Area Rating
In theory, Area Rating is a system which determines different tax costs for different wards within the City of Hamilton based on service levels. In 2001, Council selected a number of services which were suitable for Area Rating and calculated separate tax rates for these services. These different tax rates were arranged and applied to the Wards based on the previous municipal boundaries. The services that are currently Area Rated are Transit, Fire, and Culture and Recreation. In June, Council will be deciding whether or not we should continue to use Area Rating.
On principle, I can understand the value and function of Area Rating, but in practise, it has fallen short. For example, Area Rating is applied to the outlying Wards, while residences in Ward 8 that do not have sidewalks, water, or transit are still paying as though they do. You never hear the people of Ward 8 complain about this “injustice” as they understand that by helping pay for the services now, we will be able to expand those services to include these constituents. The same is true for the outlying areas. The only areas that I feel should be area rated are Rural areas, as it may be decades, if ever, that they see transit or other services. All Urban and Suburban areas of Hamilton deserve the same services and the same tax rates to pay for them.
Another inequity with Area Rating becomes apparent when you look at the transit system. The outlying Wards which receive Area Rating only pay for the kilometres of transit in that specific community. However, someone from Stoney Creek can hop on an HSR bus in Area Rated Stoney Creek and ride it to McMaster University for the same cost as someone who lives in Downtown Hamilton, yet the resident in Downtown Hamilton (or the Mountain) pays more for Transit on their tax bill. Is this a fair system?
Remember, I am not saying that Rural areas should pay the same as Urban areas. However, why are areas in the outlying Wards that are currently receiving more services than some of the rural crossroads within Ward 8 paying a lower tax rate than those Ward 8 areas? I feel that the current model of Area Rating is flawed and that Council needs to look at it more closely.
I would like to hear what you have to think on the issue of area rating, and whatever suggestions you may have for what should be done with it. The more input I have from my constituents, the more I will be able to serve their needs.
I do agree that there are times when the concept of area rating would make sense. For example if instead of Current Value Assessment we used the square footage of a house then area rating could be used to help balance out the fact that some houses are closer to services than other. However this is not the system that Ontario requires us to use.
In Ontario MPAC is used to provide the Current Value Assessment of houses. This assessment value is then multiplied by the tax rate to come up with the taxes payable. When MPAC is determining the Current Value Assessment of the house many things are taken into account such as: location, lot dimension, living area, age, renovations and quality of construction. Please note that location is on that list and in MPAC literature it is actually listed first.
When you speak with an MPAC officer they confirm that location takes into account where the house is located and area services. So a house that is close to schools, transit, and fire stations increases in value compared to a house that is not close to these items. Therefore houses that are not close to these services already receive their credit for being farther away from them than a house in central Hamilton.
By having area rating a house in Ancaster/Flamborough/Glanbrook/Stoney Creek is actually receiving TWO discounts. One directly in a reduced Current Value Assessment and one in a reduced tax rate. This current double discount applies to both urban and rural areas.
If area rating is to be reopened and ammended I would not keep the rural areas as area rated. I think that it would be better to create a new urban/residential property class. Then, if and when these currently rural areas become more urban the property classes can be updated without once again having to revisit the area rating idea.
I don’t know enough about the city tax system to know if creating new property classes is allowable but I think I recall reading that two new classes were just added this year or last. One concern that I have heard is that area rating must be continued because farmers
can not handle paying full taxes if area rating were to disappear. To this I would simply reply that farms do not have the same tax rate as a house.
In 2007 the Hamilton full tax rate for residential was 1.595786% and the farm rate was 0.336639% We must remember to compare apples to apples and that a farm is taxed at a different rate than a residence. We are all one city. No matter where you live you will likely at some point be paying for services you don’t want, don’t need, don’t use, or don’t live close to. But all citizens helping to shoulder the tax burden makes light weight of what could have been a crippling load for a few.