Napanee to consider Municipal Accommodation Tax to boost tourism revenue

The Council of the Town of Greater Napanee will hear a staff report on a municipal accommodation tax for short-term accommodations at its regular meeting on Tuesday, Sep 26, 2023.

According to the report by Town Clerk Jessica Walters, in 2017, the Municipal Act was amended to allow municipalities to levy a Transient/Municipal Accommodation Tax (MAT) as a direct tax on short-term accommodations. This tax is paid by the customer to the service provider (typically hotels, motels, and short-term rentals like Airbnb properties). 

The possibility of implementing a MAT has been discussed informally at past meetings of Council and is being raised for discussion before the 2024 budget. According to the report, a growing number of municipalities have embraced the MAT as an additional revenue stream that can be used to support local tourism efforts without burdening taxpayers.

Many municipalities in the adjacent areas have already implemented MATs. According to the report, Belleville, Prince Edward County, Kingston, and Quinte West already have a four per cent MAT.

Walters’s report notes that a discussion about licensing short-term accommodations (STAs) — something that is not currently required — so that MAT revenue can be equally applied to them will likely be a natural outcome of any effort to implement a MAT for traditional lodging operators. Many of the above communities have already implemented STA licensing, including Belleville, Prince Edward County, and Kingston.

The report discusses the pros and cons of the implementation of a MAT, stating that while the program can help provide stable funding for tourism strategies, it does place an administrative burden on the operators who will be collecting, reporting on, and remitting the tax revenue. Municipal staff will also be required to audit and enforce the program, which will have an operational impact, the report notes.

Further, the report cautions that there may be a perception that implementing a MAT may jeopardize the competitive advantage of being one of the municipalities in our region that does not currently levy this fee. And if the levy is only applied to hotels and motels and not to STAs, there may be an argument that hotel and motel operators are being placed at a competitive disadvantage.

The report also notes that if the Town were to implement the MAT, an agreement would need to be entered into with an eligible non-profit tourism entity. The most likely candidate for this role would be the Bay of Quinte Regional Marketing Board, which already provides tourism promotion services to the Town and is the designated entity for Belleville and Quinte West’s MAT programs.

A MAT has the potential to bring a new revenue stream into the municipality, although it may also bring new expenses if it is paired with a program to license (and therefore collect the MAT from) short-term accommodations. Using the 2022 data through CBRE (Commercial Real Estate Services through the Coldwell Banker real estate group), Bay of Quinte Regional Marketing has estimated that a four per cent MAT in Greater Napanee could generate approximately $180,000 per year from hotel and motel stays, according to the report. Per provincial regulation, 50 per cent of the net revenue would need to be given directly to a non-profit tourism partner for tourism marketing purposes. The other 50 per cent would remain with the Town. 

Assuming 10 per cent in costs to administer the program, this could generate around $81,000 in new revenue for local use. The report points out that implementing a MAT would allow for a substantially increased investment into local tourism promotion, leading to a positive result for the business community. Currently, the Town invests $25,000 per year with the Bay of Quinte marketing contract and relies primarily on the efforts of larger municipalities to drive tourism.

The report anticipates that engagement and communication will be the areas of the program requiring the greatest staff resources because, while national hotel brands may already have experience with MATs, local operators may not.

Staff believe, as stated in the report, that if Council were to signal an intent to implement a MAT during the upcoming budget deliberation period, the Town could realistically budget to start collecting this revenue in 2025. If Council wanted to include short-term accommodations in a MAT program from the beginning, work should be undertaken in 2024 to begin the processes of regulating and licensing STAs.

The report notes that at the conclusion of the discussion on Tuesday evening, Council is expected to provide direction to staff on a path forward. They may direct staff to investigate implementing a MAT 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 Q1 (first quarter) of 2024.

In addition, councillors may direct staff to investigate and report back on the costs, timelines, and impacts of licensing STAs, or they may decide to continue to monitor the local situation and not proceed further at this time.

As always, you can read full Council meeting agendas on Napanee’s civic web online, and watch meetings live or recorded on the town’s YouTube channel.