Lacombe city councillors (from left) Jonathan Jacobson, Thalia Hibbs and Reuben Konnik at a recent council meeting. Photo contributed

Tax law changes hit municipal councils

Many municipal council members are facing pay cuts because of federal tax law changes

Lacombe city council is among many across Canada facing a sharp pay cut because of changes in federal tax law.

Last year’s federal budget changed the rules so that one-third of a council member’s monthly remuneration was no longer tax-free. Applying taxes to the full paycheque effectively meant a $3,300 pay cut for councillors and $10,500 for the mayor.

As well, CPP and EI expenses became taxable, which meant councillors were out another $1,400 and the mayor $2,600.

A number of municipalities have adjusted mayor and councillors’ pay to compensate for the changes and Lacombe followed suit Monday.

Each councillors’ compensation was boosted by $4,800 to bring the salary up to $28,037. The mayor’s salary increases by $10,573 to $66,886. The increases do not mean pay increases, but ensure take-home pay is the same as previously given the new taxes. Pay increases take effect Jan. 1.

Lacombe chief administrative officer Matthew Goudy said the federal government’s move simply shifts more costs on to municipalities.

“To me, it’s an ugly example of the federal government downloading taxation to the municipal level,” he said “Because what are all these municipalities doing?

“Exactly what we’re doing, adjusting the pay so that the take-home pay of a councillor or a mayor is the same at the end of the day.”

Edmonton, Calgary and Lacombe County are among municipalities that have made compensation changes. The county’s pay increases were approved last month and take effect Jan. 1.

“They signed up for a job, they campaigned, they’re civil servants, and it’s not fair that one year in they get a pay cut for no reason.”

Alberta Urban Municipalities Association president Barry Morishita said it wants the federal government to reverse its tax position and have supported the work of the national organization Federation of Canadian Municipalities, which is leading lobbying efforts.

“It is a straight tax transfer to property (taxes) from the federal government, which again is ridiculous,” said Morishita, who is mayor of Brooks. “We don’t think that’s proper.”

The tax changes apply to all Canada’s municipalities but not all are affected. Some municipalities did not use the tax-free provision, although Morishita said “a vast majority” of Alberta municipalities did.

Morishita said most municipal elected officials are modestly paid, and the tax exemption helped with expenses.

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