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Learn How an LRT will erode the value of your home on resale
P.I.T. an old formula
Bankers, financial experts and mortgage brokers have used this simple rubric for decades to determine the carrying cost of residential purchases (homes). P.I.T. represents “principal”; “Interest” and “taxes” and these three items represent the components making up your monthly payments in financing a home. A second “I” representing “insurance” has become a significant reality in most recent times as well.
If you are thinking about purchasing a home or selling your home to purchase a new home, you would be wise to begin understanding that Light Rail Transit (LRT) is NOT some benign “costless” gift and (in reality) could be a “Trojan Horse” that will erode your single most significant financial investment – your home’s value on resale.
Home buyers considering purchasing your home from you are constrained by the formula of P.I.T. in determining if their monthly incomes can safely cover the monthly costs of principal, interest and taxes on any property they wish to buy.
Principal costs (the list price) is dictated by the competitive market – often referred to as “comparatives”. Interest rates are also market driven and also beyond your control. You can shop around and find minor variations on mortgage duration and mortgage rates. However, the net effect over the entire repayment term (s) is far less significant than the one item that you can and should be paying attention to. That item is taxes.
Home Owners Represent the Highest taxed People in Ontario
When you think of taxes, everyone knows that if you earn income, you will pay tax on your income. A second layer also applies to everyone. Consumption or sales tax then drains each person a second time based on what you spend.
However, a third tax on what you own ONLY applies to those of us who own our own homes. That third item is property tax (AKA: Municipal and Regional Tax). Thus, owners of home should be especially vigilant of city/regional tax. We are, after all a special breed. We are taxed on what we earn, what we buy and then (finally a third time) on what we own.
And it is that third tax that affects the monthly carrying cost of our property.
By unfortunate recipe of tax, the burden of supplying everything: recreation centers, libraries, city roads/streets, police services and all the rest is being entirely funded by home owners and business owners – not by the renters. This includes (also) subsidies to supplement fares charged to transit riders.
Work out the numbers for yourself. Statistics tell us that 4 out of 5 people (80%) of us are homeowners and are paying tax while 20% are enjoying those services (above) without the burden of that third level of tax (City/Regional Property Tax) . That statistic is directly from Statistics Canada (2011, Statistic Canada, Analytic Products, Housing).
Brampton’s population is roughly 524,000 (2011, Statistics Canada). Extrapolate the numbers. 80% of us (or almost 419,000) are footing the bill for another 105,000 who are renters.
Sadly, on the subject of LRT which will have a major impact on your property tax bill, most of those advocating for this major expense are the renters while the property tax payers are alarmingly silent or subject to misinformation about LRT being “FREE”.
LRT is not free and represents an annual operating subsidy left on the shoulders of homeowners as a legacy.
Who Is Lobbying for LRT?
Attend any of the public meetings or forums in which LRT is discussed in Brampton and you will quickly understand that the lobbyists are NOT property tax payers. Those of us paying the bills are too busy, earning our pay and paying the bills.
The province of Ontario is so deeply into debt presently that it is hard to imagine anyone with even half a brain is still agitating for enormously tax expensive projects that are discretionary. Yet, apparently here it is again: LRT in Brampton.
The Devil is in the Details
The above table was produced by Brampton City staff to provide information to City Council members prior to the decision to reject the much talked about Hurontario Main Light Rail Transit project.
It pretty much dispels the myth that the LRT project was a gift and without costs to Brampton ratepayers.
This simple table tells us that the entire LRT fiasco would have left an annual legacy of in excess of $28,900,000 on the municipal tax bills of families owning homes in Brampton. This amount represents the difference between annual operating costs for the LRT and revenues received from riders by way of fares paid.
If LRT is forced into Brampton, the annual legacy cost would mean that property tax payers would end up footing the bill for in excess of another $7,200,000 of subsidies handed over to support annual operating costs.
The details contained in this simple table also reveal that Brampton residents would see over $5,700,000 in existing bus services removed. You will no longer have a choice as the buses will simply be removed from service forcing you to ride the LRT.
There’s even more to the scheme than what was being revealed by the transit group (MetroLinx). The ensuing move from municipal operated bus transit services would see the fare revenues being grabbed by the Province of Ontario.
Throughout Peel, lost transit revenues would add to your property tax bills another $7,200,000 in lost fare revenues that are used to offset (subsidize) the bus transit systems in Mississauga and Brampton. For Brampton home owners/rate payers, you could expect that your annual city tax bill would reflect an additional $1,800,000 representing lost Brampton Transit revenues.
The overall effect of operating subsidies and lost revenues in Peel will mean that home owners/rate payers will be expected to absorb in excess of $36,100,000 annually. In Brampton (if the LRT project is again introduced, we can expect to see property tax bills burdened with over $9,000,000 annually to subsidize something that is being promoted as “FREE”.
That $36,000,000 annual hit deserves some perspective. Think of it this way. $36,000,000 is 25% of the annual amount spent on subsidized (scarce already) day care services; it means that 13% of the amount spent on police services is off the table; it means that almost 39% of the annual amounts spent by the Region for Paramedics will need to either be replaced or services reduced. For our least fortunate neighbors requiring Social Assistance, there will be a funding gap of almost 16% that will either leave reduced help or require tax payer replacement through City tax bills.
Municipal taxes are a key item of consideration in the real estate market. Potential buyers of your home recognize that high taxes are a reason NOT to purchase your home should you decide to move. High municipal tax bills can and will drive down the resale value of your home.
The loudest and largest groups of supporters of this LRT concept are NEITHER home owners nor are they municipal rate payers. Don’t permit them to influence your elected City Council. We dodged a huge financial bullet last fall when the LRT project was rejected.
A review of the conceptual plan behind the entire LRT project leaves more questions than answers. The projected ridership which in and of itself is highly suspect. Given the recently proven discrepancies in MetroLinx’s ability to accurately forecast potential riders, there is more than ample reason to discount the ridership estimates. The Pearson/Union Express was, after all forecast to have higher rider numbers than was the final result. In the private sector, such hypothetical-grandiose estimates are known as “sand bagging” (intentionally inflating some statistics to gain support for a project).
Additionally, this proposed LRT project will most certainly have a very negative impact on grid lock conditions that already are beginning to be a problem during peak hours. The LRT’s presence will have a severe limiting affect on vehicular turning along its route.
You will also find (in the details) that this is much more than a simple transit project and entails large amounts of urban planning dictating future property usage along its routes.
Also not disclosed are large financial costs surrounding parking facilities and road and water main adjustments to support LRT running on existing thoroughfares.
This is certainly one issue that has the serious potential to restrict your rights as a property owner/, municipal tax payer. Apathy in this case is unwise as decisions are being forced by non-ratepayers. It is always easy to spend someone else’s money.
It’s most troubling that the hidden subsidy costs have never been “front and centre “ in any of the tiresome lobbying by a small-noisy element in this town who have intentionally mislead the general public into believing that LRT is a free gift.
Take a minute and let your local councilor know that there are higher order priorities before us as a city. Enough time has been wasted on LRT – a project that is not needed and certainly not wanted by those of us who pay the bills.