The levy seemed like a fair compromise and an equitable resolution to the difficult task of harmonizing tax rates for area-rated services.
By Viv Saunders
Published March 11, 2016
Area rating policies are not supposed to result in significantly more revenue to the City.
In 2011, Council adopted a plan to phase out area rating for culture and recreation, fire protection and sidewalks over four years by bringing the rates paid by different parts of the city into alignment. The mechanics of the phase-out was to increase the cost of these services by 25 percent per year in the areas paying lower rates, while an equal reduction was provided to the former Hamilton taxpayers.
(This first stage of ending area rating did not include transit, which Council decided they would deal with in 2015 once the four-year phase-out of the other area rated services was complete. So far that has not happened.)
The following chart shows the schedule of area rating normalization that Council approved in April 2011. Under the new system, the City moved to a simple urban/rural split in whether ratepayers were charged for a given service.
To offset the higher levy that was already being paid for these same services in Wards 1-8 during the phase-out, the old city ward councillors had the option to make a compromise: instead of paying out the reduced levies in property tax savings, they could instead continue to collect the money and put it into reserves for wards 1 through 8 for small capital investment projects.
They chose to claw back the levy savings. Hence, the Special Infrastructure Levy was born with $420,000 initially being provided to each of the ward 1 to 8 councillors in the first year of the phase-in, to spend at their discretion. It seemed like a fair compromise at the time and an equitable resolution to a difficult task.
The total annual Special Infrastructure Levies increased from $3.3 million in 2011 to $6.7 million in 2012, $10.7 million in 2013, and $13.4 million in 2014, amounting to a total of $33.5 million over the course of those four years collected from the Wards 1-8 residents and allocated equally to the individual ward reserve funds.
During this period of time, Council was provided with the option to reduce the annual contributions but every year, they decided against passing on the savings to the ratepayers in Wards 1-8.
It's clear that these funds have been put toward some excellent projects in each of those Wards. At least some of our elected representatives truly engage the public on how those funds are allocated.
But seriously: 8 of our 15 City of Hamilton councillors were given $4,196,521 each for discretionary spending over the course of those four years?
After 2014 and including the current proposed 2016 budget, it was at the discretion of Council each year to amend this practice, remove the annual contribution to the eight old-city reserves and pass on the tax savings to properties in Wards 1-8. To date, Council has supported continuing the current practice of what is now being referred to as their "slush fund" at $1.675 million each.
The annual surcharge to Wards 1-8 is $100 per year, based on the average assessment value per home: a surcharge whose purpose has expired, but is still being paid by some of our most marginalized residents.
Regardless of what appeared to be a temporary flat 0.7% Special Infrastructure levy per year, in actuality the cost split and dollar values associated with this policy appear to have resulted in these allocations:
|Wards 1-8 Special Infrastructure Levy||$3,357,217||$6,714,435||$10,071,652||$13,428,869||$13,428,869||$13,428,869|
|Reserve Allocation per Ward (1-8)||$419,652||$839,304||$1,258,957||$1,678,609||$1,678,609||$1,678,609|
In addition to these disclosed costs, what about the soft costs that aren't easily quantified? The added costs to administer this pool of funds such as the Councillor's time/salaries, Executive Assistants, City Clerks, Finance personnel, and so on. What have those resources added up to over the last six years?
In drawing an analogy, this Special Levy is similar to being entitled to an income tax refund and ticking the box that directs part of your refund to the Ontario Opportunities Fund. Only in this case, it is Council who are ticking that box on your behalf.
It may be time to uncheck that box and remove this Special Infrastructure Tax Levy from our municipal tax bylaw, which is scheduled to be ratified at the next Council meeting on Wednesday, March 30.
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