Saint John needs 40% tax hike, pension suit hears

Saint John would need a 40 per centtax rate increase for 15 years to pay the current employee pension plan debt, the jury in a defamation suit heard on Monday.

The citys pension board is suing former city councillor John Ferguson over comments he made starting in 2005 about the boards handling of the pension fund, which had a $47-million deficit at the time.

The deficit has since ballooned to more than $190 million.

"I put it to you Saint John will have to look at bankruptcy in a year or two," Fergusons lawyer, Rod Gillis, told the Court of Queens Bench.

Greece, California, Birmingham, Ala., Harrisburg, Ala. and Stockton, Calif. are all declaring, or on the verge of bankruptcy and Saint John is close behind, said Gillis.

Gillis made the statement while cross-examining Glen Tait, the citys former fire chief, a former city councillor and pension board member. Tait is also a Progressive Conservative MLA in Saint John.

Gillis suggested the citys deficit will soon surpass $200 million and outlined the 40 per cent tax rate that would be necessary for the next 15 years.

Tait, who is now a city pensioner, agreed with the estimated tax increase required, but argued the future deficit amount isnot certain. Investments could improve, he said.

Gillis said that was wishful thinking.

Stood to gain

Gillis claims Tait was among the pension board members whovoted for expensive changesto the plan in the mid- to late-90s, which they stood to benefit from the most.

The changes, which included increasing the maximum pension cap to $45,000, up from $40,000 and then indexing it, did not benefit the average pensioner, but did benefit the top-earners who enacted the changes, Gillis has said.

He argued Monday that Tait knew in 2006 what direction the plan was headed in and that drastic action was required.

Tait testified that he didnt know.

He said he's not aware of any bad management decisions regarding the pension plan or of any attempt by anyone to bury solutions.

Tait told the court Ferguson was uninterested in facts that contradicted his claims, was unwilling to substantiate his claims and was unconcerned with the effect his claims of mismanagement, self-serving decisions and willful avoidance of solutions was having.

Ferguson's criticisms took a toll, said Tait.

"The board was discredited. Taxpayers lost trust," he said.

He recounted being confronted by retirees and former co-workers aboutabout "stolen"pension funds, missing money and mismanagement.

The board had no choice but to sue Ferguson to prove his allegations are false in court to restore public confidence, said Tait.

"You can't manage funds like that without the trust of people," he said.

The trial, nowinto its 10th day,is slated to last another four weeks.