Nanaimo’s One Per Centers

David Brown: July 29, 2012

There is a new group of one per centers in B.C. They are not the captains of private industry but rather our managers in civic and provincial government.

In Canada a One Per Center is someone with an annual income over $230,000.00. An article in Tyee scopes the number of municipal bureaucrats who are now in the privileged top 1%. They include George Duncan, the chief administrative officer of Richmond, B.C. who earns $267,613, Penny Ballem, Vancouver’s city manager at $324,110 and Kelowna’s Ron Mattiussi who makes $247,149.  Nanaimo’s own Al Kenning with a salary of $223,000 has not quite made it into the Exclusive One Per center Club but he is getting close. The Tyee article also notes that since 2007 Victoria’s executive salaries have risen by up to 76 per cent.

The first twelve years of the 21st century has indeed been very good for the managerial class in the bureaucracy. The average increase in the salaries of senior civil servants in British Columbia over the last decade has been in the neighborhood of 70%. In part this was a consequence of deliberate policy; the Liberals on assuming power in 2001 pushed up executive remuneration on the theory that management wages in the public sector had to be made competitive with the private sector in order to attract and keep the best people. Thusly, in 1998 the NDP government’s deputy to the premier was paid $136,535 but by 2008 Premier Campbell’s deputy was making $348,600. Meanwhile senior deputy ministers had gone from $116,620 in 1998 to a maximum by 2008 of $299,215.

Ron Bolin’s blog contribution “Some Notes on Nanaimo’s 2011 Annual Report to be presented
Monday, June 18” shows what has been happening in Nanaimo. Although not quite up to
Victoria’s largesse the increase in staff remuneration in Nanaimo in the period between 2004 and
2011 was 66.7%. This was propelled by an increase in the $75,000 per annum plus payroll from
$4,582,826 to $16,771,658 or a 366% increase. The number of staff people earning over $75,000.00 increased from 51 to 176 or 345% This was made possible by a 44% increase in total tax collection, which is more than double the combined population increase and inflation figure for the same period of time.

Curiously municipal managers always “blame” the market for their spectacular salary increases.
Curious, because a municipal government is the most un-market-like entity conceivable. Perhaps
they conflate the “that guy earns more than me” technique with a market mechanism. Comparisons are invariably made with salaries for their counterparts in a place like Kelowna – but then those guys make the comparison with Nanaimo. The ol’ whipsaw argument.

The market is probably also a muted driver for management wage increases in the private sector.
CEO’s of large companies have the ability to set their own salaries because the major corporate
shareholders are now largely institutional – pension funds and the like . No longer are a handful of very wealthy families influential in electing directors. The CEO effectively selects the directors and they in turn do not bite the hand of the person who has provided them with some nice perks and remuneration for not doing very much. A similar phenomena has occurred in municipalities. Power has shifted hugely to the professionals who can pretty much manage municipal councils especially when they are eight or nine “independents”.
A sophisticated city manager knows that it always wise to push for better benefits for councillors – even if these additional benefits are only a pittance compared to those enjoyed by management. At the same time ever lower voter turnouts have increased the voting influence of the stakeholders; not only do they always vote, they make sure their spouses, relatives and neighbors vote. In a largely disinterested voting environment the stakeholders have an overly large influence and ensure the election of supportive councillors.

The City of Nanaimo annual financial statement released on June 15, 2012 detailed city staff salaries and expenses for 2011. In 2011 55 city employees made more than $100,000 up from 25 in 2007.  Five employees made more than $150,000. There is no evidence that the salary driven tax rises in Nanaimo will change course. City Council for the most part follow the directions of senior staff.

Typically councillor Dianne Brennan believes that managerial wages are fair and the going rate to recruit and retain professionals. According to Brennan services are being off-loaded from the
provincial and federal governments (she does not specify these so-called off-loads) and that the
answer is a fairer split of public taxes between all levels of government and additional sources of
revenue (a municipal income tax, anyone) rather than a reduction of manager positions or salaries.

What the faux socialists on Nanaimo City Council do not understand is that ever increasing property taxes (and other municipal taxes and fees) represents a backward redistribution – taking from the less wealthy to give to the more wealthy. In Nanaimo the average homeowner is also an average wage earner. When taxes rise faster than the rate of inflation there is the usual zero sum game consequence. The average Nanaimoite has correspondingly less money to expend on his or her other needs. The year in year out rise in taxes – at a considerably higher rate than inflation and population growth – means the continuing, ongoing transfer of wealth to City Hall and a contributor to the impoverishment of home owners and renters (since rents also rise with rising property taxes).

More and more American cities are entering or attempting to enter into formal bankruptcy
proceedings. One of the latest bankruptcy casualty is Stockton, a city of 300,000 in the Central
Valley of California. With about 300,000 inhabitants, Stockton, California would be the largest city in the history of the United States to go belly up. This is a city that has huge debts for white elephant development projects along with massive unfunded retirement and health care obligations At the same time its tax revenues have gone down the toilet as property values collapsed. It has been said that Stockton municipal leaders “fell for all the crazy ideas that have caused cities around the country to lose their shirts: expensive new sports facilities, a shiny waterfront, a fancy new city hall, an arena.” Sounds familiar?

A Stockton style can’t happen here? Do not be too sure. Sure, the B.C. setup is considerably
different than California’s. In the long term, however, there may be limits on the extent to which
a provincial government will be able to backstop a municipal financial quagmire. But even if
municipal insolvency is unlikely, the “trend” will be fewer and fewer homeowners from the bottom half of the income tables.

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