HomeMy WebLinkAboutCAO 06-23
PJ(KERJNG
Report to Council
Report Number: CAO 06-23
Date: March 27, 2023
From: Marisa Carpino
Chief Administrative Officer
Subject: Municipal Accommodation Tax Program
-File: A-1440
Recommendation:
1. That Council approves, in principle, the inclusion of the Municipal Accommodation Tax
Program for the 2023 Budget for financial planning purposes;
2. That the appropriate City of Pickering staff report back to Council with a proposed
Municipal Accommodation Tax implementation plan and associated By-law; and
3. That the appropriate City of Pickering officials be authorized to take the necessary
actions as indicated in this report.
Executive Summary: Municipal Accommodation Tax (MAT) is a local tax levied by
municipalities on short-term rental accommodations such as hotels, motels, and Airbnb rentals.
The purpose of the tax is to generate revenue for the municipality to support local tourism
initiatives. The collected revenues will enable new developments in tourism services, provide
greater support for tourism organizations and businesses and facilitate investment in
infrastructure that supports new and enhanced visitor services and programs. Pickering will
benefit from the Municipal Accommodation Tax Program (MAT Program), with investments
made through new programs, enhanced services, infrastructure and lifestyle improvements
without an increase or impact to property taxes.
The standard rate amongst major cities across Ontario is four percent. Municipalities have also
utilized a gradual rate increase approach, introducing the tax rate at two percent and
increasing by one percent annually until reaching a permanent four percent tax rate. As per the
Municipal Act, municipalities must allocate a portion of the revenue to a destination marketing
organization.
The MAT Program has been implemented by approximately 45 municipalities in Ontario,
including Oshawa, Toronto, Mississauga, Oakville, Markham, London, and Ottawa. Cities of
comparable size have reported the tax can generate approximately $400,000 to $700,000
annually. City of Toronto reportedly generates approximately $24 million annually through their
MAT Program.
Financial Implications: City of Pickering is currently home to two accommodation
properties. The Comfort Inn Pickering with approximately 146 rooms and the Pickering Casino
Resort with 275 rooms. In order to forecast the MAT revenues for the City, a calculation was
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CAO 06-23 March 27, 2023
Subject: Municipal Accommodation Tax Page 2
done based on the existing hotels and their average daily rate. As part of the forecast, a hotel
occupancy range of 50 percent and 73 percent was utilized. The 73 percent occupancy rate
was derived from previous CBRE studies and is assumed as the industry standard average
occupancy rate. A lower threshold of 50 percent occupancy rate was also investigated to
provide a revenue forecast range. Table One provides a breakdown of the potential MAT
revenues at the 4 percent rate based on the two occupancy levels.
73%50%
Comfort Inn $197,620.64 $135,356.60
Casino 568,604.30 389,455.00
Total $766,224.94 $524,811.60
Occupancy
Table One
Estimated MAT Revenues (12 Months)
In addition, the MAT can also be applied to dwelling units operating as Short-Term Rentals
such as Airbnb and VRBO properties. If Council decides to adopt the MAT, staff would
recommend that short term rentals be also included. Even at the 50 percent occupancy rate,
the MAT represents a significant funding opportunity.
Discussion: On November 23, 2017, the Province of Ontario issued the Transient
Accommodation Regulation 435/17, which came into effect December 1, 2017, and provides
the necessary provisions for municipalities across Ontario to implement a Municipal
Accommodation Tax. The Regulation applies if a municipality imposes a tax through a By-law
in respect of the purchase of transient accommodation in the municipality under Section 400.1
of the Municipal Act.
The aim of the legislation is to generate new revenues that increases capacity in the
community for the development of competitive tourism products and promotion, increasing
overnight stays which in-turn, increases local economic activity. The MAT supported initiatives
include the enhancing of existing tourism products including sport, art, music, heritage and
other cultural offerings that contribute to Pickering’s high quality of life for residents, as well as
developing new programs that will improve visitor experience. The MAT Program represents
an opportunity to develop, support and facilitate new larger-scale tourism projects without
impacting property taxes.
In the Weeds – How Would it Work?
The Municipal Act specifically defines how the MAT revenues are to be spent. The legislation
states under Ontario Regulation 435/17 that the MAT revenues shall be paid to eligible
“tourism entities.” An “eligible tourism entity” is defined as a non-profit entity whose mandate
includes the promotion of tourism in a municipality.
CAO 06-23 March 27, 2023
Subject: Municipal Accommodation Tax Page 3
The City of Pickering currently does not have an eligible tourism entity that qualifies under this
program. To implement the MAT, the City must create an eligible entity as defined under the
Municipal Act which is a Municipal Services Corporation (MSC). The City requires the approval
of Region of Durham for the creation of a Municipal Service Corporation. The City’s Corporate
Services Department will take the lead on working with Region of Durham as it pertains to the
creation of the MSC. An MSC is a corporation whose shares are owned by a municipality and
which provides a system, service or thing that the municipality is authorized to provide.
Preliminary discussions with senior Region staff indicate that there should be no issue or
concerns from a Regional perspective regarding the creation of a MSC for Pickering. Under
Ontario Regulation 599/06, 50 percent of the MAT revenues will be allocated to the MSC after
deduction of the municipality’s reasonable costs of collecting and administering the tax. (The
Finance Department will be responsible for the collection of these fees). The residual balance
of the funds will be invested to support directly and indirectly tourism capital infrastructure .
These funds will contribute to a sustainable, creative, and smart local economy, while also
developing a long-term financial approach that is achievable and affordable. As a new funding
option, the MAT will allow for new strategic projects that grow tourism, increase visitor
spending and strengthen the local economy without impacting the property tax-base.
Subject to Council’s approval of Report CAO 06-23, staff will undertake the following next
steps to further investigate the MAT:
1. Conduct stakeholder engagement sessions, which includes existing accommodation
properties on the potential tax implementation.
2. Develop a recommended implementation strategy (incremental increase or four percent flat
rate).
3. Develop a By-law outlining the framework for the MAT.
4. Outline the steps and requirements to incorporate the eligible tourism entity.
5. Develop a business plan outlining the organizational structure, proposed budget, financial
projections, and the strategies for operation and governance.
Based on the projected revenues to increase tourism initiatives, it is recommended that
Council approve Municipal Accommodation Tax Program, in principle, to be included in the
2023 Budget. City staff will report back to Council in the second quarter with a proposed
Municipal Accommodation Tax implementation plan and associated By-law.
Attachment:
None.
CAO 06-23 March 27, 2023
Subject: Municipal Accommodation Tax Page 4
Prepared By: Prepared By:
Original Signed By: Original Signed By:
Laraib Arshad, MBA James Halsall
Manager, Economic Development Division Head, Finance
& Marketing
Original Signed By: Original Signed By:
Fiaz Jadoon Ec.D.,CEcD, MPM, B. COMM (Hons) Stan Karwowski
Director, Economic Development & Director, Finance & Treasurer
Strategic Projects
Recommended for the consideration
of Pickering City Council
Original Signed By:
Marisa Carpino, M.A.
Chief Administrative Officer