As municipalities undertake the new budget deliberations, the province has introduced several legislative changes including a tax rate stabilizer and a vacant land levy.
The stabilizer mechanism was introduced in the last session, and the province has since released stabilizer rates for municipalities.
In June, the Union of Municipalities of New Brunswick (UMNB) said the reforms fell short of the expectations as the province continued working toward comprehensive fiscal reform.
Local Government Minister Aaron Kennedy, the former chief administrative officer for the Town of Quispamsis, said in June some municipalities support the reforms.
“We are going to put changes in place that [are] going to make the system more predictable, stable, transparent and fair for New Brunswickers,” he said in the Legislative Assembly in June.
Under the changes, if municipalities set their tax rates above the stabilizer rate, they must publicly explain their decision.
UMNB said the stabilizer rate is calculated by adjusting the tax rate to balance out assessment growth, and adding on growth from new construction.
“Communities can still set their tax rate above the stabilizer rate, but if they do, they are required to publish an explanation on their website and include the explanation in their budget when it is submitted to the province each fall,” Dan Murphy, UMNB’s executive director, said. “Because this is the first year for the stabilizer regulation, communities will have an extra layer of information to consider as part of the budget process.”
In New Brunswick, municipalities rely on property tax assessment for 83 per cent of their revenue.
“Local councils are sensitive to the challenges their communities are facing, but the lack of alternative sources of revenue are (sic) squeezing communities between critical investments in things like roads, infrastructure or trying to keep the rates low,” Murphy said in response to questions from The Courier.
He said the biggest challenge for municipalities is repairing aging infrastructure and investing in the community growth while relying heavily on property tax.
“What councils are likely wrestling with is which roads get maintenance, what projects get built, and what can be pushed for a future,” he said.
Deferred maintenance on public infrastructure can be an option, but it could result in higher costs in the future.
The Institute for Municipal Finance and Governance (IMFG) said revenue neutrality is not new in Canada.
“I’ve seen this in other places, but it’s done a little bit differently,” Enid Slack, the director of the IMFG, said.
In the U.S., it is called truth in taxation legislation. She said if assessment grows by 20 per cent, for example, they would lower the rate by 20 per cent.
“But it’s not common for the province to set that,” Slack said.
Slack explained that tax policy and assessment should be separate.
“We think that property tax policy should be undertaken by the local governments based on their needs,” she said.
She said it is common across the country for municipalities to largely rely on property taxes for revenue alongside federal and provincial transfers.
“It is somewhat constraining, an environment where you have few revenue sources and you have to balance your operating budget,” she said.
New Brunswick municipalities are required to adopt balanced operating budgets, unlike the provincial and federal governments. Slack said while some municipalities are growing faster, that growth comes with the requirement of further service delivery.
“I think for any community balancing your budget with a limited source of revenue can be very difficult,” she said. “That’s not to say you can’t increase your property taxes, right? You have to say to your community, we need to make these expenditures.”
She said the stabilizer mechanism makes the process very visible for the public.
“There’s a lot of accountability in that system where local governments determine what expenditures they’re going to make … whether it’s sidewalks, roads or transit, they’re very visible services,” she said.
Slack said municipalities do not have access to income and sales tax.
“It’s really about the role of the province versus the role of local governments … of course, the lack of access for municipalities to income and sales tax,” she said.
For some municipalities, including Saint Andrews, the stabilizer rate is hard to understand.
Saint Andrews Mayor Steve Neil said from the beginning it felt the province was putting the burden back on municipalities.
“Knowing that if the provincial stabilizer rate came in lower than what we need to successfully operate then that burden of the municipality explaining to residents why we have to raise it falls back to us all of a sudden,” he said.
Charlotte County assessment base
Local government reform downloaded more responsibilities onto municipalities, but was not accompanied by comprehensive fiscal reform.
In Saint Andrews, the assessment base grew by 12.5 per cent, bringing its total assessment base to $786,461,100.
In St. Stephen, the assessment base increased by 10.9 per cent, totalling $859,704,600.
Eastern Charlotte’s assessment base grew by 11 per cent, with a total of $828,295,000.
Fundy Shores grew by 6 per cent, with a total assessment base of $567,718,700.
Over on Grand Manan, the assessment base came in at 9.6 per cent, with a total of $309,625,900.
Campobello Island’s assessment base grew by 9.8 per cent to $137,864,500.
The average assessment growth in New Brunswick was 11.1 per cent meaning Saint Andrews was the only municipality listed to exceed the average in Charlotte County. About 2.3 per cent of that average is attributed to new construction.
A freeze on property assessment implemented last year has been lifted, but spike protection remains in place, which means that any assessment can only increase by a maximum of 10 per cent.
The new stabilizer
As for the stabilizer mechanism, the province also released those figures, largely recommending lower rates across the board.
In Saint Andrews, it recommends lowering the residential rate by six cents. It provides no recommendation for the heavy industrial rate.
Chamcook and Bayside would see a decrease by about three cents. Rural areas also pay a 41 cent fee to the Department of Transportation and Infrastructure.
In St. Stephen, the provincial stabilizer rate is seven cents lower for residential ratepayers, while the heavy industrial rate is nearly nine cents higher.
Over in Eastern Charlotte, the recommendation is to lower the tax rate by nearly seven cents, increasing industrial rates there by five cents.
In the rural district and Blacks, it recommends lowering the rate by almost two cents and seven cents respectively.
The industrial rates all see an increase as well.
On Grand Manan Island, the province recommends lowering the residential rates by nearly five cents, while the heavy industrial rate is nearly five cents higher.
The Holt government has also proposed legislative amendments that would allow municipalities to impose a vacant property levy on eligible vacant properties. The legislation must pass three readings in the Legislative Assembly before receiving royal assent.
No municipality has decided their tax rates but are actively discussing their budget priorities ahead of the Nov. 30 deadline.
