SUNDRE – With the driving philosophy of providing planning predictability not only for the municipality’s own budgeting purposes but also for town staff’s personal lives, council for the first time recently approved a multi-year cost of living adjustment.
Although the figure council agreed on following a spirited discussion fell a little shy of administration’s recommended annual increase of 2.5 per cent, council ultimately voted 4-3 during the regular Nov. 28 meeting to approve a two per cent cost of living adjustment from 2023 to 2026.
Presenting a report outlining the logic and process behind administration’s calculations and subsequent recommendation, Chris Albert, director of corporate services, told council that Alberta’s consumer price index rate from October to October 2021-22 as per Statistics Canada was 6.8 per cent.
“This is probably not overly shocking, because I’m sure everybody’s heard about high inflation,” Albert said, adding that administration uses the rate calculated by Stats Can when drawing up its own recommendation.
“This ensures a fair and consistent and verifiable calculation every year,” he said. “However, this methodology has not been consistently adopted by council over the previous years.”
In the past, the cost of living adjustment has not followed a standardized method, he said.
Additionally, Albert noted the CPI is a number that’s calculated on year-old data.
“So, when Stats Can reports it, that’s based on the price changes that have already been experienced by town employees,” he said.
In the event cost of living adjustments either remain frozen or below the CPI rate, wages will not be keeping up with inflation and eventually be in need of a sudden and more significant adjustment to remain competitive, he said.
That’s why administration has over the years always recommended council apply the CPI to cost of living adjustments, he said.
Last year, when there was also “a fairly significant increase” to inflation of 4.3 per cent, administration began to consider the possibility of establishing a multi-year cost of living adjustment rate to further incorporate predictability into the budgeting process.
“The alternate solution is to utilize a consistent 2.5 per cent COLA rate over the next four years,” he said. “This falls in line with our budget.”
Elaborating on the rationale behind the 2.5 per cent rate, Albert said the Bank of Canada strives to hit a target between two to three per cent. Having conducted a deep dive into CPI indexes dating back more than two decades, Albert said they ranged greatly from minimal increases of around 0.1 per cent to what we’re seeing today.
But when he went over the data with a fine-tooth comb, Albert said he found the rate can be consistently averaged out between about 2.41 and 2.56 per cent.
“This jives with all of the information that I’ve acquired over my career,” he said, adding the Bank of Canada over the long term seems to have done a good job of maintaining inflation in the ball park of 2.5 per cent.
“Based on all that information,” he said, “I can fairly confidently say that doing a 2.5 per cent consistent COLA increase for the next four years, would put staff in the exact same position – or fairly close to – as if we were following our earlier recommendations of matching CPI.”
He also noted that each 0.1 per cent increment represents approximately $3,600. In other words, a one per cent increase would translate to an additional $36,000 on the town’s overall budget, he said.
The 2.5 per cent increase would therefore amount to an annual $90,000 increase.
“Best compromise for staff and ratepayers”
Council of course has full discretion in ultimately deciding what the rate should be, said Albert, cautioning that approving a multi-year approach only to revisit the rate annually “kind of defeats the purpose of the methodology.”
Additionally, in comparison to existing inflation, town staff are already negatively impacted this year.
“We’re looking at 6.8 per cent CPI, but we’re only approving a 2.5 – there is that gap,” he said, adding the gap is expected to close over ensuing years.
Concluding his presentation, Albert told council administration – as always – recommended following the CPI rate, but also sought to look into the alternate approach to “create that compromise between predictability and fairly compensating staff.”
The item will still be brought back annually to ensure actuals meet council’s expectations, he said.
“But it would establish that four-year rate,” he said. “We are recommending this because it is the best compromise for staff and ratepayers over the longer term.”
Council was presented three possible motions to choose from – the first to approve the annual 2.5 per cent COLA increase from 2023 to 2026; another to approve a one-time increase of 6.8 per cent for 2023; and an open-ended motion for council to choose a rate.
Spirited discussion
Opening the floor to discussion, Coun. Todd Dalke motioned to approve a two per cent increase only for 2023.
“I wanted to go less than that,” said Dalke.
Coun. Chris Vardas disagreed.
“I look at the numbers throughout the years; we’ve fluctuated up and down,” said Vardas, adding there have been times when council approved three per cent increases and others when the rate was frozen at zero.
He agreed that as the municipality must now have multi-year budgets, that it should for consistency’s sake follow a similar approach for cost of living adjustments.
And aside from making it easier to budget, the cost of living always goes up and the municipality has to offer concessions to keep the staff happy, said Vardas, adding he’d heard through conversations with members of other councils that some municipalities are offering increases of four or more per cent.
Coun. Connie Anderson supported a two per cent increase, but wanted to see it applied annually for four years.
Offering insight into his reasoning, Dalke said employees are already on a grid that outlines increases for a given position.
“We have no control over inflation, nor do we ask for any money back if it goes down,” the councillor said, emphasizing he fully supports the one-time two per cent increase.
“The same question is, are we going to increase our funding to the library, to GNP (Greenwood Neighbourhood Place), to ensure that those employees that work for the town also see that cost of living,” he asked rhetorically.
Clear support for multi-year plan
Coun. Owen Petersen favoured the proposed multi-year plan and spoke against the motion but said he could support a two per cent increase over four years.
Recognizing that the two per cent is shy of the recommended 2.5 per cent, Petersen said, “Ultimately, the cost of living goes up for everybody including our ratepayers – the vast, vast majority of whom don’t get a COLA. Industry is really good at not giving COLA.”
Mayor Richard Warnock said he also favoured two per cent, but annually over a period of four years. He called a vote on the motion, which was defeated 6-1 with only Dalke in favour.
Anderson then moved for council to approve an annual two per cent increase for the next four years.
Regardless of whatever rate council should choose to approve, Coun. Paul Isaac said he supports the built-in budget predictability with the four-year approach.
Isaac said he also had no issue with the recommended 2.5 per cent increase, and felt the additional $18,000 a year the half percentage point represents was manageable.
“Our staff has received a 1.44 per cent (increase) each year for the last six years,” he said. “We have been quite stingy as a council.”
He added administration and staff worked hard at lowering costs and ensuring ongoing operations throughout the many challenges presented by the pandemic over the past couple of years.
Vardas said he agreed with Isaac.
“I’d actually prefer the 2.5 to be quite frank,” said Vardas.
Steady increases preferable to sudden jumps
The owner of two local establishments – a family restaurant and a pub – Vardas reflected from his own personal experience when the provincial government increased the minimum wage to $15 from $10.
“Realistically, if we had played it smart as a business owner, if we would every year gave them just a little bit without breaking our banks (when the government increased the minimum wage) we would have already hit that plateau. So, it wouldn’t really have affected our businesses.”
He added it’s a “small price to pay to keep our administration happy.”
Speaking in favour of Anderson’s motion, Warnock recognized the increase wasn’t the recommended 2.5 per cent but said it is nevertheless a bigger increase than the last couple of years.
The motion narrowly carried 4-3, with Anderson, Petersen, Warnock and Coun. Jaime Marr in favour, and Dalke, Vardas and Isaac opposed.
