11/29/2012 09:45 EST | Updated 01/29/2013 05:12 EST

New Brunswick's three largest cities to see provincial funding cut

FREDERICTON - New Brunswick's three largest cities will see large cuts in the amount of money they get from the provincial government under a new municipal funding formula announced Thursday.

The biggest loser is Fredericton, which will get $1.3 million less next year from what it got this year. Moncton sees a cut of $825,000 while Saint John gets $339,000 less.

But Local Government Minister Bruce Fitch said the cities can absorb the hit because of increases in their tax base.

"For some municipalities, the growth in their tax base will more than offset the changes to the grant funding or how much they are paying for policing," he said.

The tax base for cities in New Brunswick increased by an average of 4.5 per cent over the past year.

"Other municipalities will receive increased grant funding that will help offset increased cost of policing or limited growth or even negative growth in their tax base," Fitch said.

Jacques Dube, the city manager in Moncton, said while no one likes to have a funding reduction, the new formula gives municipal officials predictability that wasn't there before.

"The old formula was a crapshoot and you never knew what you were going to get until the last minute," Dube said.

He said city staff were aware of the figures and have been able to prepare a city budget for next year that is balanced and won't increase the tax rate. That budget will be released Monday.

A spokesman for Fredericton's mayor said he was unavailable for comment. The mayor of Saint John did not return messages.

Total funding under the formula will remain at $66 million but Fitch said the new formula changes the way the money is distributed.

Of the 105 municipalities in New Brunswick, 59 will get more funding from the province while 46 will get less. Miramichi sees the greatest increase in funding at just over $1 million.

Fitch says the new formula provides for a fairer distribution of the funds.

"It's our belief that we need to support those communities that are experiencing fiscal challenges in generating enough revenue to simply provide an average level of services," Fitch said.

The full impact of the changes will be phased in over three years.

Bruce MacIntosh, president of the Cities of New Brunswick Association, said he is pleased the government negotiated the new model with the municipalities, but the initial changes will be difficult, especially for the three largest cities.

"Hopefully in the second and third year, the communities that are losing the most should be able to gain back," MacIntosh said.

Fitch is encouraging municipalities to look for efficiencies and only increase tax rates as a last resort, but MacIntosh said he expects some will have to hike taxes.