Purse-pinched from the pandemic, Hamilton taxpayers face another increase

Council is expected to finalize the city’s 2022 budget next week. Photo credit: City of Hamilton

For 2022, Hamilton City Council is poised to increase property taxes by 2.8 per cent, which equates to approximately $39.5 million. This comes after council approved a 2.9 per cent tax increase in 2020 and a subsequent 2.1 per cent tax increase in 2021.  

These annual increases in property taxes are occurring in an environment where many residents and businesses are still struggling from the COVID-19 pandemic.

Increases to property taxes continue despite the city pocketing budget surpluses of approximately $25 million in 2019, $50 million in 2020, and an estimated $35 million in 2021. For the past three years, the surpluses add up to $110 million.

The Real Tax Numbers 

Prior to this term of council, the 2018 rounded net levy (operating expenses less revenues) was about $858 million. Then in 2019, during this term’s first year of controlling the books, the net operating budget was increased 3.4 per cent to about $887 million.

However, the real 2020 city budget increase was actually 4.2 per cent, or about $924 million when compared to 2019, representing an increase in costs of $37 million. 

Why the difference? The City of Hamilton reduces the levy impact by subtracting additional revenues, such as user fees and additional tax growth due to the construction of new homes, resulting in the number being reduced from 4.2 to 2.9 per cent.

In 2021, this property tax story repeats itself. The actual 2021 expenditure was $954 million, representing a 3.3 per cent increase. However, when factoring in an increase in revenues, such as user fees and growth, the number was reduced to 2.1 per cent.

* Numbers may not add due to “restated” budgets in municipal reports.
** As of March 3, 2022, the Budget Committee has reduced increase to 2.8%.

In all, over the course of four years this term of city council is projected to have increased property taxes by $139 million, or 16.2 per cent. And though property taxes continue to skyrocket year after year, the city generates a profit in terms of budget surpluses.

The Surpluses

When the city’s financial books are reconciled each year, the numbers show that Hamilton collects more in property taxes than it can spend.  

For example, pre-pandemic in 2019, the City of Hamilton profited $14.7 million in tax supported operations and another $10.2 million in rate supported operations (such as water and wastewater rates). In total, this represents $24.9 million in budget surpluses. The majority of this surplus was taken out of taxpayers’ pockets and put in the city’s bank account for a “rainy” day. The bank accounts are called “reserves”.

In 2020, during the first year of the pandemic, the municipality profited a record $55.3 million in tax supported operations. In contrast, there was a $4.6 million deficit in rate supported operations. The new impact was a net $50.7 million in budget surplus.  

On March 3, general manager of Finance and Corporate Services Mike Zegarac reported to Hamilton City Council a projected $35 million surplus for 2021.   

Property Assessments

For 2022, city staff suggest that an overall 2.8 per cent increase in property taxes would only represent a $123 dollar increase for a home assessed at $381,000. 

Property assessments are calculated by the provincial agency MPAC (Municipal Property Assessment Corporation). The agency is governed by a board of directors where half of the members consist of municipal representatives.

According to the Realtors Association of Hamilton and Burlington, the average price for residential properties in Hamilton last month topped $1 million, with no signs of slowing down. 

Thus, realistically, the benchmark of $381,000 is quite low. 

Examples of actual property taxes listed below are based on an urban home assessed at $550,000 with public transit and fire services:

* Rural Fire Service

Council is expected to finalize the 2022 budget on March 23. 

With three consecutive years of budget surpluses, equating to a projected $110 million, Hamilton City Council could easily deliver a zero per cent budget for this year.