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The Future of Local Governance in New Brunswick: Time for Action

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The Future of Local Governance in New Brunswick: Time for Action THE FUTURE OF LOCAL GOVERNANCE IN NEW BRUNSWICK: TIME FOR ACTION Report on Municipal Taxation in New Brunswick GÉRARD BELLIVEAU Executive Director Southeast Regional Service Commission PIERRE-MARCEL DESJARDINS Professor of Economics and Director of the Graduate School of Public Studies Université de Moncton ANDRÉ LECLERC Consultant and Professor Emeritus of Economics Université de Moncton September 2020 Table of Contents CONTENTS ....................................................................................................................................................................................................4 INTRODUCTION ......................................................................................................................................................................................11 CURRENT CONTEXT OF LOCAL GOVERNMENT IN NEW BRUNSWICK ................................................................. 15 1.1 Classification of Municipal Entities in New Brunswick ........................................................................................................15 1.2 Changing Demographics and Tax Base ................................................................................................................................... 18 1.3 Revenue and Expenditure Structure of Municipal Entities ...........................................................................................20 1.3.1 Sources of Revenue ................................................................................................................................................................... 21 1.3.2 Distribution of Expenses .........................................................................................................................................................25 1.4 Regional Service Commissions .........................................................................................................................................................30 1.4.1 Mandate for the Local Governance Review Committee ............................................................................30 1.4.2 Recommendations of the Finn Report ........................................................................................................................31 1.4.3 Action Plan for a New System of Local Governance - December 2011............................................. 32 1.4.4 Creation of Regional Service Commissions: Community Collaboration, Communication, and Planning ..................................................................... 32 1.4.5 Changes Made Since the Implementation of the RSCs ................................................................................34 1.4.6 Lessons Learned from this Initiative ...............................................................................................................................34 1.4.7 Impact on the Distribution of the Tax Burden ........................................................................................................36 1.5 Evolution of Municipal Responsibilities in New Brunswick ............................................................................................. 39 1.5.1 The Local Governance Act - 2017 ...................................................................................................................................41 1.5.2 Challenges ...................................................................................................................................................................................... 42 1.6 Conclusion of the First Section ..............................................................................................................................................43 FISCAL INIQUITY AND NEW SOURCES OF REVENUE FOR MUNICIPALITIES .....................................................45 2.1 Sources of the Fiscal Imbalance between Municipal Entities and Local Service Districts ...................................................................................................................................................................45 2.2 Improving the Financial Situation of Municipalities ...........................................................................................................48 2.2.1 New Sources of Tax Revenue .............................................................................................................................................48 2.2.2 More Efficient Management of Expenditures ....................................................................................................... 51 ACTION PLAN .........................................................................................................................................................................................55 CONCLUSION .........................................................................................................................................................................................58 APPENDIX 1 ..............................................................................................................................................................................................60 Ranking of New Brunswick Municipal Entities by Population Size Criteria ................................................................61 1.1 Detailed Table ....................................................................................................................................................................................61 1.2 Summary Table ................................................................................................................................................................................63 APPENDIX 2 ..............................................................................................................................................................................................64 Municipal Consolidation Results 2005-2017 ...................................................................................................................................65 BIBLIOGRAPHY .......................................................................................................................................................................................68 CONTENTS 4 The Future of Local Governance in New Brunswick: Time for Action 1 Current local governance context in New Brunswick What should we take away from the current state of local government in New Brunswick? • Current classification of municipalities is obsolete. • On the revenue side: municipal entities have a certain amount of leeway to raise the money nee- • Demographic trends are having a major impact ded to finance services through the tax rate, BUT: on some municipalities: they will create a surplus the ability of residents to pay and the comparison, of assets and limit their ability to remain sustai- made by residents, of rates with neighbouring mu- nable over the long term. Consideration of new nicipalities and LSDs limit this leeway. revenue sources should be accompanied by consi- deration of local governance models. • The presence of very different means according to the size of local governments: differences in • Implementation of the RSC network has had capacity between the different categories of several positive effects: creation of a forum municipalities. for discussion and consultation among local go- vernance stakeholders in the various regions, • On the expenditure side: large variations ac- contribution of LSD citizens to the funding of cording to the size of municipalities, implies certain services, sharing of costs in the adminis- municipal services available in varying quan- tration of regional services, improvement of staff tity and quality. skills, etc. • Strong financial constraints in the municipal • Certain weaknesses remain in these regional world in New Brunswick: financial efforts for ser- commissions: the appointment of LSD represen- vices subject to provincial standards vary greatly tatives implies a significant democratic deficit depending on the type of municipality, and insuffi- for citizens, the complexity of the budgetary pro- cient spending by many municipalities on essential cesses, etc. services for which no standards are applied (e.g. emergency preparedness, climate change adap- • Requiring local governments to adopt a ba- tation, solid waste management). lanced budget makes it difficult to identify the financial challenges they face. Indeed, in this • The new challenges facing municipalities will context, financial compromises are made in the create additional financial pressures: it will be budget process and cannot be caught by financial difficult to meet these new needs without access reports. to new financial resources and the sharing of res- ponsibilities with neighbouring communities, as long as a community with such financial capacity is among those neighbouring communities. 5 Report on Municipal Taxation in New Brunswick 2 Fiscal inequity and new sources of revenue for municipalities • Significant tax inequity between LSDs and municipal entities in New Brunswick. • Municipalities operate within a fiscal framework that does not allow them to respond well to citizens’ expecta- tions, nor to prepare for the new challenges presented by the transformation of the socio-economic and climatic environment. A. SOURCES OF THE FISCAL IMBALANCE B. IMPROVING THE FINANCIAL SITUATION BETWEEN MUNICIPAL ENTITIES OF MUNICIPALITIES
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