Legislation | Bill won't have much of an impact on capital

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By STEPHEN LLEWELLYN
llewellyn.stephen@dailygleaner.com

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It looks like Fredericton homeowners won't be enjoying a reduced property tax rate in 2010 despite a new provincial law that will lower most of those rates automatically.

Coun. Mike O'Brien, chairman of the city's finance committee, said council has already decided informally that the tax rate will stay the same despite the Liberal government's new municipal property tax accountability mechanism.

But under that mechanism, Fredericton city council will still have to hold an open, formal vote this fall to reaffirm the existing rate.

Fredericton's tax rate is $1.4176 per $100 in value for the inside rate and $1.0632 per $100 in value for the outside rate. It hasn't changed in years.

O'Brien said council, which is in the early stages of planning next year's budget, isn't interested in a small, symbolic tax rate cut that some municipalities did last year in the face of rapidly climbing property assessments.

"We talked about that last year," he said in an interview. "It would be almost folly to drop the tax rate a quarter of a cent or half a cent with the projects we took on."

The city has built or is building two new sports arenas, a convention centre and a fire station.

"We saw it as an investment. We make no apology for that."

Fredericton's tax base, the value of all its property including new construction and increased assessment, grew by 7.92 per cent last year to $4.87 billion.

Even without an increase in the tax rate, that growth gave council an extra $6.3 million to spend on a total operating budget of $88.7 million.

Some experts call that a stealth tax hike.

Property assessments have been rising much faster than inflation in recent years and it became a major issue in the last provincial election in 2006. The victorious Liberals promised to do something about it.

The result was Bill 45, which contains the municipal property tax accountability mechanism that comes into effect this fall. All municipalities will have their tax rates automatically lowered so they only get the benefit of new construction and inflation in terms of growth of their tax base, not the full increase in assessment.

If a council wants to reverse the tax rate reduction, it must hold an open, formal vote so citizens can get a chance to speak before the vote.

O'Brien and city staff have crunched the numbers for next year and have an estimate that the property tax accountability mechanism will reduce Fredericton's inside tax rate by 2.89 cents and its outside tax rate by 2.17 cents, costing the municipality $1,604,163.

For a $200,000 home, at the inside tax rate, the savings would be worth $160 a year. But it's still only an estimate.

The city won't know the actual numbers for new construction and higher assessment until it gets those figures from the province this fall.

The estimate uses three per cent or $157.6 million for new growth and 3.5 per cent or $183.8 million for the increase in assessed value.

Fredericton also needs an inflation number, but the province hasn't given municipalities that figure yet.

O'Brien said his best guess for inflation this year is 1.5 per cent. If the inflation rate is lower, it will cost the city even more money.

He said cutting the city's budget by $1.6 million would be difficult.

"It would impact a significant number of people ... This year, I assure you will be one of the toughest budgets in years.''

The city needs an extra $2 million a year to cover wage increases, $1.2 million to pay for the interest on the capital construction program, another $55,000 to pay for provincially mandated health benefits for firefighters and $24,000 extra for street lights after NB Power's 2.9 per cent rate increase, he said.

O'Brien said the city is also starting to put money aside to pay for the operating costs for the new southside sports arena and the convention centre.

"That $1.6 million will be chewed up awfully fast," he said.

Official Opposition Leader David Alward said the government's property tax accountability mechanism does nothing to solve skyrocketing property assessments.

"All they have done is downloaded it to the municipalities," he said. "That is not a solution, clearly, for the long term. They don't want to deal with it."