Glen Savoie, David Coon & Susan Holt discuss local tax reform at a municipal forum organized by the Union of Municipalities of New Brunswick and moderated by Isabelle LeBlanc, communications director for the city of Moncton. Photo: UMNB

With tens of thousands of New Brunswickers facing another wave of property tax increases in the coming year because of rising assessments, representatives of the three main political parties discussed the need for municipal financial reform in Fredericton last night on the first official day of the provincial election campaign.

Judging by an online CBC report, Liberal leader Susan Holt, Green leader David Coon and Minister of Local Government Glen Savoie repeated much of what they said when they appeared before Saint John City Council nine days earlier.

Both Holt and Coon promised to let cities share in tax revenues from heavy industry while Holt also promised an overhaul of the property tax system. According to a report by Brunswick News, Coon also pledged to transfer one percentage point of the provincial sales tax to municipalities, but only after major investments in health care have been made first.

Savoie said the government is working on the fiscal reforms that it promised in 2021 as part of the municipal amalgamations that took effect in 2023.

Reliance on residential property taxes

Last night’s forum was organized by the Union of Municipalities of New Brunswick (UMNB) after it released a report calling on the province to transfer one point of provincial sales tax revenue (about $225 million per year) to municipalities.

Mt. A. Economics Professor Craig Brett. Photo UMNB

The report, compiled by Mount Allison Economics Professor Craig Brett, says the money is needed partly to make up for steady reductions in provincial grants to local governments.

During an interview with CHMA’s Erica Butler, Brett explained how the provincial grants have dwindled since the year 2000.

“Municipalities used to get 16, 17% of their money from the province back at the turn of the Millennium and now they get about five or six by way of unconditional grants,” he said.

“This didn’t happen overnight,” he added. “Back in the 1980s, the number they got from the province was closer to 40%.”

In his report, Brett points out that the steady reduction in provincial grants has forced municipalities to rely more heavily on residential property taxes compounded by the fact that the value of their commercial or non-residential tax base has not been growing as fast.

He says municipalities also need the sales tax revenue to pay for improvements to local infrastructure such as roads, storm sewers, sidewalks and buildings.

‘Broken system’

Meantime, an expert in valuing properties for tax assessment purposes, says New Brunswick’s property tax system is badly broken.

“The problem in New Brunswick is that taxes and assessments have always had this incestuous relationship and they shouldn’t and they don’t in other provinces,” says Jerry Iwanus, who worked as a property assessor for Service New Brunswick from 2019 to 2023.

Before that, Iwanus spent 40 years in Alberta in various roles including as mayor of Bawlf, a village southeast of Edmonton, as a member of a rural area assessment review board and for 16 years, in private practice property valuation.

Retired property assessor Jerry Iwanus. Photo: submitted

He says that in Alberta, rising property assessments don’t automatically trigger an increase in municipal taxes as they do here because as assessments rise, tax rates are lowered to generate the same amount of revenue.

“Here, when assessments go up, municipalities consider it a windfall,” he says, “instead of making the budgetary case to the ratepayers that ‘Hey, we need to raise taxes here because there are things we need to do.'”

Iwanus says he’s seen this from the inside as an assessor for Service NB.

“So, who gets the blame for all the increased taxes? It’s the bloody assessors and that is simply wrong,” he adds.

He points, for example, to Ontario where the law requires overall property assessments to be revenue neutral and where if politicians need to raise tax rates to meet their budgetary needs, they have to justify them.

“Assessment is an administrative function, the assessor says, ‘This is what the value of the property is.’ Setting the tax rate is a political function and that’s the part where they have to look the ratepayers in the eye and say we need to justify this expenditure.”

Iwanus, who has just published a book called Taxing New Brunswick: An Insider’s Guide to Successfully Challenging Your NB Property Assessment, says that aside from making rising property assessments revenue neutral, the province should change the law that requires municipalities to tie their residential rates to commercial ones.

(In New Brunswick, commercial, non-residential rates must be no more or less than 1.4 to 1.7 times the residential rates.)

“I think municipalities should have a whole lot more flexibility in how they apply tax rates because if residential properties are rising at such an extreme rate and commercial properties are not, that throws everything out of whack, so why is there this arbitrary figure that ties the two of them together?”

To read more on what Iwanus has to say about the property tax and assessment system as an issue in the provincial election, click here.