Tax cuts to help homeowners prove a windfall for government and business properties

Property tax rate reductions being proposed by New Brunswick municipalities to help homeowners and renters deal with significant assessment increases are also promising to generate tax windfalls for large government and business properties next year.

Provincial rules require municipal property tax reductions to be universal and there is nothing municipal leaders can do to steer savings in any direction, even if they want to.

"Our (property) tax rate reduction applies to everybody" said Saint John City councillor Gary Sullivan, who chairs the city's finance committee.

"We should have some more flexibility in setting our tax rates to match up with tax classifications.  If we had more options then certainly we could match tax rates with assessment increases."

In Saint John this year property assessments conducted by Service New Brunswick resulted in significant valuation increases on houses and apartment buildings in the city, but little assessment growth on industrial or government properties.   

That uneven movement in assessments is now colliding with provincial rules that require identical tax treatment of all properties by municipal governments.

Saint John has indicated it wants to soften the surge in residential assessment values for 2022 by lowering its municipal tax rate enough to rebate $5.6 million to property owners.

But it can only do that by implementing equal tax cuts for all properties, whether they need them or not.  The $5.6 million target is forcing the city into a universal tax rate reduction of 4.2 per cent. 

It's not enough to fully prevent tax increases on 12,000 city properties, mostly residential buildings, that have had assessment jumps of six per cent or more. 

It will also be a windfall for large government buildings and business properties that have suffered little or no assessment increases this year.

In uptown Saint John, the new Irving Oil headquarters building had its assessment frozen by Service New Brunswick for 2022, but under provincial rules is entitled to receive the same 4.2 percent reduction in its tax rate as every other property.

That will eat up $63,873 of the city's tax reduction budget.

In addition, several major industrial properties received assessment increases of just one per cent, including the Canaport crude oil terminal, the adjacent LNG facility, two N.B. Power generating stations and two JD Irving Ltd. manufacturing facilities, including its tissue mill and wallboard plant.  

Combined, the municipal tax reduction of 4.2 per cent on those six facilities will cost the city another $235,000 next year.

Other major properties owned or largely funded by the province posted assessment increases of 2 per cent, including the Saint John Regional Hospital, St. Joseph's Hospital, the Law Courts building, and the entire campus of UNBSJ.  They are also entitled to the full 4.2 per cent tax rate reduction.  

As a group that will cost the city another $200,000 in reduced tax revenue.

But while those large industrial and government properties will see their overall municipal tax bill fall next year, most property owners in Saint John will be paying more.

One block away from the Irving Oil headquarters building, the 54–unit Sydney Arms apartment building was hit with a 20 per cent assessment increase.  

The city's 4.2 percent tax rate cut will offset only a portion of that and the building owners will still have to pay an extra $6,885 in municipal property tax next year.  That's just over $127 per apartment, if the cost is eventually charged to tenants.

The Sydney Arms is one of 179 apartment buildings in Saint John that received an assessment increase of 20 per cent for 2022.

Sullivan said if the city wanted to direct more tax savings to buildings receiving large assessment increases and away from other properties, it couldn't, given provincial tax rules.

"Right now the instrument we have from the province is one tax rate, so it does cause some issues," said Sullivan.

Similar tax situations have been unfolding in other communities.

In an email Vicky Lutes, a communications officer with the Department of Environment and Local government said the province is open to the idea of giving municipalities the authority to set more than one tax rate and may act on the issue soon.

"We believe this should be considered and that may factor into the financial reforms we bring forward this fall as part of local governance reform," wrote Lutes on Friday.