Larry's Corner

Assessment Growth and Job Creation

Each day tens of thousands of Hamiltonians leave our community for work in the GTA and beyond. Hamilton has gone, some critics argue, from being ‘the Ambitious City’ importing workers into our community, to the ‘ Lethargic City’ exporting jobs and employees elsewhere. I don’t know how fair this criticism is, but it is one that I heard repeatedly as Mayor. The commuting facts do speak for themselves. Certainly then, one of our biggest challenges is to create jobs for the citizens of Hamilton. Related to this endeavour is the continual need to provide better and improved services in the areas of recreation, public health, public works including transit, planning, environmental protection, law enforcement and other emergency services: in other words, all the quality of life urban matters we have come to expect from our municipal government. The rural community is also deserving of efforts to protect and enhance that important component of our city.

Council is charged with the delivery of services; but Council alone does not control all the job-creation levers by itself. The Federal government, the Province and private enterprise are important partners in the whole area of job creation. But Council does have an important role to play in being open to business, and providing the infrastructure necessary for businesses to locate and expand in our city.

Council’s success in delivering on either or both of these challenges depends on many factors, but the common thread among any of the criteria we might wish to put forward is money: money to invest in the economy, and money to pay for the needed services. Money for cities flows primarily from property taxes, and these taxes come from the assessment value on residential, commercial and industrial properties in our city. Often we measure the health of our city on the amount of ‘assessment growth’ that we experience from year to year.

What is assessment growth? Essentially, this is a ‘growth’ in the number and/or value of properties that can be assessed for the purpose of collecting yearly taxes. Hamilton’s $1B plus budget relies in large part on the taxes collected to pay for the services demanded by our citizens. Why is assessment growth important? The easy answer is that as the cost of doing business for municipalities goes up because of inflation or rising prices in energy, labour contracts, enhanced programs, or other goods needed by the city, it becomes more and more costly from year to year to run the municipality. For example, just as it costs more to fill your gas tank or heat your home, the municipality also absorbs increased costs for these commodities. As well, the city improved its ambulance service by a few million dollars this year. This was an important thing to do, but it will cost more; and this will affect the bottom budget line. Similarly, we settled a new contract with HSR staff and are negotiating now with other city workers. Rest assured, the costs will put additional pressure on our budget. And these are just a couple of examples. So, what is Council to do? Rather than going to the existing taxpayer to shell out more dollars, assessment growth brings more money to the coffers, helping to defray these rising costs. Ideally, if growth were appropriate, it would match the yearly increases thereby covering the costs of improved services for taxpayers. This ideal is seldom matched, however. That is why taxes have gone up.

Assessment growth is important, as is the type of assessment growth, in our municipality. Ideally, industrial assessment will outstrip residential assessment. Although residential assessment brings additional tax dollars to the city, it also brings additional costs because those residents need additional services. The challenge for the city then is to promote industrial/business assessment which is less demanding on the service side of the equation. The additional benefit to industrial assessment is that jobs are also created in those new industries within the municipality, giving current commuters a local employment option. All in all, assessment growth is a desirable and positive thing.

Hamilton has been experiencing a lower than average assessment growth these past few years and things don’t seem to be improving as quickly as they should. What are the factors contributing to this phenomenon? According to some city sources, only newer municipalities (e.g. York Region, parts of Halton locally, and Calgary out of province) have been experiencing significant growth. That’s because what were once agricultural/green spaces in those municipalities have been turned into assessment generating industrial (and residential) opportunities. Older cities like Hamilton that have virtually no new employment lands have had no way of creating this kind of growth. They have had to rely on residential growth to add tax dollars to our treasury, but as has been noted, these benefits also come with costs. The reality of industrial assessment, in fact, is that because of successful appeals by companies like Stelco, and the demolition of former factories (Camco), our assessment base has been actually shrinking. I believe our economic development department presented a chart for the amalgamated city of Hamilton with growth numbers ranging from -2% to +4.5% (by former municipality) for a blended rate of slightly over 1% overall. Even brownfield rehabilitation, as welcome, important and needed as it is, simply replaces assessment that once existed on those properties; it doesn’t create new assessment dollars.

Some might argue, then, that assessment growth alone is not the best indicator of economic activity in the city. In fact one should also factor in the building permits issued in the city. Without giving away figures prematurely, I am told that 2007 will be a banner year for this kind of activity. That is very good because these permits suggest additional revenues for the municipality.

However, the city must also redouble its efforts to bring industrial land into shovel-readiness so that industrial building can proceed, thereby creating jobs and bringing assessment dollars into our treasury. The Airport Employment district is our best long term prospect for doing this, and must be worked on with bullish determination. (See an earlier article on the importance of these lands.) In the short term, the main focus for the city is in the North Glanbrook Industrial Park where the Province’s $20M will go a long way to servicing those lands. Development charges and direct land owner contributions will come up with the rest of the needed cash. The newly constructed RHVP is increasing the business interest in this area as we knew it would. Ancaster and Arvin Avenue in Stoney Creek also have industrial lands which should come on stream imminently. The area of Upper James and Dickenson will see some development this spring as well. In total about 450-500 acres will be ready over the next 2 to 3 years, all contributing to the short term supply of shovel-ready industrial, job-creating, assessment-producing lands for the city.

This, of course, is an important part of the jobs-creating equation. The other is to actually be invitational to business and investment interests. As a municipality we received a black eye in the business community, under my watch, when opponents of the Maple Leaf Pork processing plant drove it out of town, despite Council’s support (albeit by a close vote) of the project. I couldn’t believe the impact such a debacle had on the city! Now, the local newspapers have also been critical of the city’s lack of attention to the re-designation and redevelopment of lands on the former Fox-40 and Waxman metals site on Highway 20 near the Service Road and the QEW. Major interests have purchased these lands and want to change the industrial designation to retail with large box store-developments valued in the mega millions of dollars. The city is reviewing the appropriateness of changing these designations.

When I was in office, I always resisted the change away from Industrial zonings because of our need for Industrial lands; whether one agrees to the change in this case or not, the city is being accused of dragging its feet on providing answers to the developers. In fact the same developer apparently submitted his plans to both Barrie and our city for similar types of proposals. Barrie acted quickly on the request the developer stated; Hamilton seems to not be in a hurry. This lack of urgency is not a good signal to be giving the investment community. If the answer is yes, the City should state it quickly; if the answer is no, the city should be even faster in giving this response so that businesses can make alternative plans. Keeping investors in limbo only further damages our reputation as not being a business (read: jobs) friendly community. This will not help us in our attempt to improve our employment prospects and our assessment growth statistics.