Five-year funding for local governments and rural districts04 October 2022
FREDERICTON (GNB) – Legislation designed to provide financial stability to local governments and rural districts by providing them a set amount of funding for five years was introduced today by Local Government and Local Governance Reform Minister Daniel Allain.
An Act Respecting Community Funding would provide an annual amount of $75.6 million for 2023 to 2027.
“We know how important stability is for the budgeting process for local governments and rural districts,’’ said Allain. “We are ensuring stability and predictability as they transition from the status quo to their next exciting chapter of growth.’’
The current grant funding formula took effect in 2013. It has both equalization and core funding components.
As part of recent reforms, the provincial government has given local governments the flexibility to increase the tax rate on non-residential properties by up to 1.7 times the local rate. It has also reduced the provincial property tax rate on these properties over three years, giving local governments additional tax room.
Allain said the new funding mechanism will take into account these changes, recognizing local governments have more financial flexibility than they had in 2013, combined with changes at the regional service commission level.
The modernization of the province’s local governance system has resulted in changes to local boundaries, responsibilities, and taxation powers that will affect community tax bases and funding requirements. In the spring, an expert panel was formed to review the community funding and equalization grant and make recommendations.
“While we used components of the expert panel’s report, implementing their recommended new equalization formula at this time is not ideal as the restructured entities are all going through a significant transition in the next three to five years,’’ said Allain. “We thank our municipal associations for working collaboratively with us and we have been listening to their feedback and ideas.”
The funding mechanism is intended to ensure that communities needing support receive adequate funding, while those that are financially stronger do not receive equalization funding. Core funding will be redirected over the next five years to a fund to support the priorities of regional service commissions.
Equalization payments will be adjusted for annual tax base growth compared to the provincial tax base growth to a maximum of three per cent. Any reduced need for equalization funding will be redirected, along with the core funding revenue, to help support the expanded mandates of regional service commissions.
Funds for the commissions will be distributed to each one in 2023 but will be based upon applications for 2024 and beyond.
“We recognize the importance of our regional service delivery bodies and the work they will do in economic development, tourism promotion, community development, regional transportation, and in areas of social focus,” said Allain. “That is why we are ensuring the funding will be available to support those efforts in the future.”
The tax base, community funding and equalization grant figures are available online.