Saint John property tax report asks that industry pay more, province take less

Property taxes in Saint John could be lowered between five and 40 per cent for most landowners if heavy industry paid more, the province stopped draining the city of tax revenue, and municipalities could set their own rates, says a report going to city council Monday night.

The report is the latest push from the city for property tax changes and calls on city council to press the provincial government for major reform.

"Eliminating the provincial property tax rate and moving to (new) ratios would result in the reduction of overall property tax rates for all classes of customers with the exception of a 10 percent increase to the heavy industrial sector," says the report prepared by city manager Jeff Trail.  

Cities can't set rates

Trail recommends the city lobby the province to end its practice of collecting a second layer of property tax on top of what municipalities collect, let municipalities set tax rates as they see fit like "most Canadian cities," and end an upcoming assessment freeze "as soon as possible." 

Trail also calls for the full assessment of machinery and equipment at industrial properties, which are currently exempt from property tax, so the public can know what those exemptions are worth.

"At the very least machinery and equipment should be fully assessed and disclosed for tax purposes based on the basic principle of transparency," he wrote.

Saint John is struggling to put together a budget in the face of falling grants from the province and a provincially imposed assessment freeze that promises to eliminate tax revenue growth next year.

• Saint John hamstrung by provincial tax rules, report says
• Property tax concessions have cost N.B. nearly $380M over 40 years

That has raised frustration levels among local politicians about a number of issues, starting with restrictive provincial rules that forbid targeted property tax increases or reductions.   

Trail indicated the city might prefer to lower commercial and residential property tax rates and raise industrial rates, but that's currently not allowed by provincial law. Instead, all property tax rates must be raised or lowered at the same time and by the same amount.

"Most cities in Canada have authority to set tax rates and tax classes," Trail writes in his report.

"Municipalities in New Brunswick have the least amount of authority to control and set tax rates."

But a second problem is the province collects so much of its own property tax in the city.   

Commercial and industrial property owners in Saint John, with some notable exceptions, pay 81.5 cents in property tax to the province for every $1 that goes to the city.  

For example, from the Irving Oil refinery's total property tax bill this year, the city would get $2.6 million and the province would get $2.2 million.

Municipalities in New Brunswick have the least amount of authority to control and set tax rates.- Jeff Trail, Saint John's city manager 

Some is eventually returned in a municipal grant, but Trail says the province annually takes between $10 million and $15 million more from the city in property taxes than it gives back, and the city would be much better off if the province stopped collecting property taxes altogether and kept the grant instead.

In a hypothetical budget under that proposed system — including no grants from the province, all property tax revenue going to the city and freedom to rework rates independently — Trail suggested residential property taxes in Saint John could be cut five per cent with commercial property rates lowered 28 per cent and apartment building rates reduced 42 per cent.   

Industrial tax rates, which he suggested are too low based on amounts collected in other cities, would increase 10 per cent.    

"Property tax reform … is estimated to generate sufficient property tax revenues to remove the city's dependency on the provincial grant and generally taxpayers would benefit from overall tax rate reduction due to the province vacating the practice of of levying property taxes," writes Trail.

A call to lift equipment exemptions

Trail's report also recommends the city push for lifting property tax exemptions on industrial machinery and equipment but says if that is not done, the public should still know how significant the exemptions are.  

He notes that two oil refineries in Strathcona County, Alta., that combined are the same size as the Irving Oil refinery in Saint John pay five times as much property tax because their machinery and equipment are taxed.

Similar treatment in Saint John would allow residential property taxes to be cut between 33 and 48 percent with even larger reductions for other landowners, Trail estimates.

A 48 per cent cut in Saint John's residential tax rate would push it significantly below New Brunswick's other cities and nearby suburban communities like Rothesay and Quispamsis.

"If machinery and equipment was assessed in Saint John the property tax environment would shift dramatically," writes Trail. "Such an increase in property tax revenue would spur a reduction to the city tax rate for all taxpayers.

"At the very least machinery and equipment should be assessed and disclosed, if not taxed, for purposes of transparency."