Napanee Council debates Municipal Accommodation Tax, short-term accommodations

The Council of the Town of Greater Napanee debated the merits of a municipal accommodation tax and got into the nity gritty of short-term accommodations at its regular meeting on Tuesday, Sep 26, 2023, but ultimately decided they did not yet have enough information about either.

According to a report by Town Clerk Jessica Walters, the Municipal Act was amended in 2017 to allow municipalities to levy a Transient/Municipal Accommodation Tax (MAT) as a direct tax on temporary accommodations. This tax is paid by the customer to the service provider: typically hotels and motels, but also short-term accommodation (STA) rentals like Airbnb properties. The possibility of implementing a MAT has been discussed informally at past meetings of Napanee Council and is being raised for discussion before the 2024 budget.

“This report is here to start a conversation with Council,” Walters explained. “The idea of the Municipal Accommodation Tax has been floated a few times over the past years… We, as staff, know that there’s a desire to look for new creative ways to bring revenue in for important projects, and for growing tourism in our community… If we start going down this road, it will be a lengthy process. So, if this is something that Council would like to do… the sooner we start these conversations, the sooner we can have something like this up and running.”

Walters added, “If we were to start having this conversation seriously now, you’d be looking at 2025 before you were having any bylaws come into force.”

Councillor Dave Pinnell began the conversation by asking, “The MAT tax would be taxed to any person who is staying at a hotel or motel currently, unless we set up something with the short-term accommodations, right? So if we don’t move forward with [licensing] short-term accommodations, then the MAT tax will not be charged by them, right?”

Walters confirmed this, saying, “It would be relatively simple to implement this with hotels and motels because we know who they are. [But] if you wanted to also apply this to short-term rentals, which you are able to under this legislation, we would need a licensing [program] hand-in-hand with it, so that you could know who your short-term rentals are that are supposed to be remitting this.”

Pinnell said he thought it would be most fair to implement the MAT once the SAT licensing had taken effect, so as not to disadvantage hotel and motels at this time.

“I realize other communities in the area charge [the MAT], but I think we’re actually at a competitive advantage by not having it,” Councillor Bill Martin offered.

“Now, it’s going to be an administrative nightmare for everything except the motel and hotel. That’s the easiest one, but we’re going to be putting them at a disadvantage by introducing a MAT tax, in my opinion.”

Deputy Mayor Brian Calver wondered whether this was the right time to be implementing the MAT because times were already tight for the citizenry, “with other tax increases and such.”

Walters pointed out, “This is not a tax on your residents or your tax base. It’s a tax that’s paid by visitors to your community, an additional tax on the accommodation that they’re purchasing. Just to make sure that we’re very clear on what we’re talking about.”

Councillor Bob Norrie suggested that maybe people would be more likely to come to Napanee if the MAT were not implemented.

“I’m sick of taxing people to death: it’s just another tax on top of a tax on top of a tax. So that’s why I’m opposed to it,” he explained.

Councillor Angela Hicks pointed out that most, if not all neighbouring municipalities had already implemented a MAT. She called it “the opportunity for a new revenue stream. We’ve heard costs are going up, and we have the opportunity to introduce this — with the caveat that 50 per cent of whatever is brought in after our operating costs will be split with the nonprofit marketing board [for tourism in our area].”

Councillor Bill Martin said he respected that, however, “We don’t have a lot of hotels and motels here… There’s more and more short-term rentals, private rentals. How are we going to figure out how to charge them? Like, are they going to voluntarily come in? I can’t see how that’s going to happen. I think it’s going to be administratively hard to police.”

Some members of Council still seemed to have difficulty distinguishing between a business paying a tax and a person who uses that business paying the tax.

“Councillor Hicks,” Martin said, “Do you not realize the businesses, the hotels, already pay tax? They pay business taxes in this town. So I don’t know why we would want to have them pay more.”

But in the case of the MAT, it is a tax on the person renting the short term accommodation, collected by the business and remitted to the Town to pay into tourism promotion, which would then benefit that business. As Hicks put it, “The Fox Motel is not paying four per cent of their earnings; it is the tourist or the person staying in the room” paying a four per cent tax to the Town.

Ultimately the debate came down to whether licensing short-term accommodations should happen before implementation of the MAT.

Ultimately, by unanimous decision Counicl voted to direct staff to investigate implementing a Municipal Accommodation Tax for the Town of Greater Napanee, including undertaking public and industry consultations, with the results of the consultation and potential implementation strategy to be reported to Council in the first quarter (Q1) of 2024. Council also directed staff to investigate and report back on the costs, timelines, and impacts of licensing short-term accommodations.

Meetings of the Council of the Town of Greater Napanee can be viewed virtually (or watched afterward) on the Napanee Town Council YouTube channel, or attended in person in Council Chambers at the Napanee Town Hall, located at 124 John Street. Further information about Council meetings is available on the Town’s CivicWeb site.