Winnipeg, MB - As a result of the Winnipeg Police Pension Plan members’ refusal to allow a solvency exemption, the City of Winnipeg will be obligated to make annual payments to the plan in an estimated amount of $26 million each year for 5 years. Rather than raising property taxes to fund this contribution, the City has chosen to proceed with a letter of credit option, as provided by provincial legislation.
The Winnipeg Police Pension Plan (WPPP) was one of the public sector pension plans eligible for solvency exemption under the Province of Manitoba’s Solvency Exemption for Public Sector Pension Plans Regulation.
Without a solvency exemption, the City of Winnipeg’s contribution to the police pension plan must increase by approximately $26 million in 2013, for a total of $130 million over the next five years. This would be the equivalent of a 5.65% property tax increase each year for the next 5 years, equating to a 28% accumulated property tax increase.
"We’re disappointed that the plan members didn’t approve the solvency exemption,” said Chief Administrative Officer Phil Sheegl. "We proposed it in order to be consistent with other large public sector pension plans in Manitoba and across Canada, and to minimize the impact on taxpayers. Given the circumstances, we are recommending issuing a letter of credit.”
In a 2011 report approved by Council, it was recognized that the City of Winnipeg would be unlikely to default on its obligations, and a request for exemption of solvency funding requirements was determined to be reasonable and appropriate.
The request for election of exemption was a move consistent with the approach taken by other large public sector pension plans, such as the Winnipeg Civic Employees’ Pension Plan. Other major Canadian police pension plans, such as the Regina Police Pension Plan and the Saskatoon Police Pension Plan, also have a solvency exemption in place.
The Winnipeg Police Service is one of the only major police forces in Canada that does not already have a solvency exemption in place.
"In order to meet the increased cost of funding the Winnipeg Police Pension Plan, the Public Service has prepared a report recommending that the City obtain a letter of credit,” said Chief Financial Officer Mike Ruta. "This is one of the options authorized by provincial regulation, and is cost-effective for the citizens of Winnipeg.”
As a result of the WPPP members’ vote, the City of Winnipeg must obtain a letter of credit from a financial institution, to be reviewed annually.