After years of debate, 2% NOTL hotel tax will start July 1
After years of deliberation, false starts and delays, Niagara-on-the-Lake city councilors have approved the implementation of a controversial municipal lodging tax.
The tax is set to begin July 1, after narrowly passing in a 5-4 council vote last week.
For many councilors, it was simply a matter of adopting one of the few revenue options available to the city.
“It’s a revenue tool that we don’t use and it seems very strange to me that a top destination like Niagara-on-the-Lake (hasn’t) used it,” the adviser said. Allan Bisback said Tuesday in an interview.
For a city that welcomes millions of tourists each year, it makes no sense for residents to foot the bill to improve the city’s tourism infrastructure, Bisback said.
For now, the tax will only be paid by people staying in rentals of five or more bedrooms – mainly hotels. Most bed-and-breakfasts and short-term rentals will be exempt, although some councilors have said they expect the tax to be extended in the future.
“The only way for us to get additional revenue is through (the municipal lodging tax),” Mayor Betty Disero told councilors.
Bisback said revenue from the tax will be split between the city and an entity charged with handling marketing and advertising for the city’s tourism sector.
The exact nature of the entity and the percentage of distribution remain to be determined.
The tax was originally expected to be approved for implementation at the end of 2021, but was rejected by the council on December 20.
During this meeting, Treasurer Kyle Freeborn presented scenarios of how much the tax could generate.
City staff recommended an option that calculates revenue based on 60% room occupancy, an average room price of $200, and 2% tax, which translates to over $1 million in annual tax revenue, with the municipality keeping 50% for itself, or $530,987.
The presentation estimated that the city will earn about $44,000 per month from the tax. If implemented in July, it could total some $264,000 by the end of the year.
The tax is expected to increase over several years, starting at 2% in 2022 and reaching 4% in 2024, doubling the estimated revenue.
In places like Marin County, California, the transient occupancy tax is 14% for short-term rentals and 10% for most other rentals.
Three projects were initially proposed to be funded by the levy: the Canada Summer Games 13 by 13 event ($60,000), the landscaping of Queen and Victoria Streets ($101,685) and a donation of $140 $000 to the Museum of Niagara-on-the-Lake.
As part of the operating budget passed by council on January 31, the Summer Games Gathering is now being funded from parking reserves thanks to the cancellation of this year’s Icewine Festival. The city had budgeted $40,000 for the festival.
Landscaping of Queen and Victoria streets has been postponed.
The motion to approve the tax included a reduced donation to the museum of $100,000 and stipulated that the rest of the money generated by the tax will go into a reserve fund.
Com. Clare Cameron said confusing support for the museum with approval of the accommodation tax was manipulative.
“I feel like there’s something very coercive about it and I’m not comfortable with it,” she said.
She said the city was ignoring industry concerns by implementing the tax before conducting extensive public and industry consultation.
With advice. Gary Burroughs said the tax was poorly timed as the hospitality industry is suffering from the pandemic.
Paul McIntyre of Vintage Inns and Janet Jones, chair of the city’s tourism advisory task force, have asked the council to defer the tax until after discussions with industry and short-term rental operators.
But Disero said the backlash from industry officials and advisers had no purpose other than to delay the launch of the tax.
“Seems to me like we’re just trying to block that out, again,” she said.
Requests by industry officials for the tax to be delayed for “consultation” are suspect, she said.
“We’ve been talking (about the municipal accommodation tax) since 2016. There’s been so much talk and every time we’re asked to wait, wait, wait, it’s a tactic not to” , she said.
The industry will continue to try to delay the tax and the only way to get the hospitality sector to come to the table in discussions on its implementation was to “tell them there is a deadline” , she said.
After debate among councillors, it was decided that a governance advisory group would be formed to meet with hospitality officials and industry experts before the tax is implemented in July.
Disero ensured that a line was added stating that the governance group could not delay the start of the levy.
McIntyre and Jones agreed that making the tax only applicable to rentals of five or more bedrooms was unfair, but acknowledged that the parameters of the tax will most likely be expanded over time.
“If it’s a room tax, then it’s a room tax,” Jones said.
Bisback said the tax was designed in this way to give a break to short-term rental operators who had to shut down completely for much of the pandemic, when hotels could still operate with limited capacity.
But he said he wanted the rules expanded to include all one-day short-term rentals.
“I’m actually a big fan of them eventually having to enter the fray,” he said.
He also justified the choice by a question of money.
“To be frank, from a revenue perspective, the majority of rooms are in hotels,” Bisback said.
He was optimistic about the economic future of tourism at NOTL.
“We will come out of this pandemic, we will recover,” he said. “We just have to temper the emotion a bit.”