Saint John mayor warns of deepening crisis
Saint John Mayor Ivan Court says the provincial government needs to recognize Saint John cannot handle the pension crisis on its own and without help, the province’s largest city could face layoffs and crippling cuts to services.
The city is facing a $123-million deficit to the employee pension fund and there are indications the amount is on pace to climb another $30 to $40 million in 2011.
"You can't make a payment if you don't have the money. We can either declare bankruptcy and hand it over to them. If they have a better magic formula than we have," Court said.
"The magic formula is not raising taxes 16 or 18 cents [of assessed property value] or whatever the number is. The magic formula isn't cutting down to the bone and having no services."
Court was responding on Monday night to suggestions by Coun. Christopher Titus that the city needs to prepare residents for the possibility that major cuts are looming for services, such as police, firefighting and recreation.
"It is going to be millions away from various departments: police, fire, recreation. We're not talking cancelling the phone, we're talking about major changes," Titus said.
Councillors are also reviewing a hiring freeze for all city departments until the 2012 budget is prepared.
Financial problems have council worried
Saint John councillors are worried the provincial government will be unwilling to approve more generous terms for paying down the pension debt and are concerned city workers will be unwilling to accept even more concessions.
Coun. Bruce Court estimated the pension fund will possibly lose another $40 million this year.
"It will not work. You cannot keep throwing money in that hole," Court said.
The councillor said the only way to deal with the crisis is to restructure the pension plan itself.
He said the city could save $75 million by de-indexing, which would remove retirees' inflation protection.
But that is a change that only can be done through an amendment to provincial legislation.
The city has already asked its workers to accept wage freezes and fewer benefits as a way to cope with the pension deficit.
Saint John has been seeking provincial help for almost a year to solve its pension deficit woes.
Saint John originally asked the provincial government to extend the payback period to 25 years but that plan was rejected in the spring.
City staff were forced to revisit their financial options. Saint John recently sent six different options to the provincial government that include varying degrees of salary and benefit reductions, property tax increases and payback length.
Payback lengths of 15 and 20 years have been considered along with property tax increases of up to 16 cents per $100 of assessed property value.
Saint John's financial troubles caused city politicians to hold confidential meetings earlier this year to discuss potential options. And the city's managers and unions are also planning to hold meetings to discuss ways to address the pension deficit.