Residential property tax bills in Saint John driven higher by provincial restrictions

City councillor Gerry Lowe said there is no question property tax bills to owners of residential properties in Saint John would be lower by some amount in 2024 if the city had been free to set rates it wanted rather than ones provincial rules required.

"We would have definitely charged residential less," said Lowe. "We would have dropped the tax rate more."

The difference to homeowners is $20 and more on tax bills that began appearing in mailboxes this week.

The problem Saint John ran into during budget preparations last fall, and which residential property owners are now paying for, is a provincial rule that limits tax rates that can be charged to commercial and industrial properties in a community to 1.7 times what residential properties in the same community pay.

It's a significant restriction by Canadian standards and one some New Brunswick municipalities are hoping to have loosened, if not eliminated, before property tax bills are issued again in 2025. 

For Saint John, which adopted a residential tax rate of 1.58 per cent of a property's assessed value for 2024, the provincial rule automatically restricts the municipal tax rate business properties in the city can be charged to 2.686 per cent.

It is not a hard provincial limit, however. Many New Brunswick communities can and do exceed what Saint John is allowed to charge because of their higher residential tax rates.

In Doaktown, J.D. Irving Ltd. is paying a 2024 municipal property tax rate of 2.737 per cent on its sawmill in the village. In Bathurst, commercial properties like the Superstore Mall pay a local tax rate of 3.02 per cent. In Campbellton, CN Rail pays 3.13 per cent on its tracks that run through the city.

Those are all rates the province has reviewed and approved.

In Saint John, city council has made multiple requests in writing and in meetings for the province to adjust tax rules so the city can also charge larger amounts on mills, malls, tracks and other non-residential properties if it chooses, without having to raise tax rates on residential properties to do it.

"We would really like to have no restrictions and set what we want to set," Saint John finance commissioner Kevin Fudge told city councillors at budget meetings last fall. 

"We would like the ability to set as many classes as we want and set the rates the way we want, based on what works for the City of Saint John."

In those meetings, Fudge produced charts showing if Saint John had even been allowed to leave tax rates charged to commercial and industrial property owners the same in 2024 as they had been in 2023, it would have generated an additional $1.4 million in revenue for the city.

That, in turn, would have been enough to lower the residential tax rate further to 1.56 per cent and save each residential property owner in the city $20 for every $100,000 worth of assessment on their tax bill.  

However, in 2023, commercial and industrial businesses in Saint John were charged a tax rate of 2.754 per cent. Charging that again in 2024 would have been 1.765 times more than a residential rate of 1.56 per cent, so that option was disallowed by provincial rules.

The city wanted to make that kind of adjustment because residential properties in the city have risen sharply in taxable value over the last three years in a way commercial and industrial properties have not.  

However, Gary Sullivan, the chair of the city's finance committee, told CBC News in November that there was no way around provincial restrictions on taxing commercial or industrial properties more.

"Heavy industry next year will actually be paying less than the year before, overall, because we don't have the tools to do anything else," said Sullivan.

"We would love to level the playing field so that everybody's paying a fair share."

Now that tax bills have arrived, Lowe said residential property owners are paying what amounts to a surcharge on their current bills to make up for amounts the city would be charging commercial and industrial property owners if not forbidden by the province.

"They are paying a portion that heavy industry should be paying," said Lowe.

It is common in other Canadian cities to charge business properties significantly higher rates than what households pay.

In Toronto and Edmonton, property tax rates for commercial and industrial properties are more than double residential rates, according to each community's website.  

In Montreal, tax rates for non-residential properties worth more than $900,000 are set five times higher.  

Rate differentials on heavy industrial properties are often even wider. In Sault Ste. Marie, Ont., large industrial properties face tax rates seven times higher than residential properties. In Vancouver, large industrial rates are 14 times more.

Dan Murphy, executive director of the Union of the Municipalities of New Brunswick, said local governments await news from the provincial government about its plans for municipal financial reforms.  

The Higgs government has long promised to make substantial changes prior to Jan. 1, 2025, and Murphy said his association would like to see some details prior to members gathering for scheduled meetings in two weeks.

"We're hoping at that [time] we'll have a better update on where things stand on the fiscal piece," said Murphy.

The province has not publicly committed to lifting restrictions that caused Saint John to tax residential property owners more and business property owners less than it wanted this year, but in an email a department spokesperson appeared to indicate change of some kind is coming.

"The Department of the Environment and Local Government continues to work on aspects of fiscal reform," the statement says.

"Work on this phase of local governance reform is ongoing, including a more comprehensive path forward."