Many councils, school boards act to cushion blow of lost tax break
Winnipeg Beach Mayor Tony Pimentel believes council's across-the-board $1,200 monthly indemnity increase strikes a good balance. He notes that council members, in addition to having to pay the previously tax exempt one third of their indemnity, can no longer deduct expenses for an office in the home.
Most municipal councils and school boards across the province are clamouring to address the elimination of a federal income tax exemption that shielded one-third of their members’ indemnity income from tax. Their principal response has been to raise indemnities to offset the loss of the exemption.
Winnipeg Beach council, for instance, unanimously approved first reading of a revised indemnity bylaw at its regular meeting Jan. 23. The bylaw is expected to be considered for second and final reading Feb. 13. The bylaw at first reading provides $1,200 extra to council members to cushion the impact of losing the one-third tax exemption.
By way of example, Mayor Tony Pimentel’s annual indemnity was $13,902.93 last year, as set out in the indemnity bylaw passed February 2018. This year, it would have increased by $272.61 to reflect the 2% increase in last year’s cost of living index, according to a provision in the 2018 bylaw.
Barring a decision by a council just six months into its four-year mandate to increase the indemnity established in early-2018, the mayor would normally receive $13,902. However, the recommended change this year would bring the mayor’s indemnity to $15,109.93, including a non-CPI-related increase of $1,207. This latter amount represents 23.96% of the cost of paying tax on the one-third portion of $5,036.64 no longer exempted.
“We felt it a fair number,” Mayor Pimentel said Jan. 29. “We didn’t want to go with a percentage. We went with a dollar amount across the board. I felt if we’re going to increase it, we increase it by a dollar amount for everybody so it’s equal.”
He also noted that home office expenses cannot be deducted by council members.
The mayor said council discussed a potential increase last year. “We were looking at other municipalities, and we were trying to get some directions from AMM (the provincial association that provides advice to municipalities),” he said. “As a council member, we do spend time doing work at home,” he said.
In the end: “We were looking at a $200 [monthly loss due to taxation]. We thought let’s go with $100. It was debated back and forth what the amount should be.”
If your neurons are firing wildly, fear not.
The situation with the board of trustees of the Evergreen School Division is, well, easy as pie. The board is not giving itself an extra nickel. Fact is, the matter was never discussed in a public board meeting or an in-camera session — it never came up, says long-time board chair Ruth Ann Furgala.
“None of us are school trustees for the money,” Furgala said Tuesday, Jan. 29. “We’re already well paid – we know that. It [losing the one-third tax exemption] is not a huge hit to anybody. It’s such a small amount of money.”
Furgala acknowledged that the tax implications will vary but the withdrawal of the one-third tax exemption should not be a game-changer for Evergreen trustees.
Had the Evergreen board adjusted its compensation to cover the tax-exemption loss, the burden would have fallen to property taxpayers who ultimately foot the bill. “And I’m certainly not going to John or Joan Q. Public to ask that they pay more,” Furgala said.