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Finance Minister Blaine Higgs says the new law will allow seniors to defer paying as long as they own their homes. (David Smith/Canadian Press)

The Alward government introduced a new property tax law on Friday that breaks a campaign promise to permanently freeze assessments for senior citizens.

Finance Minister Blaine Higgs said the Act to Amend the Real Property Tax Act will offer property tax "relief" for people over the age of 65.

Seniors who are eligible for the program will be able to defer paying, he said.

"The property tax deferral program for seniors will provide seniors with the option to defer future property tax increases so they can still stay in their homes longer."

Seniors will be able to defer paying as long as they own their homes, but once the property changes hands, they will have to pay the deferred taxes, with interest, Higgs said.

Most seniors would face an accrued annual interest rate of 3.25 per cent, he said. For seniors with a taxable family income of more than $124,178, the annual interest rate would be 8.25 per cent.

"After consulting with seniors groups, stakeholders and the public, it was clear that we needed property tax relief for those seniors who required it, while staying on track with our government renewal goal of providing efficient programs at the lowest possible cost to taxpayers," he said. "This program achieves both goals."

Higgs said under the new law, the provincial government will pay municipalities the difference so they're not short on revenue from assessed values.

Opposition Leader Victor Boudreau challenged Higgs, saying that the program is a broken promise. He said a deferral is not a permanent property tax free as was promised during the election.

In September 2010, David Alward made a series of commitments to seniors, including a pledge to freeze property tax assessments for all homeowners over the age of 65 permanently.

At the time, the Liberals attacked the plan, saying the freeze would cost upwards of $1 billion in lost tax revenue over a decade, which would transfer a huge burden on young families, small business, tenants and families.

Six of the eight New Brunswick city mayors also criticized the proposed freeze, saying their municipalities could not afford the commitment.

The mayors told Alward during a meeting in Fredericton that property taxes are one of their main sources of revenue and a freeze could force cuts at city halls across the province.

On Friday, Higgs said the program would be evaluated in five years to determine its effectiveness and would be adjusted as necessary.

Seniors 65 or older who own a principal residence and receive the residential property tax credit could be eligible for the program, Higgs said. They may apply through a one-time application process, and apply at any time to deregister, he said.

In the case of death of the qualifying senior, the tax deferral could be extended to the surviving spouse for as long as he or she continues to live in the house.

The interest rate on all deferred accounts would be set every year at the provincial government's 10-year borrowing rate, he said.

The Tories had previously said they would cap any increases at three per cent for two years if they won the provincial election.

The Liberals had promised to freeze all property tax assessments for two years if re-elected.