The current funding arrangement, known as the unconditional grant, was developed more than 40 years ago. Under this arrangement, funding is provided to Municipalities, Rural Communities and in support of Local Service Districts to help offset some of the costs of delivering services to citizens.
Historically, unconditional grant funding has been provided for two purposes:
- To provide core funding in recognition of the fact that the ability to raise revenues is less than expenditure needs (fiscal gap); and
- To address the fact that the ability to raise revenues is greater in some communities than in others (equalization).
While the intent of the unconditional grant remains an equitable distribution of funds which recognizes varying ability to raise taxes locally, the formula has become increasingly inequitable in terms of distribution. As with other elements of the local governance system, there have been a number of reviews of this funding arrangement.
Government recognizes that communities require a new arrangement which will provide stability in financial planning and supports the most eἀective use of the grant dollars available.
Attention is also required in other areas of community funding. As an example, the administration and management of services in Local Service Districts and former LSD areas in Rural Communities is funded through the provincial budget. In municipalities, the expense of administering local services to property owners is paid through a local municipal tax rate established by its municipal council. This creates inconsistencies.
Additionally, as the new Local Governance System is implemented, opportunities for new funding arrangements will need to be explored.
Current Challenges at a glance:
- Many communities are struggling to pay for basic services residents need and want, while trying to maintain reasonable local tax rates.
- Some communities are facing significant economic burdens, such as those which have experienced the loss of a key industry.
- Municipalities are challenged to finnd new or additional sources of revenue to operate.
- The current unconditional grant is not distributed fairly among New Brunswick communities.
- There are inconsistencies in relation to funding the administration of services.
The Path Forward - Actions to achieve Objective 4
Address community funding challenges by:
- Designing and implementing a new community funding model with input from stakeholders. This model will:
- support the principles of fairness and accountability across communities;
- provide a degree of stability and predictability for communities; and
- accommodate new or expanded Municipalities and Rural Communities.
- Creating parity among taxpayers by transferring the costs of managing services in LSDs to the Local Service District tax rate.
- Exploring future opportunities for communities to generate or access revenue.
- A community funding model that is based on sound principles including equalization, predictability and accountability.
- Improved predictability regarding the total funding available and the method of distribution.