A review of municipal pay levels ordered by the province recommends the government act to help rein in rapidly escalating wages among unionized civic workers and some administrators.
The report by consultants Ernst & Young, released by the Canadian Taxpayers Federation, was conducted as part of the province's core review launched last year.
It found unionized municipal workers received pay hikes totaling 38 per cent from 2001 to 2012 – twice as much as the 19 per cent in raises for unionized provincial government staff. Inflation over the same period was 23 per cent.
The report also notes several larger B.C. cities pay their chief administrators close to the $230,000 in pay and bonuses earned in 2011 by the average provincial government deputy minister, while that's exceeded by city managers in Vancouver, North Vancouver, Abbotsford and Maple Ridge, as well as Metro Vancouver's chief administrator.
The review didn't consider whether city managers deserve the same pay as provincial deputy ministers, but said that should be investigated.
Provincial compensation restraint policies that began in 2008 with that year's recession should be reviewed and updated to potentially serve as a broader philosophy extending across the public sector to municipalities, the review recommended.
"The government should do what is necessary to bring municipal government compensation into alignment over time, including financial levers if necessary."
Canadian Taxpayers Federation B.C. director Jordan Bateman said he hopes city councils reform themselves and the province doesn't need to take "extreme measures" like tying provincial grants to wage restraint.
"I would see that as a last resort," he said.
The report suggested the province may find it harder to retain its own managers if cities pay more and Bateman said that makes the issue a legitimate concern for government.
"If municipal wages are going up fast and they're grossly overpaying staff, it gets hard for the province to keep their employees in place," he said.
Unlike limits on management pay imposed across the provincial government, local government compensation isn't coordinated or regulated, the report said, and there's no limit on what cities can decide to pay.
Collective bargaining by cities is generally "highly fragmented and inefficient," the report observed, allowing unions to exploit their divisions.
"Unions can focus efforts on municipalities where outcomes are more likely to be favourable and use the resulting agreements to ratchet up increases in other municipalities."
Metro Vancouver's largest cities pulled out of the regional district's joint bargaining arrangement in 2012 in favour of more local flexibility in negotiations.
"Without a coordinated response to organized labour, there is a real risk that unions can divide and conquer," the report said.
The leak of the report to the CTF comes as municipal leaders prepare to gather in Whistler next week for the Union of B.C. Municipalities convention, where the province usually faces a barrage of funding requests.
Finance Minister Mike de Jong said in a statement the province has reached out to the cities via UBCM to explore practical tools and models that can help the entire public service deliver similar services at similar costs.
"We know many local governments are looking carefully at revenues and ideas for new revenue streams," de Jong said. "They need to be looking equally closely at their expenditures."