Saint John pension crisis fuels more uncertainty

Saint John’s ongoing pension crisis is causing the city to be six months late in filing its 2010 financial statements with the New Brunswick government.

All municipalities are required to file their financial statements with the provincial government each year but the uncertainty caused by Saint John’s pension troubles means the city is having difficulty calculating its financial position.

Last month, Saint John Mayor Ivan Court said the most recent audit of the city pension fund showed a deficit at the end of 2010 of $123 million, a modest improvement from 2009.

However, that figure was then tossed into doubt last week.

New Brunswick's superintendent of pensions has sent that report back to the city with an order that it be resubmitted. 

Pat Woods, the city manager, said the new audit will add as much as $7 million to the amount owed. The revision will put the pension deficit almost exactly where it was the previous year.

Coun. Stephen Chase, the city’s deputy mayor, said Saint John will now have to pay even more money annually on top of the approximately $8 million extra city council is already expecting to pay.

"We don’t know what the impact on the bottom line is on that budget," Chase said.

Until an agreement is reached with the provincial government on what is owed to the fund for 2010 the city cannot close last year's books. 

Even more critical to the city are negotiations with the provincial government over the expected rate of return on the fund's investments.

Saint John projected the rate at 6.5 percent, however, the superintendent of pensions said a six per cent predicted rate of return would be more realistic.

That half of a percentage point difference raises the amount the city owes the fund by $32 million.

These negotiations between the provincial government and New Brunswick’s largest city are the latest in the ongoing talks over how Saint John will cope with its pension crisis.

A year ago, Saint John requested the provincial government extend the payback period to 25 years on its pension deficit. But the provincial government rejected that plan in the spring.

With that plan denied, Saint John staff were forced to revisit their financial options.

Saint John recently sent six different options to the provincial government that include different 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.