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LRT property value increases fall short of costs

LRT property value increases fall short of costs

lrt valuesOne of the challenges the average Hamiltonian faces in trying to sort out the LRT question is the explosion of facts and figures being cited to support opposing positions. In a recent article, Raise the Hammer’s Ryan McGreal –an LRT supporter writes: By attracting hundreds of millions of dollars in new dense, urban, mixed-use developments along the transit corridor, LRT helps us achieve the goal of raising the density of uses on our existing infrastructure – and generating more money to help pay for it.

He provided a similar claim about potential new development on the Bill Kelly Show. Writing in a similar vein, the Hamilton Spectator’s Paul Berton wrote: …LRT is not just about transit; it is about economic development. LRT has the ability to transform the Hamilton economy. We know from the experience in other cities that it will spur development along the route, create its own environment of investment, and that these businesses will pay taxes. On a visit to Hamilton to announce the awarding of the contract for the James Street North GO station, Transportation Minister Glenn Murray repeated to Kelly that LRT was the best option for attracting development and raising property values. To test these assertions, we went to Metrolinx’s Hamilton Main-King Benefits Case February 2010 to see what the transit agency itself had to say about potential development along the LRT route. The benefits cited by Metrolinx are over a 30-year period (2009- 2038).

Referring to the proposal for a full implementation of LRT along the “B” Line route from Eastgate to McMaster—Metrolinx’s most optimistic projection is that there could be an uptick in property values of $144 Million. Given that Hamilton’s commercial tax rate is about 3.4 percent of assessed value, $144 Million would produce about $4.9 Million per year in incremental tax revenue. If, as expected, Hamilton were to assume roughly $300 Million in debt, it would take roughly $10 Million in extra taxation just to service the debt, which would require development and property value increases totalling almost $300 Million, more than double Metrolinx’s most optimistic figure. Much of the route is already fully developed as largely commercial assessment with some medium density high rise between the Queenston Traffic circle and Eastgate. Commercial property expert Syd Hamber a Senior Vice President of commercial real estate firm Collier’s International, says there is no compelling reason for existing property owners along the route to demolish and build new, although undoubtedly there is some potential for redevelopment of the most distressed section of King Street from Gage Avenue to Victoria Street. “If they build new, the assessment goes up, but the kind of rents they would have to charge would be out of the reach of the average renter,” he said. “At today’s interest rates people who can afford, say $2000 a month, can buy a home.”

The Canadian Urban Institute prepared a study of the potential property value increase in 2010 and concluded that the total increase in property values along the “B” line would yield approximately $81 Million in new taxes over a 15 year period, or roughly $5.4 Million per year. The chart on page 3 illustrates the disparity between capital and operating costs on the one hand and projected increase in assessment value on the other. For the range in the amount of new taxes we took Metrolinx’s most pessimistic figure as the low number and the Canadian Urban Institute’s projection which was about 10% higher than Metrolinx’s most optimistic projection.

About Bay Observer Staff

Providing a Fresh Perspective for Burlington and Hamilton.

5 comments

  1. The 144 Million Dollar figure is widely considered to be grossly under estimated.

    Many more experienced and thoroughly vetted analysis’s statistics and case studies will tell you that an LRT in lower Hamilton will be worth Billions of dollars to the value of properties.

    With literally 100s and 100s of single family dwellings 1/4 to 1/6 of what they would be valued at in Toronto. Less than 600 single family dwellings would need to increase in value only $250 000…

    Pretending that the LRT will only increase estate values by 144 Million is totally defiant of basic logic.

    So get on board with supporting what the public purse is supposed to do, invest in society and infrastructure for the greatest benefit of the greatest number of citizens.

    ENB..//

    • The math is wrong and misleading. The property value figure was annualized, which means that yes, there would be a deficit after the first year, but within 4 to 15 years, the overall cost would break even.

      And where did he get the idea that incremental operating costs for LTR over BRT would be $7.8 million a year. LRT requires considerably fewer vehicles and fewer drivers (the biggest portion of operating cost for a transit service) compared to BRT.

  2. Unfortunately, you forgot to mention that the single report you reference says several times that its benefit estimations are 1)conservative and 2)may not reflect the whole picture.

    Do the BRT operating costs include the cost to maintain the road bed underneath the buses? Road maintenance is our top expense every year in Hamilton and any measure we can take to relieve that burden will be a benefit to citizens.

    This report includes a single paragraph about operating cost calculations, basically putting it down to hoodoo – a loose guess based on numbers found elsewhere with no consideration given to local operating efficiency opportunities and which leaves out many externalities.

    Plus, the main conclusion of the report is that the ROI for both LRT AND BRT is positive. So you cherry picked just the negative numbers and left out the conservatively estimated positives.

    Even Metrolinx’s worst case estimation gives a positive ROI and this was published 4 years ago, before a lot of the downtown development momentum really got moving.

    Hamilton needs higher order transit on the B-Line. Now.

  3. Please get rid of the facebook widget, it takes over the keyboard and makes commenting virtually impossible

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