Local Governance and Local Governance Reform Minister Daniel Allain has announced legislation that would freeze funding for local governments and rural districts for five years.

An Act Respecting Community Funding would provide an annual amount of $75.6 million for 2023 to 2027.

The current grant funding formula took effect in 2013. It has both equalization and core funding components.

As part of recent reforms, the provincial government has given local governments the flexibility to increase the tax rate on non-residential properties by up to 1.7 times the local rate. It has also reduced the provincial property tax rate on these properties over three years, giving local governments additional tax room.

Allain said the new funding mechanism will take into account these changes, recognizing local governments have more financial flexibility than they had in 2013, combined with changes at the regional service commission level.

The modernization of the province’s local governance system has resulted in changes to local boundaries, responsibilities, and taxation powers that will affect community tax bases and funding requirements. In the spring, an expert panel was formed to review the community funding and equalization grant and make recommendations.

The funding mechanism is intended to ensure that communities needing support receive adequate funding, while those that are financially stronger do not receive equalization funding. Core funding will be redirected over the next five years to a fund to support the priorities of regional service commissions.

Equalization payments will be adjusted for annual tax base growth compared to the provincial tax base growth to a maximum of three per cent. Any reduced need for equalization funding will be redirected, along with the core funding revenue, to help support the expanded mandates of regional service commissions.

The tax base, community funding and equalization grant figures are available online.