The main purpose of equalizing tax rates should be to increase the revenue coming into the system so the city can afford to improve service.
By Ryan McGreal
Published September 14, 2009
A proposed reform of Hamilton's area rating tax system for transit would simply introduce more intra-municipal conflict without resolving the underlying problems in the current system.
Area rating is the bizarre system in Hamilton in which residents of different parts of the city pay different rates toward certain municipal services: transit, culture and recreation, and fire protection.
Hamilton is the only municipality in Ontario to do this, and it is a throwback to the forced amalgamation of the city with its suburban neighbours in 1999.
As a result, residents of the old city pay nearly three times as much for transit as residents in Glanbrook, three and a half times as much as residents in Stoney Creek, four times as much as residents in Dundas, and nearly five times as much as residents in Ancaster.
Transit is a public good, meaning it benefits everyone in the city, not just people actually using it. We all enjoy cleaner air and lower traffic congestion, and the economy as a whole benefits from the increased mobility and density that transit affords.
Therefore, it's counter-productive as well as unfair for some Hamilton residents to contribute more toward transit than others. Area rating creates a two-tiered (actually, six-tiered) tax system and starves the HSR for desperately needed operating funds.
Our City Councillors punted in 2008 on addressing area rating, deciding in a Committee of the Whole that, as Mayor Eisenberger put it at the time, "Harmony overrides fairness."
However, in full Council they had a change of heart and resolved that they need to deal with it before the 2010 municipal election, and asked staff for a report recommending how to fix the system.
A number of sources at the city have informed me that the staff report is now in circulation. Unfortunately, I'm told the report recommends equalizing transit tax rates by reducing the old city's rate and increasing the other area rates so that: a) they are all equal and b) the change is revenue neutral.
Talk about a recipe for conflict. Instead of increasing suburban transit tax rates to put more operating money into the HSR, we're increasing suburban transit tax rates to ... cut urban transit tax rates? Suburban ratepayers are sure to cry foul.
The main purpose of equalizing tax rates should be to increase the revenue coming into the system so the city can afford to improve service. Making transit tax into a zero sum game simply pits urban and suburban ratepayers against each other yet again with, ultimately, nothing new to show for it.
It's no exaggeration to say that the HSR is starved. Overloaded vehicles, regular 'drive-bys', underserviced areas, lower-order technology (buses rather than rail) are a sad legacy of two decades of steady cuts in funding.
HSR annual ridership fell from 30 million in 1985 to just over 20 million in 1994 during a time when the city experience significant population growth. Real (inflation adjusted) HSR funding fell a further 25 percent between 1994 and 2005. The HSR's share of city funding fell steadily during this time while other departments saw their budgets grow significantly.
Ridership levelled of after 2005 but has barely grown since then due to multiple fare increases, while transit ridership in other cities has grown strongly.
Unlike virtually every other city department, the HSR must fund capital purchases out of its own operating budget. The province has stepped in with new vehicle purchases through Metrolinx, but operating funds are still a big problem.
The city receives both federal and provincial gas tax transfers, ostensibly for use in improving transit service, but the city continues to take that money and use it either to hold the line on fare/levy increases or else to fund general programs.
Transit is grossly undervalued in Hamilton and has been for at least the past two decades, but we neglect to build and maintain an excellent transit system at our long-term economic peril.
Great cities generate value through the urban economies of density, scale, association and extension; and transit is an integral part of enabling the density and scale on which innovation and growth depend.
Whereas local politicians in Hamilton generally regard transit as at best a social service, we need to think bigger and start regarding transit as an essential urban amenity and an economic engine in itself.
Ending area rating could be a step in that process - if we do it in such a way that the system ends up with more money.
On October 29, the city will publicly present the transit operational review that IBI Consulting has been conducting since earlier this year. Some politicians are surely hoping that the report will detail places that Hamilton can cut "fat" out of the system, but even a cursory look at our transit system shows that it is already running at the limits of its capacity - especially in the lower city, where demand is strongest.
Maybe I'm just naive, but I really hope the consultant comes back and recommends that Hamilton finally decide to make transit a priority again and commit to a proper level of funding: not as a subsidy to the poor, but as an investment in a more livable, more productive city.