A new report finds New Brunswick’s municipal financing model is unsustainable following local governance reform.
The independent report, released Friday, said up to one-third of local governments could run deficits in the next three years.
“We have shown that overall, accelerated growth in the tax base will help local governments generate surpluses over the next three years if they succeed in limiting growth in their expenditures to the rate of inflation,” said the report, authored by Pierre-Marcel Desjardins and André Leclerc.
“Despite this good performance overall, many local governments and [rural districts] will find themselves in a difficult financial situation because they have to contend with growth in their tax bases that is clearly below average.”
The situation is occurring as local government reform increases the responsibilities of regional service commissions (RSC), said the report.
Those new responsibilities are currently being financed between the province and the local government on a 50-50 cost-shared basis.
Desjardins and Leclerc said this could prove challenging for local governments and rural districts that are in precarious financial situations.
“This could compromise implementation of the RSC’s strategic initiatives,” said the report.
Moreover, the report said, the current equalization program increases the wealth disparities between local governments.
Desjardins and Leclerc also noted that resolving the infrastructure deficit problem will be costly for local governments.
They estimate the replacement value of infrastructure in “poor condition” for New Brunswick local governments is around $2.18 billion as of 2023.
In response to Friday’s report, Local Government Minister Glen Savoie said more comprehensive financial reform will begin in 2024.
“This report is going to form the basis of those conversations, so what we’re looking to do is to make sure that we have a proper alignment between the needs of the municipalities, the local governments, the entities,” said Savoie.
Savoie said the hope is to implement some of the reforms in 2025 but noted there are partners that have to be engaged in the process.
The minister would not say which options the government may look at, saying it would all be up for consideration.
However, the report said a comprehensive approach is needed to ensure most local governments come out as winners.
“Any changes that focus solely on a single component are bound to create situations that are less favourable for some local governments and will result in opposition to the changes,” it said.
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