Employer contributions to the city pension plans could translate to a 2.7 per cent increase in property taxes, the city says. (Mark Taylor/CBC)

The City of Regina is running a pension deficit of nearly a quarter of a billion dollars and to fix it could cost taxpayers a 3-per-cent property tax hike, officials say.

That's the situation the city laid out to reporters at City Hall on Friday. 

The city pension covers 4,000 employees in five groups, including city workers and employees with Regina public schools, the Regina Qu'Appelle Health Region, the Regina public library and the Buffalo Pound water treatment plant.

Currently, the pension fund is underfunded by $238 million.

The city says the fund took a hit during the stock market decline a few years ago, but even though the markets recovered, the liability continues to grow.

Unless contribution rates are increased, or future benefits are cut back, the pension is not sustainable, city manager Glen Davies says.

However, the employee committee says the city is acting like Chicken Little by suggesting the existing pension plan is on the verge of collapse.

It says employees agreed last year to pay increased rates to keep the plan afloat, but the city has not ratified the deal.

It also wants a second opinion on the financial health of the pension.

Because the pension is funded 50-50 by employees and the employer, if rates go up it could have an impact on Regina's taxpayers.

Either the mill rate will increase or the city will have to decrease services. The fix the city is looking at would result in a 33 per cent increase in employee contributions, combined with a 2.72 per cent property tax increase.

City councillors will discuss the pension situation at a committee meeting April 6. A final decision is scheduled for City Council on May 2.