Local Government Minister Bruce Fitch is scrapping the province’s long-standing system for funding municipalities and bringing in a new plan that will help cash-strapped councils, primarily in rural and northern New Brunswick.

Fitch unveiled on Thursday the new Community Funding and Equalization Grant program, which is replacing the old system of unconditional grants.

"The new grant formula will be more equitable and provide a fair equalization component for municipalities, rural communities and local service districts," Fitch said in a statement.

Fitch said all three municipal associations have endorsed the main thrust of the reforms.


Local Government Minister Bruce Fitch introduced a new municipal funding arrangement on Thursday. (CBC)

Fredericton stands to be the single biggest loser in the funding arrangement as it will have $1.3 million cut from its provincial funding. Moncton will lose $824,468 under the plan and Saint John will also see a $338,805 cut.

For some communities, the actual funding cut is not as deep as some had first thought.

Saint John Mayor Mel Norton said in October he was concerned his city could lose almost $1 million under the new program. 

Miramichi, by contrast, will gain $1 million under the new formula. The northern city of Campbellton will gain $192,149 in funding, while the southern village of Memramcook will receive an additional $194,015 in its grant.

The $66-million funding arrangement will have a base funding allotment of almost $12 million that will be divided among municipalities and rural communities.

However, there will be a $54-million equalization component to the new program.

Fitch said the financial changes will be phased in over the next three years.

So under the program, municipalities that aren't growing and cannot raise enough tax revenue to pay for services will get equalization money under the new program. However, it won't be enough to close their budget gap.

Those municipalities, Fitch said, have three options: they can find ways to grow their tax base, raise taxes or amalgamate with neighbouring municipalities.

Fitch said the provincial government's ultimate goal is to let municipalities control the property tax system and get the province out of municipal funding completely.

"Reorganization of local government is something that subsequent administrations have always said needs to be fixed, so we're moving forward," he said at a news conference.

"Disentangling responsibilities between provincial and municipals would be a very good goal, and that's what we want to work for."

There will also be a one-time, $1-million transition grant given to 25 municipalities to help them pay for increased policing costs.

Tax bases continue to grow

The value of municipal tax bases continued to grow over the last year, according to the Department of Environment and Local Government.

The provincial government said cities have seen their tax bases increase by an average of 4.57 per cent compared to a 3.11 per cent increase for towns, 4.12 per cent for villages and three per cent for rural communities.

Fitch said this translates into additional dollars for local governments.

"The increase in tax bases could generate $18.9 million more for cities, $4.7 million more for towns, $1.9 million more for villages and $117,000 more for rural communities," the local government minister said in a statement.

For example, Moncton’s tax base is $6.9 billion, an increase of $5.8 million, from 2012. Even with the $824,468 cut in their provincial funding, the provincial government estimates Moncton will still have $5 million in additional revenue.

The legislative changes that will allow for the new formula to be created will be introduced in the fall session.

The Alward government has implemented a series of local governance reforms since coming to office in 2010.

Last year, Fitch announced a plan that would encourage municipalities to consider amalgamating. The plan includes incentives to entice rural areas to co-operate or merge with other towns and villages

At the time, Fitch said he hoped there would be 100 fewer municipalities within the next year.

In late August, there were 30 different proposals from communities around the province that were considering some sort of restructuring.

New Democratic Party Leader Dominic Cardy said the latest initiative is going to make it harder for local governments to prosper.

 "Cities are engines of growth. There is nothing equitable about draining money from growing cities and transfusing it to rural communities that are bleeding jobs, opportunity, and hope," Cardy said in a statement.

"We have to stop the bleeding, and that can only come by giving every community the power to heal itself."