By Tonia Kelly
During his campaign to become Ottawa’s next mayor, Larry O’Brien promised no property tax increases for the next four years – a daunting challenge in November for a new mayor because budget deliberations will begin early in the new year.
In looking at ways to save money at City Hall O’Brien should consider the merit pay program for city managers. Under this program, in addition to the annual cost of living allowance, managers receive salary increases of two to four per cent if they achieve pre-set performance objectives, and up to seven per cent if they exceed their objectives.
Compensation and benefits at City Hall is an issue which, except for the occasional flare-up, is largely unscrutinized.
Senior managers juggle dollars from one pot to another, recommending which services to cut, while somehow avoiding belt-tightening themselves.
The controversy over merit pay is not so much over managers who are still within their salary range but for those who are at the top of or above their salary range.
The latter group has become to be regarded as receiving additional compensation for work they are already well paid to do.
Corinne Pohlmann is director of national affairs of the Canadian Federation of Independent Business, an organization of that lobbies for small and medium size businesses at all levels of government.
Pohlmann says that pay based on performance is not a bad idea because it replaces the sense of entitlement associated with automatic annual increases, but that salary increases of nine per cent in one year to some city managers is not realistic.
“Unlike the private sector that has to earn the money in order to pay it out in compensation,” she says, “government at all levels only has to raise taxes.”
The number of city managers earning more than $100,000 per year rose from 127 in 2004 to 196 in 2005.
Their total salaries rose from just over $15 million in 2004 to over $22.5 million in 2005, an increase of approximately $7.5 million in only one year!
Katherine Graham, dean of the faculty of public affairs and management at Carleton University, specializes in urban and local governance. She chose not to comment on whether or not city managers are overly compensated, but says that salaries play an important role in attracting qualified people to municipal government.
Graham explains that municipalities are very complex organizations, given the number of employees and the complexities senior level employees face – not only from staff, but from council and the public.
“These are jobs that do have a lot of responsibility,” she says, “and make it difficult to attract people without appropriate compensation.”
Of course, the private sector has its own horror stories. An outstanding example of this is the merit pay to John Roth, CEO of Nortel during its meltdown in 1999-2000, when thousands of employees were being laid off.
Roth resigned as CEO on Nov. 1, 2001, and began a year-long leave of absence during which he collected his full salary, as well as receiving tens of millions more in other compensation and by exercising stock options.
Compared to this private sector compensation, the $800,000 paid to outgoing Ottawa city manager Bruce Thom in 2003 seems like loose change.
But there’s a difference in our toleration of excesses in the private sector. The difference is choice – our choice as “shareholders” to participate. In the private sector we can choose to buy Nortel shares and choose whether and when to sell them.
There is risk involved, and for reasons of naivety, and sometimes greed, shareholders get burned. But in the public sector, the only choice taxpayers have as “shareholders” is to withhold taxes, an act of civil disobedience which most are unable or unwilling to perform.
It may be that many senior managers become accustomed to the city’s huge annual operating budget ($2.1 billion for 2006), of which 55-60 per cent goes to compensation and benefits for city employees. As the saying goes, “A million here, a million there, and pretty soon you’re talking real money.”
But the view of most taxpayers is different. For many of them, the reward for exceeding performance expectations is sometimes only the renewal of their no-benefits contract.
According to one city employee, some managers at the top of their range are demoralized because of a City Council motion in the 2006 budget process suspending their merit pay award for 2006.
They believe that council has “stuck it to the staff.” Council didn’t “stick it” to them.
Council isn’t there to protect them from reality. Councillors represent the people of Ottawa who elect them.
Many of these have come to believe that they are being heavily taxed in order for a privileged group of municipal employees to enjoy a standard of living and security that they themselves do not.