The promised overhaul of New Brunswick’s property tax system leaves non-residential ratepayers potentially exposed to a larger share of the tax burden. Newly introduced legislation would widen the allowable residential-to-non-residential tax ratio so that commercial and industrial properties could be taxed at up to two times the rate applied on residential properties.
Other proposed amendments to statutes governing assessment and real property tax give the New Brunswick government the lead role in setting residential property tax rates, albeit with flexibility for local decision-makers to reject the recommended numbers. Provincial intervention would occur through a new mechanism dubbed the tax rate stabilizer.
It would be determined through a formula that factors the previous year’s tax rate, the year-over-year increase in the assessed value of the property tax base and a “local government cost index” (LGCI) specific to the municipality, which reflects population growth, the consumer price index, the non-residential building cost index and growth in salaries and wages. The New Brunswick government’s intention is to hold property tax increases at or below the upper threshold of the LGCI.
The approach is calculated to introduce a broader range of considerations for property tax rates than assessments alone. However, local governments could push the tax rate higher than recommended, provided they publicly reveal and explain their rationale for doing so.
“It is intended to improve transparency and accountability in the local government budgeting process by providing a clear reference point for how much revenue a municipality plans to raise based on costs and services,” states background material posted on the province’s website. “Local governments continue to decide tax rates, but the local rate stabilizer helps residents better understand how revenue decisions are made any why tax changes occur.”
This comes roughly 15 years after a previous provincial government introduced a requirement for municipal councils to publicly vote on their decision before they could opt out of recommended revenue-neutral property tax rate.
“It is an interesting approach designed to pressure municipalities to keep tax bills lower,” Andre Pouliot, vice president, property tax, with the Atlantic Canada based real estate and property tax advisory, Turner Drake and Partners, observes in the firm’s newly released newsletter. “Most did (opt out) and the changes were scrapped in 2012.”
This new round of property tax and assessment reforms would also give the New Brunswick government leeway to transfer some of the provincial property tax it collects from heavy industry back to their host municipalities. This is meant to address extra service and infrastructure costs related to heavy industry’s presence. Further details are left for future regulations.
Other proposed amendments would extend the assessment appeal period from the current 21 to 30 days, enable online assessment notices and update the design of property tax bills.
“This legislation will help us set the foundation for a property tax system that is more transparent, predictable and stable, starting in the 2027 taxation year,” says Aaron Kennedy, Local Government Minister for New Brunswick. “With these changes, your property taxes will not be driven by changes in property values alone. They will reflect the needs, budgets and service decisions of your local community, with clear explanations on your property tax bills.”
