Fredericton councillors agreed in principle Monday to reducing the city's inside tax rate by a cent next year, but not before they debated whether the decrease should go further because of concerns residents are struggling to make ends meet.

"It would have shown that we're making an effort … to make it more affordable," said Coun. Steven Hicks.

Councillors approved a budget that would reduce the city's inside tax rate from $1.3386 to $1.3286 per $100 of assessed value next year.

They also voted to increase the outside tax rate, paid by residents who enjoy fewer services, by five cents — from $1.0565 to $1.1065 per $100 of assessed value.

Residents of areas newly annexed by the city through local government reform would also see their rate go up by five cents.

But before councillors ultimately approved in principle those tax rate changes, Hicks introduced a motion to increase the inside rate cut by an additional two cents, and another motion that would freeze the outside tax rate, while allowing for the five-cent increases in the varying rates paid by residents in newly annexed areas.

Fredericton Coun. Steven Hicks introduced a motion seeking to reduce the inside rate by three cents instead of one. (Aidan Cox/CBC)

"I do understand we've got escalating costs, but our residents have had to bear a tremendous burden for inflation … in their own homes," he said.

Hicks noted the increases the city has seen year over year in property assessments by the province.

This year, the city generated $135.7 million in property tax revenue, and following the release of assessment figures for next year, the city anticipates it will generate $148.2 million, for an increase of 9.24 per cent.

"I think we need to do our part to try and bring things down, and we have a lot of needs, and we have a lot of wants and we have to prioritize those," he said.

"I think things have gone pretty good the last few years and it's time to tighten things up."

In response to Hicks's motions, Deputy Mayor Greg Ericson said he didn't think reductions to the tax rate were the fairest way to go about improving affordability.

Fredericton Deputy Mayor Greg Ericson says he doesn't think tax rate reductions are a fair way of pursuing improvements to affordability. (Aidan Cox/CBC)

"You can say it helps the average family home by a certain amount of money, but it helps those in big houses with big incomes even more, and that's unfortunate because I don't think that's the intent of it," Ericson said.

Ericson added that of all the taxes residents pay, only about 15 per cent are those that go to the municipality, making the provincial and federal governments also responsible for improving affordability.

"I don't like the idea of at the last minute having to craft a budget that seems to take moral responsibility for affordability in our community when we can only move 15 per cent of it around."

Both of Hicks's motions were ultimately voted down. 

When staff put together the budget, they typically start with their expenses, and then determine how much revenue they'd need to cover them, said Alicia Keating, the city treasurer.

"On the expenditure side, we saw a number of increases just like every household would see — our garbage contract, for example, went up 18 per cent," Keating said. 

"So we try to hold departments to as little of an increase as we can, but there are some contractual obligations that we just can't avoid."

Fredericton city treasurer Alicia Keating says the city is working to bring the outside tax rate up to 95 per cent of the value of the inside tax rate. (Aidan Cox/CBC)

Keating said that with the one-cent reduction in the inside rate, the city is forgoing about a $1 million in revenue.

If councillors were to reduce this by another two cents, the city would have to find another $2 million in savings.

Considering a home that cost $335,000, the one-cent decrease would save a household about $33 on its tax bill, while a three-cent decrease would save it about $100 annually, she said.

As for the outside rate, Keating said staff are working toward bringing it to within 95 per cent of the inside rate, recognizing that residents who pay it might not receive the same level of service.

She said the plan is to also gradually increase the rate paid by residents in the amalgamated areas, so that it eventually catches up with the outside rate.

"One of the foundations of local governance reform was to equalize some of the tax rates, recognizing that people that live farther away from certain communities still access and use the services in those communities," Keating said.

"So that's essentially the argument, is those residents come enjoy our services, which we are obviously very welcoming and we would love them to come, but they should be paying an equal rate or an adjusted rate to to help fund those services."

The motions that were approved in principle will be dealt with by city council for final approval at a later meeting this fall.