09/12/2012 11:18 EDT | Updated 11/12/2012 05:12 EST

New Brunswick wants to cut property taxes for business, rentals and cottages

FREDERICTON - The New Brunswick government says it plans to reduce property tax rates for businesses and people owning rental properties and cottages, while it's also promising to protect homeowners once a cap comes off property assessments at the end of next year.

In releasing a paper Wednesday on the province's property tax system Local Government Minister Bruce Fitch said reductions would be offset by increased assessments and projected growth.

"This will help our business owners and will ultimately mean they have more money to reinvest in their companies," Fitch said. "It can help them improve and it will help them create jobs for people."

The property tax rate on businesses would be cut by 33 cents per hundred dollars of assessment over four years. That would drop the rate to $1.856 from $2.186.

Apartment owners have complained for years that they were being double taxed because they pay both provincial and municipal property taxes. Fitch said the provincial rate for rental properties, cottages and second homes would be reduced by 33.4 cents over four years.

"This will help the landlords and we expect those savings will be passed on to the renters to either help lower rent, improve the quality of housing or mitigate any planned increases in the rental prices," Fitch said.

But Willy Scholten of the New Brunswick Apartment Owners Association said it's too early to know if the changes would mean lower rents.

"The expectation would be that this will have the ability to minimize rent increases," Scholten said.

"Up until this point, property taxes have represented 50 per cent of our expenses ... so if the tax rates are being decreased then that should have an impact on rents."

The paper includes an option for homeowners to make monthly payments rather than one annual tax payment.

It says when the government's two-year, three-per-cent cap on property assessments ends next year a new mechanism will be introduced to prevent spikes in assessments of more than 10 per cent.

Any of the 146,000 homeowners who benefited from the cap will get a permanent exemption until they sell their homes.

While assessments for those homeowners can increase, the gap they now enjoy between their actual and capped assessments would remain in place.

"They found a formula that is complex, but when we study it, it is still a gain for municipalities," said Jean-Paul Savoie of the Francophone Municipalities Association.

Municipalities have complained that the cap hurt their ability to raise revenue needed to provide services.

Fitch says a new cost-sharing model will ensure the cost of RCMP services is also shared more fairly.

The total cost of the RCMP in the province would be divided among each of the 12 provincial districts. The impact on individuals would be determined by the population of the district and their community's share of the tax base.

As a result, Fitch said he can't make a blanket statement on the tax implication of the changes.

"In the local services districts, on the changes that we've made, there are some areas that may have a reduction based on some of the changes that we're making, and there are some that may have a minor increase."

Savoie said his group had hoped for a provincial formula, rather than one based on the districts, but believes it is still an improvement.

Municipalities with their own police forces won't be affected in the way they pay for policing.

Liberal member Bill Fraser said all the variables in the government's plan leave too many unanswered questions for property owners.

"If my bill is $1,000 now, is it going to be $4,000 four years from now?" he asked. "We need to know specifics so the people of New Brunswick can prepare."

Owners of farmland and farm buildings would pay the same or less property tax than they paid before the changes proposed by Fitch. Farm businesses would get the same tax rate relief as other businesses.

However, farmers' homes would be treated the same as any other in the province.

The changes require legislation, which is expected during the next session of the legislature.