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N.B. Local Governance Reform: 5 Key Local Government FAQs

Published:

March 4, 2022

Author(s):

• James Mosher
• Chris Pelkey

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On December 17, 2021, New Brunswick’s Local Governance Reform Act (Bill 82) amending the N.B. Local Governance Act (and other related acts and regulations) took effect. The Bill will drastically change New Brunswick’s local governance landscape, with broad-reaching implications for existing and newly created local governments. And it will do so quickly: the reform will be phased in over three years, but the bulk of the foundational work must happen in 2022. Both the N.B. Department of Local Government and Local Governance Reform and local governments have their work cut out in the months ahead. To help all stakeholders understand what to expect and how they can optimize their role in the transition process, here are the answers to five key questions local governments are asking us about N.B. local governance reform.

1. What’s the Bill do?

New Brunswick is currently divided into 340 local entities: eight cities, 26 towns, 61 villages, eight rural communities, one regional municipality, and 236 local service districts (LSDs). The Bill reduces this to just 90 local entities: 78 local governments and 12 rural districts. The rural districts are similar to LSDs, the unincorporated areas outside of the territorial limits of local governments. However, they’re much larger; many will have a population equivalent to a local government. The Bill achieves this reduction in three ways:

Amalgamation. Amalgamating two or more existing local governments. Where the Bill amalgamates two or more local governments, a new incorporated local government entity is created, and an election for the new local government of that entity is required. The newly elected council will form a “First Council”.

Annexation. Annexing portions of former local governments and LSDs to existing local governments. Where an annexation results in a population increase of more than 50% in the new local government territory, a new incorporated local government entity is created, and an election for a First Council is required. Where an annexation results in a population increase between 15% and 50% in the new territory, no new incorporated local government entity is created, but by-elections to add new councilors to the existing council are required. Since the existing local government council structure remains intact, the resulting council isn’t a “First Council”. Where annexation results in a population change of less than 15%, there’s no newly created local government entity, and no elections required.

Rural districts. Establishing a rural district for each service commission territory covering all areas other than the new or expanded local governments. Rural district residents will elect the councilors who will represent them on the advisory committees established for the transition to the new structure, as well as elect the officials who will represent them on their Regional Service Commission board. 

The Bill sets November 28, 2022 as the date of all elections.

 2. What’s the process to transition from the current to the new local governance structure?

 The Province has established a transition process, in which the Minister, representatives of the Province, and the local governments affected by the reforms each have a part to play:

The Minister. Elections only occur on November 28, 2022, yet the restructuring is effective on January 1, 2023. The work required to implement the reforms by the January 1, 2023 effective date is substantial. To achieve this, the Bill confers on the Minister the authority to do all of the things that a First Council would do in any other restructuring, plus some additional powers to facilitate combining different size local governments with different asset bases. Using this authority, the Minister’s role is to take the steps necessary to create the basic structure of new local government entities, including to:

• Make bylaws regulating the procedure of a First Council, prescribing the time and place of its regular meetings and providing for the calling of special meetings.
• Review existing bylaws and make or amend bylaws to be effective January 1, 2023.
• Prepare a transitional budget that sets out the remuneration of the First Council members, the First Council’s expenses for the period before January 1, 2023, and the salaries of newly appointed municipal officers it appoints.
• Estimate the money required for the operation of a restructured local government and adjust the tax rates required to raise this money.
• Fix different tax rates for different portions of a restructured local government and the period of time a different rate applies.
• Negotiate collective agreements.
• Arranging the appointment, reassignment, termination, or retirement of municipal officers.
• Arranging pension or superannuation plans for the permanent employees of a restructured local government.

We expect the Minister’s ultimate goal is to have all necessary procedural mechanisms for the First Council in place by January 1, 2023, and effectively hand over to the First Council a turn-key local government on that date.

Transition Facilitators. The Province assigned a “Transition Facilitator” to each local government entity affected by the reform. The Facilitators’ role is to work with each affected local government to prepare for and implement the transition to the new structure. It’s anticipated the Transition Facilitators will also liase between the local governments and the Provincial Department during the transitional period.

Advisory Committees. The Transition Facilitators have established “advisory committees” for each major restructuring, each comprised of members of the local governments involved in the particular restructuring. The advisory committees’ role is crucial: to give the Transition Facilitator input and advice respecting the transition issues that will need to be addressed to implement the restructuring – and there are many. We note that the Bill doesn’t require the creation of the advisory committees or mandate the participation of any local government members as part of the process. As a result, participation in the advisory committees is an opportunity for local government members to provide advice to the Transition Facilitators in structuring the new local government that will take effect on January 1, 2023. Based on the Bill, refusal to participate in an advisory committee, or a situation where an advisory committee refused to meet the timelines the Minister set, will not automatically hold up the restructuring process.

3. What roles will existing councils & New First Councils play?

Both existing councils and First Councils of newly created local governments will have different roles to play in the restructuring process.

Existing Councils. The most significant role existing councils can play in the restructuring process is appointing members, and providing meaningful guidance, to the advisory committee and Transition Facilitators, giving affected local governments  a voice in shaping the restructured local government that will take effect on January 1, 2023. Beyond that, the Bill doesn’t suspend the powers of any existing local government councils while the Minister’s powers are in effect; they remain intact. This ensures all existing local governments can continue to exercise their authority to manage the government’s affairs during the transition period. However, once the First Council is elected, the existing council is prohibited from taking certain actions that may affect the future administration of the new local government without authorization by the Lieutenant-Governor in Council, including making or amending bylaws, disposing of capital assets, and appointing or dismissing officers and employees.

First Councils. While it’s impossible to know the content or form of the turn-key solution the Minister will hand over to the newly elected First Councils on January 1, 2023, it’s likely that it will, at the very least, include a full set of procedural bylaws, a simple budget, and a complement of municipal officers. The First Council will then be in a position to exercise all of the regular powers the Local Governance Act grants a First Council for a period of six months after taking the oath or making the affirmation of office. The Bill also preserves a First Council’s ability to exercise its powers under the Local Governance Act from the time members take the oath or make the affirmation of office until December 31, 2022, even if its action conflicts with those taken by the Minister under the Bill. Practically, however, there is likely to be minimal, if any, overlap: the elections are on November 28, 2022, and the Minister’s transitional powers cease on December 31, 2022.

4. What are the key considerations for existing councils advising Transition Facilitators?

While the Minister has the authority necessary to effect the restructured local governments, he will likely exercise that authority based on the recommendations of the Transition Specialists, informed by the affected local governments through the advisory committees. This creates an important – and unique – opportunity for existing councils to ensure local or regional considerations are accounted for when establishing the new local governments. And practically, it’s likely that at least some, if not many, elements of the structure the Minister hands over to First Councils on January 1, 2023 will be in place for some time after the effective date, making the initial structure important to get right. Some of the key considerations local governments will want to consider include: 

Making, Amending & Repealing Bylaws. Many local governments might have outdated bylaws, perhaps lacking the resources to review and update them. The reform offers the opportunity to tackle this daunting task, and make new bylaws to fill gaps, amend existing by-laws to modernize them, and repeal outdated bylaws. Newly formed local government entities won’t inherit the bylaws of their predecessors wholesale.  Instead, they will inherit whatever bylaws the Minister creates using his transition powers under the Bill. Practically, this is likely to entail reviewing the bylaws of the amalgamating local governments, and deciding which to implement as is, which to revise, and which to disregard. Where the reforms expand an existing council, the bylaws of the expanded local government will remain in effect, and will extend to the annexed area. This will likely still require a review of existing bylaws to ensure they fit the expanded local government entity, and amendment or creation of bylaws to address new needs resulting from the expansion. Some areas to contemplate include:

• Procedure. The Minister will need to make procedural bylaws to create the structure of each new local government entity, and so First Councils can hold council meetings once they take office. Existing local governments have an important role to play to ensure the procedural bylaws set First Councils up for success when they begin operating on January 1, 2023.

• Zoning. The reform of land use plans, from which zoning bylaws are derived, will only come later. Practically, this means local governments can only address the substantive review of zoning bylaws after January 1, 2023. But zoning bylaws must be in place on January 1, 2023, and it’s likely the conditions of zoning bylaws of affected local governments will differ, some significantly. This means transitional bylaws could be required to address conflicts and to cover the annexed portions of former LSDs.

• Gender Neutrality. The review process offers the chance to modernize all bylaws by incorporating gender-neutral language.

• Animal Control. It also affords the chance to address recent trends such as “chickens in the backyard” and other animal control issues that are increasingly prevalent as more residents embrace homesteading and small scale agriculture and animal husbandry.

• Dangerous & Unsightly Premises. Similarly, local governments can also consider updating bylaws to respond to the growing trend of front yard gardens.

Labour & Employment Issues. The reforms will undoubtedly result in the duplication of positions and duties and, in some cases, conflicting bargaining rights between unions, likely triggering a myriad of labour and employment law issues. The Bill gives the Minister the authority to deal with these issues, but existing local governments have the knowledge the Minister needs to do so effectively:

• Councilor Remuneration. The Minister has the authority to set compensation (and, for the brief period before January 1, 2023, the expenses) for the First Council members by way of a compensation bylaw. Existing councils are well positioned to consider and advise the Minister of whether existing compensation is appropriate, or if an increase is in order.

• Collective Agreements. It could be necessary to negotiate new collective agreements or determine successor rights over bargaining unit employees. Amalgamation of two or more local governments could result in a conflict between bargaining rights held by two different unions or locals of the same union that councils must manage. Existing local governments have the local knowledge to assist the Minister if he exercises his authority to negotiate new collective agreements. Similarly, new local government entities that include amalgamated or annexed local governments that have never before had unionized employees will need to learn how to manage a unionized workplace, and the legal implications of taking specific actions or positions concerning bargaining unit employees.

• Pensions. Local governments might also need to address the termination, continuation, or transition of employee pension plans due to the creation of new local government entities.

• Municipal Officers. The reform will lead to some redundancy in municipal officers, such as CAOs, Clerks, and Treasurers. Municipal officers enjoy statutory protection under the Local Governance Act allowing them to hold office until they resign or their employment is terminated for cause. However, the Bill authorizes the Minister to appoint, reassign, arrange for the retirement of, or terminate the employment of officers for new local government entities. The Minister also has the power to set the salaries of appointed or reassigned municipal officers. Again, affected local governments are well positioned to help decide who those appointments should be and their remuneration.

• Employee Redundancies. Similarly, the Bill will result in employee redundancies that will require careful management and decisions about acceptable employee complements. Existing local governments have the knowledge to assess the number of positions they will require and who’s most appropriate to fill each.

Regional Service Commission Relationship. The existing 12 N.B. service regions and 12 Regional Service Commissions remain. However, each service region will be comprised of one rural district and several local governments, and the boundaries of each service region will be redrawn. The Regional Service Commissions will also be restructured, ultimately impacting the relationship between local governments and rural districts and their Regional Service Commission and each other. Local governments will need to keep this in mind during the transition planning, and in particular:

• Expanded Mandate. The Commissions’ mandate will be expanded to include: developing and implementing a regional strategy; undertaking activities related to regional economic development, regional community development and regional tourism promotion; identifying regional sport, recreational, and cultural infrastructure and coordinating the apportionment of costs for that infrastructure; establishing a public safety committee to exchange information and discuss resource sharing and joint planning by its members in relation to policing services, fire protection services, and emergency measures planning services; and providing or facilitating the provision of the common service of regional transportation to its members. The qualifier “regional” in respect of a number of the Commissions’ new mandates indicates they are in addition to, and not a replacement for, local government activities in relation to non-regional services and activities. Local governments might need to consider the practical implications of this expanded mandate during the transitional period. For example, local governments currently collect tourism accommodation levies; how will the Commissions’ expanded mandate impact this? How will the expanded mandate impact local government budgets?
• Governance. The Bill authorizes the Minister, until December 31, 2022, to appoint a Chief Executive Officer for each Regional Service Commission and to establish the terms and conditions of their appointment. Each Regional Service Commission Board will still consist of the mayors of each local government in the service region, but joining the Board will be: a non-voting CEO of the Commission (the newly appointed position); and the chair of the advisory committee of the single rural district. The replacement of multiple, but in some cases sparsely populated, LSDs with a single, but more equally populated rural district, is likely to result in a more balanced Board representation. New voting mechanisms reflect the Commissions’ expanded mandate.

Taxation. The reforms effect or trigger several critical changes to how taxation occurs within newly created local government entities:

• Varying Tax Rates. For local governments that are incorporated, amalgamated, annexed, or decreased in territorial limits as part of the restructuring process, the Minister has the authority, before December 31, 2022, to fix different tax rates for different portions of a restructured local government.

• Flexible Non-Residential Property Tax Rates. The Bill gives local governments the flexibility to set the tax rate for non-residential properties at a ratio of 1.4 to 1.7 times that of the local residential rate, rather than the current 1.5 ratio.

5. What’s coming down the road?

The reforms under the Bill don’t end on January 1, 2023. There are more reforms coming over the next couple of years for which both existing and newly formed councils will need to be prepared, including:

Provincial Tax Plan Phase 2. The Province has announced a second phase to its taxation plan that will consider provincial property tax rates, the cost of roads, taxation of condos and apartments, the implementation of gas tax funding, and the creation of a municipal assessment committee. Local governments will need to navigate these new policies and initiatives as they are introduced.

Economic Development Agencies. A number of local governments are parties to economic development entities established under the N.B. Companies Act to promote economic development in their respective local areas. Generally, those entities are funded by agreement between the local governments involved, and use some form of cost-sharing mechanism based on population size or assessed tax base. As a result of the changes to territorial boundaries, local government entities, and the expanded mandate of the Regional Service Commissions, local governments will need to revisit existing agreements with, and funding to, these development entities.

Third-Party Contracts. Restructuring presents the opportunity to review and perhaps amend or, in some cases renegotiate, contracts with third party service providers (such as garbage pick-up). Local governments will also need to be watchful for potential litigation around alleged breaches of contracts with third-party service providers due to the amalgamation of two or more local governments.

Land Planning. As part of the local governance reforms, changes to land use planning include: 

• Statements of Public Interest. The Province will develop regulations outlining various statements of public interest related to land use planning by January 1, 2023. Local governments and rural districts will have five years to bring their land use plans into compliance with public interest statements.

• Regional Land Use Planning. Regional planning will remain voluntary. However, by July 1, 2024, the Province will implement regulation under the Community Planning Act detailing policies and objectives and an implementation process for regional land use plans.

• Local Land Use Planning. By 2027, all local governments must have in place local land use plans meeting the specific requirements, including various policy statements depending on the type of local government (city, village, municipality, and so on), including on: climate change and mitigation; housing, including affordable housing and rentals; and inclusionary zoning.

• Provincial Facilities’ Location. The Province will amend the Community Planning Act to require local governments and Regional Service Commissions to consult with the Province when preparing or amending documents such as regional, municipal, or rural plans, and zoning bylaws.

Inclusionary Zoning. The Province will also amend the Community Planning Act to give local governments a new tool to manage increasing affordable housing issues, empowering them to adopt inclusionary zoning bylaws requiring affordable housing units in new multi-unit developments.

Provincial Funding. The Province will also introduce amendments to the N.B. Community Funding Act by January 1, 2023, implementing a new grant formula for equalization funding. Local governments and rural districts will likely also need to negotiate and enter agreements and memorandums of understanding with the Province regarding provincial funding programs.

Please contact your McInnes Cooper lawyer or any member of our Municipal Law Team @ McInnes Cooper for help understanding how to optimize your role in N.B.’s local governance reform.

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