Launch date defeated in tie vote but proposal is not dead, councillor says
The municipal accommodation tax in Niagara-on-the-Lake might be on life support but it's not dead, Coun. Norm Arsenault says.
“It’s never dead and I suspect that it may come back in the near future,” Arsenault said in an interview Monday.
After the levy's June 2022 launch date was defeated on a 4-4 tie vote during a council meeting on Dec. 20, Arsenault and Lord Mayor Betty Disero said the tax will likely be voted on, and hopefully approved, later this month.
While voting on various aspects of the capital budget, council voted against starting the collection of the accommodation tax in June.
That leaves high and dry four key projects that were proposed to be funded with the revenue generated by the tax.
The projects without funding as of now are: installing flowers along Queen and Victoria Streets, the 13 for 13 Canada Summer Games Cultural Festival, new public washrooms on Queen Street and a donation to the NOTL Museum.
Arsenault voted in favour of collecting the tax, along with Lord Mayor Betty Disero and Couns. Sandra O’Connor and John Wiens.
Couns. Gary Burroughs, Erwin Wiens, Wendy Cheropita and Clare Cameron voted against it. Coun. Allan Bisback was not at the meeting.
For Burroughs and Cameron, it was a matter of bad timing.
“Not right now, with everything that’s happening to the hotels and the accommodation industry and our town (due to COVID-19),” Burroughs said in an interview on Monday.
Burroughs said he has lived in NOTL since the 1960s and has seen the town prosper and grow over the last six decades but he is worried the accommodation tax will hurt one of the town's key industries when it is already down.
“It’s because of tourism that (NOTL has) been as successful as it is,” he said. “To penalize, in any way, the hotel sector would be wrong at this time.”
“The timing is just awful, doubly awful now that travel restrictions are once again being discussed,” Cameron told council at the December meeting.
This week Premier Doug Ford announced a three-week lockdown for the province amid record-breaking COVID-19 case counts.
Town treasurer Kyle Freeborn told councillors he consulted with the Town of Huntsville, which has collected a four per cent accommodation tax on all short-term rental rooms in the town since 2019.
“Their revenues were around $100,000 per month, even during COVID,” Freeborn said.
Councillors were presented with three scenarios for implementing the tax in June, which accounted for varying levels of room capacity and prices.
Scenario two was what was voted on. It assumed a 60 per cent room capacity with an average room price of $200. Based on this, the town estimated it would earn roughly $309,000 over the course of seven months, or $44,000 per month.
This was based on the town charging 1,347 rooms. The majority of rooms being charged are in hotels at 1,262. Country inns and villas account for the other 85.
As The Lake Report has previously reported, council’s decision to charge the tax only on short-term rentals with five or more rooms significantly reduces the number of taxable rooms, entirely excluding bed and breakfasts and cottage rentals, which make up the majority of short-term rentals in town.
Eligible businesses will collect a two per cent accommodation tax on all room rentals with the town ramping the tax up to four per cent over the next few years.
Based on the numbers presented by Freeborn, post-pandemic, when room capacity is back to normal and the tax is at four per cent, NOTL could collect more than $1 million in revenue per year from the tax.
Despite having traditionally been against the municipal accommodations tax in any form, Burroughs says those days might be behind him.
“I’ve learned a lot in the last three years and I think it probably is a useful tool,” he said, acknowledging the tax as a valuable revenue source for the town.
But he has no plans to vote in favour of the tax until the pandemic is over.
Burroughs is also concerned about implementing the tax before the town finishes its tourism strategy.
During the Dec. 20 council meeting, chief administrator Marnie Cluckie told Burroughs a request for proposals for a consultant on the tourism strategy would be going out sometime in the first quarter of 2022.
Arsenault said having the tourism strategy in place would be helpful but the town can’t let the dearth of a tourism strategy prevent it from moving forward with important projects.
“We’re only asking about (charging) two per cent (for the accommodation tax) as a starting point and then (we could) go from there and develop a tourism strategy around that,” Arsenault said.
“I don’t have an issue with that. We just need to get the (accommodation tax) in place to get started. There’s never a right time to impose something like that.”
During the meeting, Coun. Erwin Wiens told fellow councillors he was uncomfortable with allocating the money generated from the tax before it had even been collected.
“Any money that comes from (the accommodation tax) should go into an account first and we should have it before we spend it,” Wiens said.
“It’s not prudent to do this because what happens if something like the pandemic continues? We commit funds we don’t have and it’s a mistake.”
Noting that the tide was turning against an approval of the tax, Disero stepped in to share her point of view.
“The one thing I want to say is ‘shame,’ ” Disero said.
She said council had committed funds to various enterprises and that rejecting the accommodation tax as a source of revenue could mean the town has to raise taxes on NOTL residents in order to pay up.
“And maybe that’s what you want but it’s certainly not what I want,” she said.
In an interview, Disero said there are three options for the town to pay for the projects the accommodation tax was supposed to fund.
“Either cut core services, which I’m not happy about doing, or raise taxes, which I’m not happy about doing,” Disero said.
“The third option is to set a date to implement the accommodation tax, which I think will be the solution.”
Regarding the Canada Summer Games 13 for 13 event, Disero said if the town couldn’t find a way to fund it, council would have to ask the region for a way out, something she has no interest in doing.
In an interview, Wiens said the town needs to reign in unnecessary spending on consultants and lawyers.
“You want to save money? Don’t pay a consultant for a new firehall $95,000,” Wiens said.
“It just becomes frustrating for me. $700,000 a year on lawyer fees when our previous high is $100,000. That’s where the money comes from.”
In relation to how the town could pay for the Summer Games event, Burroughs noted, “We’ve already committed to doing it so we’ll have to find a way to do it. That’s all we can do.”
But Disero is confident the tax eventually will be put in place.
“I think that throughout the operating budget (discussions in January) we’ll be able to sort out the question of implementation and format,” she said.
One of the key reasons the vote on the tax failed to pass was the absence of Bisback, Arsenault said.
He said Bisback’s absence had been planned for nearly six months, “which was unfortunate because this issue would not have happened,” Arsenault said.
Bisback is the chair of the audit and finance committee and had approved the motion to start collecting the tax in June before it was brought before council.
Cheropita raised the concern that the town had not consulted enough with the hotel industry in NOTL since they are the businesses collecting the tax.
“Even just to say this is what our audit committee has discussed, this is where we are headed and you’re going to be impacted by this,” Cheropita said.
Arsenault said discussions on the tax have been ongoing for three years and there has been plenty of talk with industry stakeholders.
Disero said there was room for both approaches.
“What I’d like the staff to do is set up a criteria working with the industry on what the expenditures should be and then come back as soon as they can with what meets the criteria and what doesn’t,” she said.
If expenditures can’t be decided upon, Disero said there is the option for the town to start collecting the tax and putting it into a reserve fund so spending on specific projects can be determined later.
Evan Saunders, Local Journalism Initiative Reporter, The Lake Report