N.B. municipalities to take on outdated tax system at finance summit

Municipal and provincial leaders will meet this fall to discuss all things financial and funding as further steps in New Brunswick’s overhaul of local government.

A finance summit is expected to take place on Sept. 21.

The Union of Municipalities of New Brunswick said the summit will be a critical piece to help local governments carry out their new mandates.

“We haven’t yet undertaken those talks to modernize municipal revenue and to make sure that our communities can achieve the goals set out in the white paper of being strong and vibrant places to live that are properly funded to ensure they can meet the mandate that are required by their citizens,” said Dan Murphy, the UMNB executive director.

Municipalities have been tasked with handling, in some cases, larger geographical jurisdiction, more population and services previously provided by the provincial government.

They must also help run and pay for regional service commissions, which also have new mandates associated with the municipalities that exist within their territory.

“When you compare the orders of the government, you know municipalities have way less tools, we have responsibilities to balance the budget and a lot of the growth that’s happening in our province is happening in our municipalities, and a lot of communities are struggling to meet that growth without the appropriate revenue tools,” Murphy said.

Property tax is collected by the provincial government and redistributed to the municipalities to pay for the services and programming they provide residents.

Municipalities do not receive any harmonized sales tax revenue or income tax revenue.

With more downloaded responsibilities, social issues and a worsening housing crisis, the municipalities want a bigger chunk of the property tax pie.

“We want to make sure this is a place where municipalities have their chance to have their say, push out what they think are the best solutions to meet the goals of a new modern municipal sector,” Murphy said.

The summit will look at all municipal revenue streams, including the long-belaboured equalization grants. Many municipalities have questioned how the equalization grants are calculated and who gets what.

Recent changes saw at least 26 municipalities lose some core funding and equalization grants.

“Municipalities are stepping into spaces that they haven’t traditionally, but we’re still working with an outdated system of taxation that hasn’t been adjusted since the 1960s,” Murphy said.

The City of Saint John declined to provide any further comment ahead of the summit, but a presentation to the city’s finance committee showed the city will endorse “the province vacating the property tax or provide more tax room to the municipalities.”

The province supports expert panel recommendations for equalization, removing limits in legislation on property tax multipliers and, if removal of barriers isn’t possible, offering more flexible fairness limits.

As well, municipalities would obtain control in terms of setting rates and classes for customers.

All of these were recommendations contained in a 2017 report titled “Municipal Property Tax Issues in the City of Saint John” by Harry Kitchen.

New Brunswick, according to the presentation, is the only province with a limit of 1.4 to 1.7 times the residential tax rate by the province.

Ontario, Alberta and British Columbia all have upper limits, while Nova Scotia, Newfoundland, Prince Edward Island, Quebec, Manitoba and Saskatchewan don’t have any.

In a press release in June 2022, the city said it looked forward to working together to achieve the best possible outcome for all when it came to tax reform.

The City of Saint John has several large industrial players, which makes its taxation and funding issues more significant.

In Moncton, Jacques Doucet, the city’s general manager of finance services, said the issue is finding balance between the financial tools it has and not overburdening taxpayers due to revenue-sharing shortfalls.

“For us, it’s always about making sure we have the proper funding to be able to address our key issues and priorities,” he said.

Doucet said municipalities are facing much greater social challenges, some of which fall outside their legislative authority. All municipalities in New Brunswick are also not allowed to run deficits in their budget, and so with growing responsibilities and the costs of those rising, it will be more challenging to balance the books.

“As municipalities, we still have to deal with those issues,” he said. “They impact our taxpayers and I think with proper funding I think we can be very successful.”

Public transit is one of the key examples major municipalities cite. No form of public transit is subsidized by the provincial government. Municipalities cover all the costs.

“Public transit is heavily subsidized by taxpayers, not necessarily the users, but I think that that’s a key investment and it would be a win-win for everyone,” Doucet said.

He said many newcomers are used to using services like transit, especially if they are coming from larger cities, so it would be prudent to have proper funding for things like that.

Doucet said he is also concerned about the diversion of funds to the new regional service commissions. It cannot come at the cost of the funding provided to municipalities.

“If it is not addressing the priorities the municipalities are dealing with, it puts us in a difficult position because we have less funding to deal with the same priorities and also the new priorities we’re seeing now,” he said.

The finance summit is expected to take place in Fredericton.