No tax relief from growth, Hamilton stats show

CATCH News – September 3, 2012

Business growth has been most councillors’ top priority for years, but the bottom line financials continue to disappoint them. They have established multiple corporate subsidy programs, slashed business taxes by more than 40 percent, and committed hundreds of millions in future infrastructure spending to projects like the aerotropolis, but the annual increase in taxable assessment continues to be considerably less than inflation.

Last year saw only a 1.1 percent rise – average for the last five years but down from 1.3 percent in 2009 and 2010 – almost all of it from residential construction where new taxes don’t cover the servicing costs. In addition, those numbers are not inflation-adjusted and the consumer price index rose 2.3 percent last year – or more than double the increase in taxes generated by Hamilton’s growth in new assessment.

And while taxes from new residential development climbed nearly $8 million (1.9 percent) in 2011, revenues from the city’s industrial properties fell by 1.7 percent largely as a result of successful tax appeals. ArcelorMittal Dofasco, for example, won a $9.6 million reduction in its 2011 assessment and reduced their taxes by $1.5 million for the 2009-2011 period in settlement appeals for eleven of its properties.

“Reasons for the reductions include a combination of factual corrections made to the structural components in the assessment valuations for each property,” explained the staff report. “Examples include building height, square footage, interior finish, flooring thickness, etc.”

Nineteen of the city’s 22 golf courses also had their assessed value reduced – by $16.9 million – as part of a province-wide appeal launched a decade ago by the National Golf Course Owner’s Association. The appeals process is handled by the Municipal Property Assessment Corporation, not the city directly.

In response to the staff report presented last month, Ancaster councillor Lloyd Ferguson suggested “we should see a significant drop now in these appeals” because the big ones have been settled. But finance chief Rob Rossini explained that besides the remaining three golf courses, there are still some other major outstanding appeals underway.

“The two big ones are US Steel Canada and National Steel Car and there are also some other ones involving grocery stores that now sell department store type products like Wal-Mart,” he noted.

His report points to 550 outstanding appeals registered at the Assessment Review Board that for the 2009-2012 years there have a total value of $2 billion.

“Of this $2B still under appeal, $300 million is in the industrial property class (larger appeals being $157 million for US Steel and $27 million for National Steel Car), $735 million in retail/shopping plaza (Limeridge Mall, Eastgate and Centre Mall being the largest) and $632 million in other commercial.”

On the other side of the ledger, redevelopment of the Centre Mall increased their assessment by $18 million, while the growth at the Flamborough Power Centre at Clappison’s Corners added another $8 million.

The province-wide appeal of the assessed value of grocery stores is being driven by Loblaws who argue they are selling similar merchandise to Walmart and should be assessed the same way. In Sarnia, that has meant a more than 30 percent drop in assessed value for one Loblaws store, and a tax refund of over three-quarters of a million dollars over a six year period.

The report offers several reasons for the minimal translation of business growth into more tax revenues including differences between values determined at the building permit stage and those established later by MPAC, and the fact that about a fifth of new construction in the last five years has been government-owned buildings that don’t add to the tax roll.

Subsidy programs set up by the city to encourage growth often cut into new taxes for several years. The report points to the example of the $1.1 million grant to Canada Bread for constructing to LEED (Leadership in Energy and Environmental Design) standards that “will offset the assessment growth in the first years” of its operation. The Maple Leaf wiener plant has also qualified for the LEED subsidies that are deducted from new taxes – for $2.6 million over 5 years.

A further factor not noted was the 30 percent drop in building permits last year from the billion dollar level achieved in 2010.