Hotel room tax up for city council discussion
$2 rate to all accommodations could generate $5M
City council will consider implementing a hotel tax of $2 per room, per night, beginning Jan.
1.
Politicians will deal with a staff report Tuesday recommending the $2 rate apply to all accommodations in the city, estimated to generate about $5 million in revenue annually.
The report calls for the creation of a Niagara Falls Hotel Association to distribute the funds.
If approved, the transient accommodation rate would be in place for five years, however, after three years, the partners will review the program and may retain a consultant to study its effectiveness.
Doug Birrell, chief executive officer of Niagara Hospitality Hotels, is scheduled to address council, representing various business improvement associations.
Legislative changes by the province last April provided municipalities the option to implement a tax.
The province encouraged municipalities to consider how a new tax may bring greater transparency and consistency to existing practices through the sharing of funds with a tourism organization, application of a uniform rate, and clearer labelling of the charge on hotel bills.
Toronto city council approved a four per cent tax on accommodations, which began April 1.
Despite a staff recommendation in November to implement a four per cent hotel tax also starting April 1 in Niagara Falls, councillors deferred a decision until they could consult with stakeholders.
Meetings with stakeholders were held in January and March.
Provincial legislation states municipalities that adopt a tax and have an existing destination marketing fee program in place are required to share the tax revenue with an appropriate not-for-profit tourism organization in an amount that matches the total revenue generated by the existing DMF program.
With respect to Niagara Falls, at least 50 per cent of the revenue generated must be shared with a tourism entity.
The city would be required to administer the collection of the fee.
Stakeholders will collect the tax at the source from consumers.
In Niagara Falls, there are 132 hotel/motels with approximately 12,000 hotel rooms.
The tax would only be charged on the hotel room and could not be applied to other components of tourism operations.
The tax can also be applied to short term rentals and other forms of accommodation. The only exclusion is university or college residence accommodations.
Although there are no specifics outlined related to how the monies can be spent, it’s staff’s opinion they should be used to support tourism.
Examples would be financial assistance for major events, such as televised New Year’s Eve and live concerts, fireworks, and destination marketing.
Once implemented, the tax will replace the DMF.
This means tourism businesses could no longer charge a DMF. This does not prevent a hotel from charging a resort fee or facility charge, but these would not be considered a tax.
A not-for-profit Niagara Falls Hotel Association will be created to address the needs of the accommodation sector. Directors will largely come from various BIAs in the sector.
All accommodations are eligible for membership in the association, which will operate independently from council and will be responsible to manage and disperse the funds collected for tourism promotion and destination marketing.
The city will collect the funds and retain a portion of the tax (five per cent) to administer the program.
The city will no longer directly fund tourism initiatives from property tax or casino-hosting reserves.
This will become the responsibility of the association.
The collection of the funds would begin Jan. 1 and monies allocated by the association would be dispersed starting in July.