Hamilton councillors request report that would see impact of eliminating area-rated services

Thestar.com
March 8, 2022

For the first time since area-rating was implemented in 2000, Hamilton councillors are discussing how to eliminate the controversial tax policy that would see higher tax increases for suburban and rural homeowners.

In a somewhat surprise suggestion, Stoney Creek Coun. Brad Clark introduced a motion during the March 3 budget meeting to eliminate all area-rated services, including transit, but phase-in the tax impact for rural and suburban homeowners over a 10-year timeline.

“Area rating was never intended to be a long-term tax shift policy by the province,” said Clark.

The city’s finance staff had introduced a series of recommendations during the meeting to eliminate area-rating for Ancaster’s sidewalk snow clearing starting in 2023, along with phasing out area-rating costs for sidewalks and street lighting, recreation and parkland purchases over a four-year period.

The city’s area-rating changes to fire service have been put on hold until 2023.

Transit, recreation street lights, sidewalks and fire are area rated based on urban-rural boundaries, while sidewalk snow clearing, parkland purchases and the special infrastructure levy are area rated based on the former municipalities’ boundaries.

Clark said eliminating area-rating costs for those three services will hurt suburban property owners. He said if Hamilton must eliminate the tax policy after 22 years, all area-rated services, including transit, should be included over a 10-year period.

“There are going to be significant tax hits to people in the rural community,” he said.

Ward 3 Coun. Nrinder Nann said it’s time to end area-rating for the betterment of residents in the downtown, especially in her ward, who even though they have the lowest income, pay the most in taxes because of the policy.

“It enables rightsizing, (and) ensures the distribution of taxes is enabling an expansion of services into these areas,” said Nann.

Mayor Fred Eisenberger, who has supported ending area-rating since 2017, called the tax policy a “drag on our process."

“The opportunity to set it aside is going to be a blessing quite frankly.”

Eisenberger supported staff’s recommendation to end the three area-rated services over four years. But he then backed Clark’s suggestion, which was approved by the councillors 10-2, for staff to examine all area-rated services, including transit and what impact it would have on taxpayers several time periods from four to 10 years. Staff are scheduled to provide a report at the March 23 budget meeting.

“I want to understand what the impacts are,” Eisenberger said.

Area rating was introduced by the province as part of the amalgamation process to merge the city of Hamilton with its surrounding municipalities. The policy was accepted at the time to help suburban residents through a difficult and expensive integration process.

Under the policy, suburban residents pay for certain services they receive.

Over the last 20 years, several councillors had raised the prospect of eliminating area rating, including in 2009 when council asked city staff to provide options for reforming the policy. Staff provided a report with a series of options, but Eisenberger created a citizens’ panel to review the area-rating options.

Councillors accepted a stop-gap solution to the problem in 2011 that resulted in some services being placed on the general levy. It meant higher taxes for suburban households, but it also created an area-rating fund for councillors in wards 1 to 8 to use for local projects.

Downtown councillors have repeatedly called for the elimination of area-rating for transit as a way to expand the service across the city.

A report to council in 2011 found that if area-rating was eliminated for transit, residents in wards 1 to 8 would see a decrease in their taxes, while in wards 9 to 15, homeowners would have to pay about 6.6 per cent more in taxes.

Changes to area rating are revenue neutral, but any elimination or change to the tax policy results in a re-distribution of the tax.