Ensuring bigger tax hikes?

Nearly half of this year’s property tax increase was imposed to compensate for provincially-forced discounts in development charges (DC). City council is now considering providing developers with additional DC discounts that would also have to be recouped through tax increases.

Development charges are supposed to pay for city spending on roads, pipes and multiple other municipal services necessary to accommodate growth. The total growth costs are first calculated, then divided between residential and non-residential growth and applied to new development projects, either as a per unit charge for homes or a square foot fee for new commercial and industrial projects.

Reductions in development charges that were imposed by provincial legislation resulted in 2.5 percent of the 5.8 percent 2024 property tax increase ($35 million) as the city tried to make up for the lost revenue. Councillors are now grappling with city-determined discounts that would shift more growth costs from developers to taxpayers. For example, mountain councillor Mike Spadafora, has suggested discounts be given to warehouse developers in the Airport Employment Growth District.

Save our Streams Hamilton is campaigning to eliminate the DC discounts on non-residential growth. They content the discounts are an incentive to demolish Hamilton wetlands, creeks, hedgerows and woodlots in Ancaster and Glanbrook. Warehouses there are taxed at the lower Ancaster / Glanbrook commercial tax class, not the Hamilton Industrial tax class so the returns to the city are less than understood by some councillors.

Discounts and even full exemptions on growth fees are not new. Previous Hamilton councils have provided them and those have been made up adding about $20 million a year to local taxes and water rates. Provincial law, in fact, requires that any city-determined discounts must be made up by local taxes and fees.

This year, the subcommittee updating the DC bylaw has proposed eliminating the two discounts with the largest impact on current residents – the 37% discount for industrial growth fees, and the 40% discount for downtown residential development.

Not surprisingly there’s lots of push-back from developers. The final council decision won’t be made until late April. The official public consultation took place on February 22. Of the 16 delegates who spoke to councillors, thirteen advocated bigger discounts on development charges.

The fundamental question facing councillors is who will pay for growth – the developers or the taxpayers – but nearly all delegates were from only the former group. While multiple letters were submitted, only three individuals spoke on behalf of taxpayers.

There were two earlier meetings that the public was not informed about with multiple developer attendees. As the staff report acknowledged, only a single person was present from the general public. This is also hardly surprising. The development charges stakeholder committee includes “representatives of the Hamilton Halton Homebuilder’s Association, the non-residential development community, the Hamilton Chamber of Commerce, and non-developer community group representatives.”

The first three ensure that any builder liable to pay development charges not only has a voice that can also quickly mobilize those they represent to lobby for what they want. The “non-developer community group representatives” are just a couple of interested individuals who volunteer to sit on the committee.

There are two specific issues now before city council. One is whether the non-residential development charges will continue to be discounted and by how much. The other is whether the current 40% discount for downtown residential development will be phased out or reduced. Any discounts approved by council will mean a bigger burden on local property taxes and water rates.

Irrespective of what council does, the Ford provincial Conservative government has already legislated discounts on all development charges across the province. That’s the source of the $35 million shortfall being covered by nearly half of this year’s property tax increase and/or by the plus 10 percent hike in water rates.