'Perfect storm': Cities worry as tax revenue drops over property tax scandal

New figures show property assessment reductions approved by Service New Brunswick to fix tax bills sent out to landowners last March have passed the $200 million mark. 

And with thousands of assessment cuts likely still coming, municipalities are beginning to worry about what that will mean for next year's finances.

"It's a perfect storm," said Saint John Mayor Don Darling. "2018 is going to be a very difficult budget." 

Service New Brunswick has been inundated with a record 17,500 property tax challenges this year and as the agency reviews each one landowners have been winning significant reductions.  

In two separate revisions to its assessment data last week, the agency lowered valuations on 2,197 properties compared to just 21 that got an increase.  

That brings the total number of assessment reductions to 6,147 since March. They are worth a combined $219 million and last week's additions to the group include some of the largest assessment reductions to date.

Less tax revenue

The biggest discount last week was in Saint John where Irving Oil Ltd. won a $1.1 million assessment cut on the former CHSJ broadcast centre it owns on Crown Street.  

That's good news for the company but the change will mean $28,800 less in tax revenue from the property for Saint John next year, part of a wave of successful tax challenges across the city that are adding significantly to its growing financial problems.

• Saint John senior hit with 93% assessment, tax hike on property
• No evidence of renovations found in hundreds of homes at centre of property tax scandal

Saint John is already facing a $3 million reduction in its Community Funding allotment from the province next year because of its declining population.  

Added to that is a one way assessment freeze announced by the Gallant government also for next year. That is expected to restrict revenue growth to all municipalities from property taxes because it only freezes assessment increases (unless they are caused by property sales or new construction) and allows assessment reductions to continue.

But now a third problem has emerged with property owners winning millions of dollars in assessment reductions before the freeze even takes effect.

"I had not heard that yet," said Darling. "If that trend continues, it's a body blow. We could have an even larger deficit.  It's going to be very difficult."

Service New Brunswick's latest property assessment revisions brings the total number of properties winning assessment reductions in Saint John alone to 1,102 since March. The combined value of those reductions is $38.1 million.   

The province absorbs the tax losses and refunds on that amount this year — about $750,000 so far — but the city will lose out next year. 

• Saint John mayor wants grant increase to make up for N.B. assessment freeze

"This is a very serious time for us," said Darling. "We're faced with cutting services or raising the property tax rate and I don't believe we should raise the tax rate."

Other cities affected

Large property assessment reductions are showing up in most communities.  

The other two largest assessment cuts revealed last week by Service New Brunswick included a $1.07 million reduction for the Riverstone Plywood mill in Miramichi, and a $949,000 reversal of an assessment increase on a 54-unit apartment building in Fredericton owned by Gerald Wilson.

Service New Brunswick hit Wilson's property with a $1 million assessment increase in March, helping to boost city tax revenues, but has now retracted most of it.   

"I'm satisfied," said Wilson. "It's as good as can be expected."

The province has so far cut assessments by a total of $3.5 million on 77 properties in Miramichi and $22.3 million on 678 properties in Fredericton. 

There are still 10,000 assessment challenges not yet processed.