Years of city council’s focus on economic development appear to be bearing little fruit. Last year’s growth in taxable assessment is the lowest since 2007, and what expansion is occurring is overwhelmingly residential, not the industrial expansion sought by councillors to enlarge city revenues and avoid tax hikes.
“The net assessment growth reported for 2012 is lower than what the City of Hamilton has realized in the last five years,” says a staff report released on Friday. “Although 2012 growth is lower than previous years, Hamilton did see reasonable growth; however, this was offset by appeals and lower-valued new properties.”
City-wide assessment rose only 0.8 percent last year, well down from the 1.3 obtained in 2009 and 2010 and also a drop from the 2011 figure of 1.1 percent. The gain is only about half last year’s inflation rate and suggests that more than a decade of council effort to increase commercial and industrial taxes revenues is not working.
“Growing the non-residential tax base” to fill city coffers without bumping up tax rates has been the central strategy pursued by councillors who say homeowners are carrying too high a tax burden. With three-quarters of taxes coming from the residential sector, industrial and commercial growth has been identified as the most politically painless approach to paying city bills. But despite numerous corporate subsidy programs and a cut of more than 40 percent in business taxes, the 2012 results suggest the trend is going in the other direction.
Industrial and commercial growth was basically flat in 2012, adding a combined $220,000 to tax collections, while the increase on the residential side was over $6 million. But the net gain was only $5.2 million in taxes because of the anemic commercial and industrial contribution and a $1 million decrease in the multi-residential category.
“Although growth was experienced in the [non-residential] classes (for example industrial assessment growth as a result of Canada Bread), significant write-offs and successful appeals have offset this growth, resulting in marginal growth of the commercial and industrial property classes of 0.2% and 0.3% respectively,” explains the report. “When compared to the entire assessment base, however, this marginal growth did not improve the overall net growth of 0.8%.”
Canada Bread alone pushed up total assessment by a little over a tenth of one percent, but there only four other existing industrial properties that showed assessment growth while thirty showed a decrease – primarily as a result of appeals.
“The number of appeals challenging MPAC’s assessments have been increasing. Many appeals are being settled, resulting in reductions in assessment,” notes the report. “The average municipal tax reduction resulting from assessment decreases in the Residential property class is -$360. The impacts are much higher for the Commercial and Industrial property classes, which average -$8,613 and -$14,093 respectively.”
The category of new properties in 2012 underlines the residential growth and the minimal industrial expansion. Of the 2187 added last year, 2145 were residential, 40 were commercial and just two fell into the industrial classification. The latter provided just $42,570 of the $3.3 million in taxes from new properties – a dramatic drop from $1.2 million added in industrial levies in 2011.
The report attempts to explain why a record year in building permits that was greeted with such enthusiasm by city officials has produced such a poor result in taxes. One factor is a time lag of two or more years “from when a building permit is issued, to when the assessment appears on the assessment roll.”
A second is the large proportion of construction value accounted for by government properties that are not taxable – an average of 20 percent of building permits over the last five years. The third warns that “the construction value determined at the time of building permit issuance and the final assessed value of the property as determined by MPAC may not necessarily be comparable”, noting that items like machinery often reported in the total value of a project are not assessable.
In last year’s report staff also warned that council-approved subsidies cut into the taxes collected on new industrial development, noting specifically that “Canada Bread was approved to receive a LEED grant of up to $1.124 million which will offset the assessment growth in the first year(s)”, and similar subsides were also used to attract the Maple Leaf wiener plant.
Nearly half of assessment growth in 2012 took place in Glanbrook reflecting the rapid residential growth in Binbrook as well as the location of the Canada Bread facility. That growth represented a 7.6% increase in tax payments for Glanbrook. The only other former municipality exceeding one percent was Ancaster at 1.5% while four of the five lower city wards saw net reductions in assessment.