Two burning issues for this fall’s municipal election are being referred to as “area rating” and that’s generating confusion for both voters and candidates. The two are connected but represent different concerns with different potential solutions.
Area rating correctly refers to a system that imposes different taxation rates on different geographic areas. It is widespread in municipal politics but is applied in a unique way in Hamilton. This is the only city in Ontario to allow residents of parts of the urban area to pay far lower taxes for public transit services than those who live in other parts of the urban area.
In current practice it means residents of the former suburbs pay about one-third the tax rate of those who are generally poorer but live in the pre-amalgamation city. The exact tax rate is calculated on the basis of the total hours HSR buses spend in each of the former municipalities. That means any change is service is paid entirely by the residents of that former community.
For example when a $300,000 trans-cab service was proposed for Binbrook, the tax hit was $85 per household and not surprisingly was rejected. But a $300,000 HSR improvement in the old city adds only pennies to the property taxes of residents of the old city.
This arrangement is a holdover from the pre-2000 period before amalgamation when suburban councils purchased transit service from the Hamilton Street Railway. When the province forced the six former municipalities of Ancaster, Dundas, Flamborough, Glanbrook, Hamilton and Stoney Creek into a single city, transit taxes as well as those covering fire protection, recreational and cultural services were not amalgamated.
This generally reflected different service levels that had existed in the various municipalities. For example, some suburbs utilized some volunteer fire fighters, or had provided fewer arenas and recreation centres per capita and that meant lower taxes per household.
The resulting large differences in tax rates were supposed to be quickly eliminated. But politicians representing the five suburban areas strongly resisted changing these arrangements even though all residents were able to equally access the area-rated services – bus fares were the same for everyone as were recreation fees and all paid the same for events at municipally-funded facilities such as Hamilton Place and Copps Coliseum.
Reforms repeatedly split council and got punted at least three times to ‘after the next election’ before a deal was struck in 2011 to end area-rating for pretty much everything except the HSR. The new deal saw suburban tax rates increase gradually over four years.
But rather than have taxes go down in the old city during that transition period, councillors agreed to keep them at the same rate and plow the difference into a special fund that was divided evenly between the eight wards in the old city and allocated for infrastructure renewal recommended by each individual councillor.
This is the source of the increasingly controversial slush funds that also have been confusingly labeled as “area-rating” monies. In a few wards, the use of these funds is voted on in a participatory budgeting process, but in most its allocation is effectively decided by individual councillors. There’s a formal approval by full council but in practice that’s merely a formality.
With the new ward boundaries – several of which now include parts of two of the former municipalities – reforms of both transit area rating and the infrastructure slush funds will be on the agenda of the council elected in October. For example, how will an old city councillor explain that her slush fund is only available to some of her constituents?
Reform could take different forms possibly including a significant increase in transit funding and in bus service to the former suburbs. It may address problems in HSR bus routes like the Barton whose seven-minute service only goes east as far as the former border of Stoney Creek and then riders wishing to continue on Barton are forced to transfer to a bus that only comes every 30 minutes.