New accommodations tax moves forward for council approval

MARCH 4 – UPDATE: Council approved moving the municipal accommodations tax (MAT) forward to the March 24 meeting of council for final approval.

At the special meeting, councillors heard from a half dozen members of the public with concerns over the timing of its implementation, logistics and communication of the process to roofed accommodation businesses.

Todd Davis, Acting Director of Community Development and Strategic Initiatives and author of the extensive MAT report, clarified the June 1 launch date for collection of MAT for all bookings not paid in full by that date, would see remittances due by the end of October, giving operators time to adjust to the change.

He also noted putting off implementation, as requested by several deputations, to Jan. 1 2021, would result in a financial hit to the municipality and encourage operators who wanted to avoid the tax, to have their guests pay in full in advance of the implementation date.

Answering concerns that operators are not aware of the coming new tax, Davis noted a comprehensive communications strategy is under way and will include direct communication with all licensed (commercial and new STA licenced) businesses, as well as broader messages.

Industry and public consultation would be held to determine how the funds collected are to be spent, under provincial legislation rules, for “eligible tourism entities” and the municipality.

Ontario legislation states 50 per cent of the funds are to be used by the municipality for spending on infrastructure or services that support tourism (road repairs, affordable housing, etc.) The remaining 50 per cent is to be used for destination promotion and development. StayPEC, as noted below, is an “eligible Tourism entity” that spends funds on promotion of tourism in the shoulder, and winter seasons only. Other possible eligible entities will be explored.

MARCH 3- At a special meeting Wednesday night, council will hear an overview and recommendations to implement a four per cent Municipal Accommodation Tax (MAT) on short-term, roofed accommodations (e.g. hotels, motels, inns, vacation rentals, B&Bs, etc) in Prince Edward County.

In a staff report last fall, it was projected the four per cent MAT would bring roughly $836,500 in tax revenue to the municipality. The amount is based on a conservative estimate of 53 per cent annual occupancy at an average rate of $175 per night. The tax is only applicable to the accommodation portion of the fee.

“A MAT would support the services and resources that thousands of visitors access when they come to the County,” says Todd Davis, Acting Director of Community Development and Strategic Initiatives. “Furthermore, a MAT would help grow strategic, sustainable investment in the tourism industry – a vital part of the local economy – without increasing taxes for local residents.”

The proposal will be discussed at a special Committee of the Whole at 7 p.m. March 4. A bylaw will be brought forward and the decision would come to council March 24. (Moved forward from March 10 due to weather cancellation of special council meeting).

Davis’ report notes two phases – implementation of the tax, and allocation of the MAT funds. The proposed start date is June 2020, and a proposed approach for phase two would come before council in the fall. The report notes that to co-ordinate the collection, the finance department would be required to hire one full-time staff person at an estimated cost of $120,000 and that any staffing or overhead costs would be paid for from the MAT funds.

“With the Short-Term Accommodation (STA) licensing process well underway the municipality
has a solid understanding of Prince Edward County’s accommodation landscape. With the
ability to now cross-reference between STA licenses and MAT remittance, the time is right to
implement a MAT,” his report states.

Three STA booking platforms have been consulted (AirBNB, VRBO and Home Away). AirBNB will remit quarterly MAT payments to the municipality. VRBO and Home Away do not collect MAT on behalf of their hosts.

It is recommended MAT is added to any accommodations reservations that are not paid in full prior to June 1, 2020.

Since January 2018, the Prince Edward County Accommodations Association StayPEC has been collecting a voluntary two per cent destination marketing fee (DMF) from guests staying in their 10-member accommodations (representing 440 rooms, 751 beds and 312 employees). Their collection amounts to approximately $100,000 annually and is used to promote shoulder season and winter tourism.

StayPEC is considered to be an ‘eligible tourism entity’ to receive a portion of MAT funds. It is proposed, in phase two, to develop a memorandum of understanding with StayPEC to outline how funds will be spent.

Ontario legislation states 50 per cent of the funds are to be used by the municipality for spending on infrastructure or services that support tourism (road repairs, affordable housing, etc.) The County proposes industry and public consultation on this spending.

The remaining 50 per cent is legislated to be used for destination promotion and development. It is proposed the municipality continue working with StayPEC to determine how the funds should be used. Two reports expected in the fall – the Tourism Business Retention and Expansion study and the Tourism Master Plan – will coincide with recommendations on how funds should be spent.

At Wednesday’s meeting, council will also receive an update on the Short Term Accommodations licensing program launched in November, 2019.

Davis’ report states that of more than 750 applications filed, more than 80 have received licenses, while more than 500 are waiting for final inspections.

“To date, only two applications/licenses have been rejected or revoked, one due to zoning issues, which are currently being addressed in collaboration with the planning department. A second application originally received a license but then had it revoked due to issues with an illegally constructed second unit on the property.”

Throughout the process of developing regulatory tools, Davis notes research indicated there were between 1,100 and 1,500 short term accommodations in the County.

“Accounting for statistical inaccuracies and potential market changes, the program conservatively requires 900 properties to be licensed to achieve break-even.”

Community Development Department staff are working with the building and fire departments to offer a workshop to assist STA owners better understand the building and fire safety requirements of the program. Relevant department staff will be on hand to answer questions to help facilitate complete applications and successful inspections.

“In the rural areas the most common trend staff are encountering relate to revisions to the applications and fees based on bedroom – septic capacity challenges,” Davis’ report states. “A number of the larger, rural STA’s advertised previously for large groups had to revise their license applications and businesses to comply with the capacity of their septic systems. We can anticipate that in the 2020 high season there will be less whole home rentals that can accommodate large groups of people.”