Bruce Fitch plans overhaul of property tax system

New Brunswick homeowners will be offered a new "spike protection" mechanism to guard against large property tax assessment hikes, Local Government Minister Bruce Fitch announced on Wednesday.

Fitch released a discussion document on property tax reform that called for a number of changes.

"We are fulfilling our commitment to make a fairer and more effective property tax system," Fitch said in a statement.

As a part of the provincial governments proposed package of reforms, the three-per-cent property tax freeze is being lifted.

The local government minister said homeowners will be moving back to a market-value system where their property assessments, which are used to calculate property taxes, can fluctuate.

Fitch said there will be a permanent exemption given for the 146,000 homeowners who took advantage of the two-year assessment cap.

For example, if a person saved $10,000 between the 2012 market value and the 2012 capped value of their property, they will receive an exemption for that rate. So every year when that person's property assessment comes in, they will be exempted for $10,000.

However, when they sell their house, the new owner will pay the full market rate.

The provincial government estimates it will take about 20 years for all the exemptions to work their way out of the system.

As well,homeowners will be given the option of paying for their property taxes monthly instead of in one large annual payment.

The provincial government will also introduce a mechanism to safeguard homeowners from property tax, assessment increases of more than 10 per cent.

Ending 'double taxation'

Another element of the property tax plan is to reduce the amount of tax by 23 per cent that is imposed on rental properties, commercial properties and second homes.

Building owners have complained for years they have to pass on the extra cost to tenants.

There's also to be help for homeowners.

Fitch said he hopes the change will mean relief for tenants.

"This will help the landlords, and we expect those savings will be passed on to the renters, to help either lower rent, improve the quality of housing, or mitigate any planned increases in the rental prices," Fitch said.

But the reforms announced on Wednesday will not force apartment building owners to pass on the savings.

Owners say the tax break isn't enough to guarantee rent reductions but it may help landlords put off rent increases.

Other elements of the property tax reform paper include:

• Property tax bills will be simplified.
• A new cost-sharing model for RCMP services that will more fairly distributing costs among all users.
• Minimizing the impact of these reforms on farmers, homeowners and businesses in local service districts.
• Exempting libraries from property tax.

The tax reduction doesn't go far enough, according to Willy Sholten of the New Brunswick Apartment Owners Association.

"This will mean that we'll still be 1.8 times the single family rate and 1.8 times the average in Canada. So there's still quite a gap. But the government has done something and it's being portrayed as the first phase."

But any tax reduction is good, according toKevin Lacey, Atlantic director of the Canadian Taxpayers Federation.

"This tax reduction will mean that those living in apartments in the long-term will likely see a benefit. And this combined with the government's announcement in the budget that it will freeze rental rates is a good thing for taxpayers of the province."

The provincialgovernment says it won't be losing money because of the tax reductions.

It expects it'll be covered by a doubling of the real property transfer fee in the last budget that should generate up to an extra $8 millioneach year.