Council has punted on transit area rating for 17 years. With an election this October, it's long past time to put this crutch to bed and start really investing in ridership growth.
By Ryan McGreal
Published August 28, 2018
One of the most pernicious legacies of amalgamation is that it locked in a pre-existing disparity in transit levy rates and service levels between the old City of Hamilton and its surrounding suburban municipalities. Before amalgamation, the suburban municipalities paid the City of Hamilton to provide some transit service from the HSR, but at a significantly lower service level than the old city received.
HSR articulated bus (Image Credit: Chris Whitfield)
When Ancaster, Dundas, Flamborough, Glanbrook, Hamilton and Stoney Creek were officially merged in January 2001, those pre-amalgamation transit levy rates were grandfathered in, with the result that different parts of the new city of Hamilton continue to pay different tax rates toward transit and receive different service levels.
(Note: only residents living within the urban area of the city pay any transit levy. Residents living in the rurals outside the urban area pay nothing.)
Because of area rating, any increase in service to one of the lower-rated areas is charged entirely to local ratepayers at that rate, rather than pooled across the entire tax base. As a result, it is politically almost impossible to add new transit in under-served areas.
Transit was not the only municipal service that was area-rated on amalgamation. In 2011, Council voted to harmonize the other service levels - fire, emergency and recreation services - by phasing them out over four years.
However, they punted on transit and decided to leave it alone until the 2014-2018 term of council.
We are now just a few months away from the end of that 2014-2018 term and nowhere closer to a resolution. Early in this term, Council apparently "decided" to punt area rating for transit yet again in a backroom agreement that was never ratified at a public meeting.
As a result, 17 years after amalgamation, we remain the only municipality in Ontario to charge residents different tax rates for transit depending on where they live in the city.
To see how this plays out, imagine a house with an MPAC assessed value of $400,000, which is close to the average assessed value for Hamilton residential properties. Depending on where the house is located, the annual transit tax could be as low as $104 in Dundas or as high as $380 in old-city Hamilton.
Looked at differently, old-city residents make up 63 percent of the total urban households but pay 84 percent of the total transit levy, whereas Dundas residents make up 4 percent of the total urban households but only pay 1.5 percent of the total transit levy.
Area rating is a clumsy tool for its avowed goal of charging residents based on how much service they receive. Along the borders of the levy areas, there are literally people on one side of the street paying three or four times as much as their neighbours on the other side of the street. That fails the most basic test of fairness or reasonableness.
In addition, area rating myopically assumes that transit service in a given area is only for people who live in that area. That does not reflect the reality of how and where people move around in Hamilton. Most Hamiltonians do not do all of our living, working and playing in the same neighbourhood. Instead, we travel between different parts of the city.
For example, you might live on the west mountain and work in Ancaster Business Park, or live downtown and work in Red Hill Business Park, which are two of the city's designated employment growth centres. However, both business parks are in area-rated parts of the city so they have artificially restricted bus service.
This is economically inefficient and hurts the city's attractiveness to employers, who want to know their employees are able to get to work quickly and conveniently.
Most people who do take jobs in these centres are forced to drive, which raises their transportation costs while increasing the overall traffic congestion, air pollution and injury risk on Hamilton's dangerous streets. Again, none of this makes strategic sense.
At a baseline, ending area rating means harmonizing the transit levy between areas so that everyone pays the same amount toward the total net operating budget, which in 2018 is around $65 million.
A back-of-the-envelope calculation based on the number of households in each area (excluding rural residences, which pay nothing) suggests that a harmonized transit levy of approximately 0.071 percent would evenly distribute the cost of transit across every ratepayer.
A four-year schedule to phase out area rating might look something like this:
|Area||Baseline||Year 1||Year 2||Year 3||Final|
Unfortunately, this solves one problem but creates another. Specifically, it results in the cost of transit being distributed across the entire city while the allocation of transit service is still concentrated in the old city and especially the lower city.
That would be unfair to suburban ratepayers, who should reasonably expect to get more service in exchange for contributing an equal share of the cost.
But if the HSR realigned its network to distribute existing transit service across the entire city, the result would be considerably worse transit service on busy transit routes that are already operating over-capacity and generating the lion's share of gross operating revenue.
The best solution would be to increase the levy rate for suburban ratepayers without lowering the urban levy rate, in order to increase the total HSR operating revenue and add new service to under-served areas without cannibalizing existing services.
Councillors often claim this can't be done - that the phasing out of area rating per se needs to be revenue-neutral - but Council also determines the total HSR operating budget as part of its annual budget process.
I cannot find any statutory reason to prevent Council from increasing the total HSR budget each year that it phases out area rating, such that the old city continues to pay the same net rate while the suburban rates are harmonized.
This would bring in a major infusion of new operating revenue that can be allocated to expand service in busy, over-capacity routes and along under-served suburban corridors at the same time. That way, everyone would directly experience the benefits of new transit investment and the network as a whole could be designed to operate more effectively.
|Area||Baseline||Year 1||Year 2||Year 3||Final|
In Hamilton, transit ridership remains stagnant year after year. Local politicians like to claim that this is part of a head-scratcher of a continental trend, but that's just not true. Cities that are investing in high-quality transit networks are enjoying significant year-over-year growth in ridership while we tinker around the margins of our crisis-riddled transit system and continue to barely tread water.
To be sure, new money alone is not going to turn the HSR around. That endeavour needs a real commitment of vision and leadership from Council, executed by an effective management team that is inspired and empowered to aim for excellence instead of just managing the decline.
But there is no excuse to sit back in mock impotence and do nothing while the structural dysfunction of Hamilton's transit area rating system persists year after year. With a municipal election coming up this October, I implore voters to pay careful attention to what the candidates promise to do to address this.
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