Commissioner on local governance Jean-Guy Finn, seen in a television camera viewfinder, is recommending a massive overhaul of New Brunswick's municipal layout. (CBC/Daniel McHardie)

An independent commission is calling for a mass cull of New Brunswick's municipalities and local service districts from more than 350 to 53.

Jean-Guy Finn, the commissioner of local governance, released his highly anticipated report on the future of how municipalities are organized, governed and taxed on Thursday.

What is likely to become the most incendiary aspect of the controversial report calls for the introduction of 53 municipalities, down from 101 municipalities and 267 unincorporated areas. The commissioner's report would also group the municipalities into 12 regional service districts.

Finn, who once served as New Brunswick top civil servant — the clerk of the executive council — said the government should abolish its policy of no forced amalgamations or his recommendations will never see the light of day.

'I'm not wedded to the exact boundaries, but I feel very strongly that 50-ish, 50 to 55 is probably the maximum that we should have given the size of the territory and the population.'— Jean-Guy Finn, local governance commissioner

"There needs to be a major adjustment now in local government structure to match this new distribution of population and this new economy we are in," he told reporters. "This will not happen if it is done on an ad hoc basis. It has to be done systematically."

Urban and rural tensions are always high in a province that often sees communities fighting over delivery of services and who picks up the tab for large projects, as well as stiff competition for economic development projects.

Local government reform 'on hold': Graham

The Liberal government is not committing to implementing the report.

"We are putting the reforms on local government on hold. The top priority is the economy," Premier Shawn Graham told the legislature in question period.

Graham said the commissioner was clear that the report must be implemented as a whole and not piecemeal. With the dismal economic climate, Graham said he will postpone the reforms until the province can afford to implement the study.

In his report, Finn estimates the fiscal impact of the proposed reforms would be $88 million. Finn had a $424,000 budget for his commission that lasted just more than a year.

The commissioner also acknowledges that mapping out these new boundaries is not an exact science and he says interested groups should have an opportunity to lend their thoughts to the redrawing.

But he says the changes must reflect the population and economic communities of the province. In all but one of the new regional service districts, Finn says, 90 per cent of people will live and work in the same area.

Finn says the province should strike a provisional committee that would review the precise boundaries of the municipalities. He stresses that the number should not proliferate.

"I'm not wedded to the exact boundaries but I feel very strongly that 50-ish, 50 to 55 is probably the maximum that we should have given the size of the territory and the population," he said.

The report indicates that the existing structure of governance is not sustainable and because of population and economic shifts, it is adding duplication and fragmentation of services.

The new boundaries were selected with two criteria, a minimum property assessment base of $200 million and a minimum population of 4,000. The report says municipalities have to be big enough to survive especially as populations are declining throughout the province.

The face of the province would look totally different if the proposed reforms were carried out, and certain cities would add significant numbers in terms of both population and tax base.

It would also realign some historical bragging rights on what cities are the province's largest. Under the Finn model, Fredericton would annex the municipalities of New Maryland and Harvey, giving it a population of 78,999, making it the second-largest city in the province beating out Moncton, which currently holds that title with a population of 68,679.

Commissioner calls for major taxation reform

The independent commissioner is also calling for a total overhaul of the taxation system.

Overall, Finn said some communities may be paying more in taxes, but it is necessary for these areas to maintain quality services, which would otherwise become too expensive.

"I'm not proposing increases or diminishing of property taxes. What I'm talking about is reorganizing services so they can be delivered more effectively," Finn said.

"You set the stage for people receiving more services, better services at better cost per unit. If you don't do that, there are some municipalities that exist now… that will not be able to deliver at all certain services or will deliver them at a very high cost per unit."

Among the many changes to how people in local governments pay taxes would be the abolition of the unconditional grant system that is doled out to municipalities. A new equalization program would be structured to address any disparities between the 53 new municipalities to raise revenue.

Finn is calling for the elimination of the current non-owner-occupied property tax and the reduction of the non-residential property tax rate to $1.50 per $100 of assessed property value from $2.25.

The province is also being asked to transfer the tax room equal to the amount collected from non-owner-occupied residential and non-residential property taxes.

The report recommends the provincial government transfer the 44-cents-per-$100 tax to all former local service districts and adjust the rate annually to pay for the cost of road services.

Finn also nixes the idea of freezing property tax assessments, which many people have complained have been rising too sharply. Instead, he would rather a system of three-year averaging for assessments.

Finn says any fiscal reform must be done in an integrated fashion because trying to address specific problems, such as taxation of apartments, would "create more problems or exacerbate existing ones."

The overall fiscal impact of Finn's recommendations will top $88 million. The new $38-million equalization program would be offset by the elimination of the $71-million unconditional grant , but Finn's recommendations would also scrap a $14-million policing subsidy and $22 million will be lost as revenue from local service districts will be spread out.