“Hamilton offers one of the richest suites of financial incentives in Canada” proclaims a brochure being distributed by the city’s economic development department that goes on to detail seventeen corporate subsidy programs. Recent beneficiaries include the numbered company planning the controversial 30-storey condo tower at Jackson and James South that include last year’s demolition of the back of James Street Baptist Church.
The destruction of a large part of the mid-19th century church and the approval of the combined residential and commercial tower were criticized over the heritage loss and a city decision to require less than half the number of parking spaces as condo units. A Spectator investigation also found several bankruptcies associated with the principle developer.
This month, council approved a $2.4 million grant to 2203284 Ontario Inc under the city’s Hamilton Tax Increment Grant Program (HTIGP) in relation to the $77 million project. The amount is calculated from the $800,000 increase in taxes on the property expected to occur when it opens. In the first year, the entire tax increase will be paid back to the developer with that amount declining by 20 percent until it hits zero.
That means after five years the total addition to the city’s tax revenues will be $1.6 million while the rebates to the company amount to $2.4 million. This project also benefits from an 85 percent reduction in development charges in the downtown area. That’s one of the other corporate subsidy programs currently offered by the city but its cost is covered directly by taxes from other property owners.
The staff report recommending the grant to the condo project advised that not approving it “would undermine the principles of the HTIGP and regeneration efforts, in general, and could potentially terminate or delay the project.” That option was not considered by the general issues committee which approved the grant without discussion.
Another HTIGP grant in June directed $1.6 million for the redevelopment of the Royal Connaught Hotel and $320,000 to a Barton Street West townhouse project. A James North seven-storey building won an okay last year for $850,000, but some grants have been issued in amounts as low as $2100.
Subsidies like these are generally prohibited by the provincial government to prevent a race to the bottom where cities out-bid each other to attract new development – to the benefit of corporations and the detriment of the public. But exemptions to this principle are allowed by Queen’s Park if they are located within a designated Community Improvement Project Area – an option utilized by Hamilton for many of its corporate subsidies.
For the HTIGP program that ‘improvement area’ has steadily expanded since the program was originally established in 2001 to get more people living downtown. It now includes the downtowns of both Hamilton and the former suburbs, an Airport Gateway area in Mt Hope, corridors along Barton Street and Kenilworth Avenue and all designated business improvement areas.
The same geographic scope is applied to the city’s Commercial Corridor Housing Loan and Grant Program, its Commercial Façade Property Improvement Grant Program, and its Office Tenancy Assistance Program for leasehold improvements to office buildings. The programs are credited with helping spur the condo boom in the core, but also play a role in the disconnect between rapid growth in Hamilton and tepid increases in taxes collected.
Last year was the third in a row that building permits exceeded a billion dollars a year in Hamilton (and last week the city announced 2015 is the fourth) but taxation from new assessment was only up 1.3 percent ($9.7 million) – and the largest part of that was attributed to residential sprawl in the former suburbs.
“There were just over 2,000 new roll numbers added totalling $358 million in increased assessment, primarily all in the residential property class,” explained a staff report in March. “In terms of the municipal tax levy, these new properties resulted in higher tax revenues of $4.6 million or 0.5 percent growth.”