of return on investments. Interest will compound annually.

4. A Board director is eligible to receive the retiring allowance plus interest when that Board director ceases to be an elected official in any MVRD member jurisdiction, whether as a result of resignation or being unsuccessful in re-election.

5. Payment of the retirement allowance will be made on a date specified by the Board director by notice in writing to MVRD, which date must be at least 30 days from the date of the notice and not more than 90 days following the date that the Board director ceased to be an elected official. If no notice is given, MVRD will pay the retirement allowance after 90 days following the date that the Board director ceased to be an elected official.

6. Eligibility for the retiring allowance will be retroactive to January 1, 2007 for: a. those individuals who are elected officials in any MVRD member jurisdiction as of March 23, 2018; and b. served as a Board director at any time after January 1, 2007.

7. In circumstances where a Board director ceases to be an elected official by reason of death, MVRD will pay the retirement allowance, plus any interest, to the Board director’s estate.

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