Cities Feel Tax Pinch
(exceprt from article posted in the Times-Transcript,December 07/10)

New Brunswick municipalities are under pressure to curb costs as the latest property tax base figures released by the Department of Local Government reveal a squeeze in the rise in revenues.

After years of rising home values, soaring tax bills and bulging municipal coffers, the Progressive Conservative cap on the growth of property assessments has muted past increases.

Overall, the 2011 tax base for cities, towns, villages and rural communities in New Brunswick has climbed by $1.8 billion or 4.7 per cent from last year's figures. While municipalities will benefit from an increase in the tax base, it falls short of the more than seven per cent spikes of previous years.

Local Government Minister Bruce Fitch said the increases this year are attributed to a combination of new construction and an increase in the value of existing properties. "But owner-occupied property increases were limited by the three per cent property assessment cap brought forward by our government," he said.

Of the province's three biggest cities, Moncton fared best with a tax base increase of $376 million or more than six per cent to $6.28billion. Fredericton's tax base increased $270 million to $5.81 billion, an increase of 4.88 per cent. Saint John's tax based increased $234 million or 4.01 per cent to $6.10 billion.

By comparison, in 2009 Moncton's tax base increased by 7.90 per cent, Fredericton's by 7.92 per cent and Saint John's by 9.08 per cent.

The downward trend of municipal property tax bases coupled with a decrease in the unconditional grant signals the onset of municipal belt-tightening, Fitch said.

"Municipalities were hit with a double whammy this week with changes to the unconditional grant and now a change in the tax assessment," Fitch said, referring to decision to cut unconditional grants by one per cent to save the province nearly $700,000.

"But taxpayers are overburdened and we've got to find a middle ground," he said. "The three per cent cap on assessments protects residents and municipalities still see positive growth."

A property owner's tax bill is determined by taking the municipal tax rate and multiplying for each $100 of assessed value.

For example, the average tax rate for New Brunswick cities is $1.62. For a house assessed at $100,000, the property tax bill would be $1,620. The average tax rate in towns is slightly lower at $1.36 whereas villages are the most affordable at $1.26.

The tax bases are used by municipalities to determine their tax rates in time for budget preparations, due by the end of the month. The growth in assessments means municipalities can collect millions of additional dollars without raising taxes.

"We're confident we can deliver a budget with no tax rate increases," said Mike O'Brien, a Fredericton city councillor and chairman of the city's finance committee.

Given 90 per cent of Fredericton's revenues come from property taxes and unconditional grants, however, O'Brien said every item in the city's budget will be reviewed.

"We'll have some soul searching to do to find reductions and efficiencies in the programs and services we offer residents," he said. "There has been a slow creep in budget over the years and it's time to start restraining spending."