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N.B. government overhauls way it funds municipalities
Province to redirect money to equalization, regional service commission fund
Daniel Allain, the province's minister of local government and local governance reform, introduced legislative amendments Tuesday afternoon.
The changes will see a grant municipalities received phased out as the province shifts focus to an equalization program and partly funding regional service commissions, which take on more services.
"For the first time in more than 50 years, the local governance landscape has changed, and it requires a review to reflect the new structure," Ryan Donaghy, the deputy minister of local government, told reporters at a briefing before the bill was introduced.
Allain said during the briefing that the province heard municipalities and their associations calling for stability as major reforms take place.
He said that's why some aspects of the existing system will remain as others are phased out over five years. The province is committing to spend $75.6 million annually through the new system, a set amount for five years.
"We're trying to stop the highs and lows of municipal reform," Allain said.
Daniel
Allain, minister of Local Governance Reform, says he heard from
communities seeking stable funding as municipal reforms take place. (Shane Fowler/CBC)
The funding system in place since 2013 has what's known as a core funding component most communities received and an equalization grant that some received.
Equalization stems from the Equal Opportunity Program in the 1960s. Tax revenue collected by the province is distributed to communities with a lower financial capacity, so residents across the province have access to comparable municipal services.
"Fundamentally, the $75.6 million, what's it for? It's to make sure that we help — as the federal government does to the provinces — that we help municipalities that need not a hand out, but a hand up," Allain said.
While equalization will remain, the formula used to calculate it will compare a community's annual tax base growth to the provincial tax base growth.
Core grant to be phased out
The core grants will be phased out over five years.
Allain said that's because the province is giving communities the ability to set a local property tax rate on non-residential and heavy industrial properties at a range of 1.4 to 1.7 times the residential rate.
That leaves it to each community to make up for losses from the end of the core grant.
However, Allain said the funding isn't being cut but redirected.
Instead, it will go into a pool of money used to fund the expanded role of the 12 regional service commissions.
Commissions mandated to deal with things like garbage collection and land-use planning will take on regional economic development, tourism promotion, regional transportation and cost-sharing of recreational infrastructure.
Allain said some commissions had already started carrying out those tasks, but they all will now be required to provide those services.
The changes are likely to affect budgets in several of the province's largest cities that received millions in payments that will now be phased out.
Fredericton received more than $1.9 million as a core grant this year.
Figures released Tuesday show that would be reduced to about $1.6 million in 2023. Its regional service commission grant would be about $545,350.
The association representing the province's cities had called on the province to hold off on changes that would affect their finances until comprehensive tax reforms are implemented, something the province doesn't plan to start until 2024.
Moncton
Mayor Dawn Arnold says cities wanted to have tax reforms completed
before seeing changes to the province's funding system. (Shane Magee/CBC)
"We are very anxious to get that comprehensive tax reform in place before any of the equalization payments are changed," Moncton Mayor Dawn Arnold said Monday evening.
Last year, Moncton received nothing under the equalization side, but more than $3.2 million as a core grant. That will be reduced to $2.58 million next year.
"Any loss in revenues is something that we need to make up and it's something that the citizens of Moncton, the taxpayers of Moncton again would lose and they will need to make up the balance," Jacques Doucet, the city's chief financial officer, said Monday.
The changes will see the province adopt some of the 12 recommendations made by an expert panel in a report released last week, but ignore others.
Allain said the province had heard concerns from communities about fully implementing the suggestions at this point.
He said the formula the province is establishing should be reviewed in five years, but the legislation won't require that review.
ABOUT THE AUTHOR
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N.B. government overhauls way it funds municipalities
Province to redirect money to equalization, regional service commission fund
Daniel Allain, the minister of local government and local governance reform, introduced legislative amendments Tuesday afternoon. Funding for communities will be frozen at $75.6 million for five years.
The changes will see a grant municipalities received phased out, with funds redirected to regional service commissions which take on more services.
Allain said the province heard municipalities and their associations calling for stability as major local governance reforms take place. He said that's why some aspects of the existing system will remain as others are phased out.
"We're trying to stop the highs and lows of municipal reform," Allain said.
Alex
Scholten, president of the Union of Municipalities of New Brunswick,
speaks to reporters at the legislature in Fredericton on Oct. 4, 2022. (Jacques Poitras/CBC)
Alex Scholten, president of the Union of Municipalities of New Brunswick, says the association representing 61 communities supported local government reforms with the understanding there would be funding to cover added costs.
But, he said the changes announced represent a downloading of responsibilities taxpayers may need to cover.
"It's not something we particularly cherish in terms of having to charge residents more, but it is going to be difficult decisions around the budget tables across the province this year."
Allain, responding to concerns later on Tuesday, said the province isn't cutting spending. Instead it is transferring money to help fund regional service commissions. The minister said that should lower the bills municipalities face to help fund the commissions.
"So, hence, it's pretty much equal," Allain said.
Equalization remains
The funding system in place since 2013 has what's known as a core funding component most communities received and an equalization grant that some received.
Equalization stems from the Equal Opportunity Program in the 1960s. Tax revenue collected by the province is distributed to communities with a lower financial capacity, so residents across the province have access to comparable municipal services.
"Fundamentally, the $75.6 million, what's it for? It's to make sure that we help — as the federal government does to the provinces — that we help municipalities that need not a hand out, but a hand up," Allain said.
While equalization will remain, the formula used to calculate it will compare a community's annual tax base growth to the provincial tax base growth.
Scholten said municipalities wanted changes to equalization.
"This model is not effective," Scholten said. "There was a lot of issues with how the numbers were arrived at, how the formula didn't make a lot of sense when you compared what one municipality got versus another."
Core grant to be phased out
The core grants aspect will be reduced and phased out over five years.
Allain said that's because the province is giving communities the ability to set a local property tax rate on non-residential and heavy industrial properties at a range of 1.4 to 1.7 times the residential rate.
That leaves it to each community to make up for losses from the end of the core grant.
Allain said the funding isn't being cut but redirected. Instead, it will go into a pool of money used to fund the expanded role of the 12 regional service commissions.
Commissions mandated to deal with things like garbage collection and land-use planning will take on regional economic development, tourism promotion, regional transportation and cost-sharing of recreational infrastructure.
Allain said some commissions had already started carrying out those tasks, but they all will now be required to provide those services.
The government moved to limit time to debate of the bill enacting the changes to speed its passage in the legislature.
New Brunswick Liberal Leader Susan Holt told reporters it's a "huge bill that impacts every single New Brunswicker, even though it's complex to understand," and the party's MLAs will try to represent those concerned about the issue as it is debated.
"We've got less than two days to debate a massive piece of legislation and so it it doesn't feel like democracy," Holt said.
The changes are likely to affect budgets in several of the province's largest cities that received millions in payments that will now be phased out.
Fredericton received more than $1.9 million as a core grant this year. Figures released Tuesday show that would be reduced to about $1.6 million in 2023. Its regional service commission grant would be about $545,350.
The association representing the province's cities had called on the province to hold off on changes that would affect their finances until comprehensive tax reforms are implemented, something the province doesn't plan to start until 2024.
Moncton
Mayor Dawn Arnold says cities wanted to have tax reforms completed
before seeing changes to the province's funding system. (Shane Magee/CBC)
"We are very anxious to get that comprehensive tax reform in place before any of the equalization payments are changed," Moncton Mayor Dawn Arnold said Monday evening.
Last year, Moncton received nothing under the equalization side, but more than $3.2 million as a core grant. That will be reduced to $2.58 million next year.
"Any loss in revenues is something that we need to make up and it's something that the citizens of Moncton, the taxpayers of Moncton again would lose and they will need to make up the balance," Jacques Doucet, the city's chief financial officer, said Monday.
The changes will see the province adopt some of the 12 recommendations made by an expert panel in a report released last week, but ignore others.
Allain said the province had heard concerns from communities about fully implementing the suggestions at this point.
He said the formula the province is establishing should be reviewed in five years, but the legislation won't require that review.
ABOUT THE AUTHOR
https://www.cbc.ca/news/canada/new-brunswick/property-assessments-tax-rates-nb-1.6604694
In face of record house prices, municipalities asked to consider lowering tax rates
Province has mailed out 2023 property assessments
"Local governments will need to take these assessment increases into consideration when setting their property tax rates for next year," said Service New Brunswick Minister Mary Wilson in a statement alerting property owners that assessment increases are in the mail.
Property values have been rising rapidly in New Brunswick for the last two years, mostly on houses. That is affecting the taxable value of homes everywhere, even those that have had the same owner for years.
Wilson credited the escalation in values to a "strong real estate market" driven by "a growing population" in the province. New Brunswick added more than 21,000 people in the last year, the most in a single year since at least Confederation, in 1867.
Service
New Brunswick Minister Mary Wilson is asking municipalities to consider
lowering their tax rates in the face of record house valuations by
assessors. (Jacques Poitras/CBC News)
Assessment notices arriving this week detail what the New Brunswick government has determined each property in the province will be worth as of Jan. 1, 2023.
If the amount goes unchallenged by the property owner, a municipal tax rate and, in some cases, a secondary provincial property tax rate is applied to the assessment to generate a tax bill.
Assessments up $1.47 billion
Last year, about half of New Brunswick's 34 cities and towns lowered their property tax rates, to some extent, as a first wave of assessment increases washed over property owners. But this year increases are higher and more widespread.
In Moncton, assessments on all properties are up $1.47 billion on the city's nearly 30,000 properties. It's $500 million more than last year's increase, and most of it is related to escalating house prices in the city.
Hundreds
of houses in the Moncton neighbourhood around Lonsdale Drive and
Candice Lane are receiving notices of 22 per cent increases on their
assessments this week. Many of the same homes had 27 per cent
assessment increases last year. (Pierre Fournier/CBC)
Al Meloche, 69, lives on Moncton's Lonsdale Drive. Several properties in his neighbourhood have sold for record prices since 2021. That has caused the value on his own home to jump $101,300 in two years. It is now assessed for taxes to be worth $280,700. Meloche doesn't disagree that his home is probably worth at least that much.
"Years ago I remember the tax estimate was always way lower than the value of the house. Now it's getting pretty close," he said.
So far the assessment jumps haven't caused a significant tax increase for Meloche.
In New Brunswick, large assessment increases on residential properties that have not been sold or renovated have to be phased in gradually by 10 per cent per year. In addition, Moncton lowered its tax rate by 6.2 per cent last year.
For Meloche, the combination of those two policies kept his 2022 property tax bill down to a 3.2 per cent increase, despite a 27 per cent hike in his assessment.
All
land owners have been mailed assessment notices by Service New
Brunswick detailing the taxable value of their property for 2023. Tax
bills based on those assessments will follow early next year after
municipalities set tax rates. (Peter Anawati/CBC)
"It worked out all right for me," said Meloche about the $96.55 extra he ultimately had to pay in increased property taxes on his home in 2022, and he is hoping for a similar outcome in 2023.
However, few communities lowered their tax rates as dramatically as Moncton last year.
Saint John cut its tax rate 4.2 per cent and Fredericton 1.6 per cent.
Others left them unchanged, and thousands of homeowners with large assessment increases faced tax hikes at or near the 10 per cent limit.
New Brunswick municipalities will be preparing budgets and deciding on tax rates in the next few weeks.
Saint John Mayor Donna Reardon said she believes another tax cut will be "under consideration" this year given assessments in her city are up more than $680 million.
In addition, the province is granting municipalities some flexibility to target tax cuts at residential properties alone for the first time.
"I think it would be in our best interest to continue in that vein," she said.
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