It's one of the most sensitive and controversial issues that has plagued city council for almost a decade -- and it's all about your money.

The issue is area rating, and it determines how Hamiltonians are taxed based on where they live.

Tomorrow, city staff will present a report to council members that outlines proposed changes to the system.

The current area rating system was implemented after amalgamation in 2001 to ease the tax burden on the five towns that joined the old city of Hamilton.

Since then, each former municipality has been taxed differently based on the recreation, transit and fire services they receive.

However, Rob Rossini, the city's manager of finance, says these tax divisions are still based on old boundary lines when services are not.

Currently, some rural areas are using services for which they aren't being taxed and urban areas are picking up the tab.

"We preserved a certain type of taxing system based on a snapshot of how services were delivered back then," said Rossini. "Things have changed."

On the table are proposals to change transit and fire area rating to reflect service areas rather than ward boundaries, stop area rating culture and recreation programs, and adding sidewalks and street lighting to the area rating pool.

The report also recommends phasing in the plan in two stages -- 2011 and 2015 -- so residents in rural areas won't face an immediate large tax hike.

"This is very much a go-slow approach. It's two stages, seven years -- because it does have impacts," Rossini said.

Residents of the urban areas of Glanbrook could face the biggest increase -- 3.1 per cent each year, 2011 to 2014, and an additional 0.7 per cent a year, 2015 to 2017.

At the same time, residents of the old city of Hamilton will see their taxes drop 0.7 per cent each year during the first phase and 0.4 per cent each year during the second phase.

City staff say their top priorities are to keep the process revenue neutral -- meaning the city won't use the process to bump up its tax income -- and that no one will face service cuts.

Mayor Fred Eisenberger has proposed forming a citizens' jury to get public input about the plan.

The jury, which would be made up of randomly selected citizens across the city, would deliberate on area rating and report back to council in November 2010.

Although staff has included the option of eliminating area rating, Eisenberger said he doesn't want to abolish it entirely.

"No one's talking about the elimination of area rating. This is not about elimination," he said.

"It's about making adjustments that have built up in the last nine years. The question is, how much more has been urbanized?"

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City plans to change how it taxes your area