Service Costs in New Brunswick Local Service Districts (LSDs) – Text of the Comptroller’s Report May 2008

The Finn Report (also known as Building Stronger Local Governments and Regions: An Action Plan for the Future of Local Governance in New Brunswick) was released in December 2008 and contained a number of recommendations regarding local governance in New Brunswick. The Report was produced by the Local Governance Commission that had been established in September 2007 by Premier Bernard Lord and was headed up by Jean-Guy Finn. The Graham administration (which held office when the Report was released) failed to act on the Report but a number of those recommendations were eventually adopted by the Alward government in 2011.

With respect to Local Service Districts (LSDs), the Finn Report relied heavily on the findings of the 2008 Review of Local Service District costs carried out by the Office of the Comptroller (Review of Provincially Provided Services in Local Service Districts May 2008). The main finding in the Comptroller’s Report (which was actually an update of a similar report done in 2002) was that the costs of services supplied to LSDs by the Province were significantly greater than revenues available from property taxes collected from LSD residents and businesses. That is, the analysis suggests strongly that the Province is funding service delivery in LSDs by using other revenue sources  available to it (e.g., income tax revenue, or property tax revenue from non-LSD residents), as well as property tax revenue collected in LSDs.

The reforms put in place in 2011 will result in transfer of various service delivery responsibilities from the Province to Regional Service Commissions and/or local municipalities. In other words, many (if not all) of the ‘Provincial’ services delivered to LSDs and rural communities will, over time, become ‘local’ services rather than the responsibility of the Province. It is hard not to conclude that a motivation for these reforms was a desire on the part of the Province to see that these ‘local’ service costs were paid for by local property taxes, rather than income and other tax revenues. The Comptroller’s Report is thus important, as calculations in the Report appear to support the idea that property taxes are not covering the costs of service delivery in LSDs. A major source of the shortfall in revenue appears to result from the fact that the $0.65 assessment (per $100 of property value) for provincially-supplied services has not increased for several decades.

The Comptroller’s Report is not available directly from the Government of New Brunswick website. I obtained a copy and have converted it into a web document, as shown below. This involved stripping away much of the formatting of the original report, but some re-formatting has been done to add clarity. I believe the text and data have been reproduced accurately, but, if any errors are found, please advise me.

[Note – this is the second post on LSD service costs and governance. I suggest reading the first post in this series prior to this one. Additional posts on this topic will follow.]

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Regional service commissions – another train wreck?

A few months ago, the government of New Brunswick released its plan for reforming local governance. This has been a long time coming and it appears that fiscal pressures have finally forced action. While problems in local governance and cost-sharing have long been recognized, political resistance to change has prevented action until now.

The Province has a significant and growing debt, and, given stagnant economic growth, there is little room for optimism. While a reversal of the corporate and income tax cuts of a few years ago, plus a rise in the HST, might balance the books for now, those measures will provide only a brief respite for the Province’s fiscal managers. The main driver in the decision to move forward with the formation of the Regional Service Commissions was, I am sure,  the desire to off-load certain costs to property owners, especially those in rural areas, where villages and local service districts have relied upon the province to provide local services at below cost. This reorganization provides an opportunity for the Province to eventually free itself of a cost burden. Moreover, the property tax hikes that are coming down the road (especially for rural residents) will be the laid at the feet of local governments rather than the Province.

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