Hamilton council's Steel Committee wants to remind the provincial government it will be on the hook for hundreds of millions of dollars in pension support payments if U.S. Steel fails to meet its pension obligations.
By taking aim at the provincial purse, the city his hoping the province will help them force the federal government into solving the dangerously underfunded pension fund of U.S. Steel. That fund could be as much as 40 per cent short if the steelmaker was shuttered overnight.
'You would hope that would encourage them to work with us.'- Coun. Brian McHattie
"The Province of Ontario now knows what we know: Approximately how much they're in for if they were to apply their pension fund to its fullest capability," said Ward 1 Councillor Brian McHattie, touting a city report that outlined the $977-million funding shortfall of the former Stelco pension fund.
"You would hope that would encourage them to work with us to put pressure at the feds (to fix the pension fund), because the province is not going to want to pay either."
The city report, presented to a sparse Steel Committee that failed to make quorum ahead of the Canada Day holiday, also outlined the potential impact to the municipal tax base if U.S. Steel were to mothball the plant at the end of 2015.
Potential impact
It's part of an attempt to asses the potential economic impact to the city when U.S. Steel's obligations to operate (part of a deal with the federal government which allowed Stelco to be sold to U.S. Steel) expires at the end of 2015.
The other part is reminding the province that they'll be on the hook to fill out the shortfall under the Pension Benefits Guarantee Fund (PBGF). That's the leverage the city is hoping to draw on for help understanding what deal exists between the federal government and U.S. Steel past 2015.
Recently re-elected Liberal MPP Mitzie Hunter, who handles the pension portfolio for the province, turned away interview requests from CBCHamilton.
"What happens in 2015?" asked Steel Committee chair and Ward 7 Councillor Scott Duval. "There's an agreement between the feds and U.S. Steel that's confidential… How are they going to pay (pensioners)?"
Making the case
According to the city report, the $977 million shortfall in the pension, amounts to roughly $102,000 per pensioner.
The PBGF kicks in a certain amount based on how much each pension is. For someone expecting a $2,000 pension per month, the projection is U.S. Steel will be 40 per cent short. The PBGF kicks in half of that to recover some losses.
"With (this city report), that gives us the details we need to make to the case the federal government that they need to live up to their responsibilities that they talked about with U.S. Steel behind closed doors and they need to deal with the pension issue at the federal level," McHattie said.
How much the Province may have to plan for, however, is unclear. Estimates from Local 1005 put the value around $300 million, however some estimates are as high as $780 million.
Taking aim at the provincial purse
The city is hoping that by highlighting the pension issue, the province will be more inclined to find out about the closed-door deal the federal and provincial government made with U.S. Steel.
Also hanging in the balance, according to the city report, is $9-million in annual property tax from the plant.
The same report showed if the plant were mothballed, it would have an overall $22-million impact on the local fthe tax base, based on revenue from pensioners and the 329-hectare facility.
Hamilton tax base would also take a hit
That money would have to come from somewhere, explained McHattie.
"If they shut down tomorrow, we'd be out $9-million in property taxes from U.S. Steel," he said.
"I think that's close to a one per cent tax increase… If you think think of our last couple years, we've come in at 1.3, 1.4, 1.5 per cent (tax increase), and that's with the taxes we have today. You add another 0.9 (per cent increase) on that, and that's a significant increase to all the rest of the folks who are paying taxes in Hamilton."
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