Tory backs hotel, short-term rental tax

Mayor also seeking to kill rebate for owners of vacant properties

Mayor John Tory will back a tax applied to all hotels and accommodations, including on homeowners offering residential properties for short-term rentals on websites such as Airbnb, the Star has learned.

Tory will also support a move to kill a program that offers rebates to owners of vacant commercial and industrial buildings, nearly half of them downtown where property values have skyrocketed, senior city hall sources say.

The city paid $198 million to owners with vacant commercial and industrial properties between 2001and 2013. Under the provincially mandated program, property owners with empty commercial properties can get a rebate on their property tax bill of 30 per cent and 35 per cent for industrial.

Ending the Vacant Property Tax Rebate will save the city up to $20 million a year and ensure business owners pay their fair share while making sure neighbourhoods are not filled with unoccupied buildings, senior city sources said.

On Thursday, city manager Peter Wallace will release a series of long-awaited reports on revenue tools, road tolls, asset sales and the city’s financial outlook.

Wallace has warned that Toronto desperately needs new sources of cash or city council will have to impose dramatic cuts to close the gap between annual spending and revenues.

City councils have for years approved costly new programs without adequate funding, using unsustainable measures to close a gap that starts at hundreds of millions of dollars while relying heavily on unpredictable land transfer tax revenues.

On the capital side, council has approved almost $30 billion worth of unfunded projects.

The mayor’s staff say Tory will lay out his “bold” moves to fix Toronto’s finances in a major speech to the Toronto Region Board of Trade on Thursday.

“For too long, we have been underinvesting in our city, making life harder for everyone. And that can’t go on,” said Amanda Galbraith, the mayor’s chief spokesperson.

“The mayor will be standing up and announcing his plan to give us the money we need to build transit and protect city services.”

Tory has made no secret of the fact that he favours a hotel tax, which exists in many other North American cities and could generate between $21million and $126 million in annual revenue depending on the tax rate applied, according to a KPMG report released last summer.

The mayor supports a rate that would generate up to $20 million a year to city coffers, senior city sources said.

Hotels in Toronto already participate in a Destination Marketing Program (DMP) on a voluntary basis. The new tax would be in addition to this existing DMP fee of 3 per cent of hotel room revenues that is earmarked to promote the city. It is estimated that the DMP contributed $19 million to $20 million toward Tourism Toronto’s budget in 2014.

The Greater Toronto Hotel Association opposes any new hotel tax and has warned it will cause job loss, reduction of foreign direct investment in the hotel industry and other economic harm.

The mayor hopes that extending the hotel tax — the rate to be determined — to Airbnb and others offering their homes for short-term rentals will make the fee more palatable to the hotel sector.

“This is a fair way to ensure Toronto’s popularity with Canadian and international visitors and helps maintain our success as a city,” a senior city source said.

The city will need permission from the province to impose a hotel tax.

They will also need permission to eliminate the vacant property tax, which is mandated across the province. With files from David Rider