John Tory set to back tax on hotels, short-term rentals

Tax would be applied to all hotels and accommodations, including short-term rentals such as Airbnb.

Thestar.com
Nov. 23, 2016
By Betsy Powell

On Thursday, city manager Peter Wallace will release 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.

He will suggest council open the door to a host of revenue-generating measures, including road tolls on the Gardiner Expressway and the Don Valley Parkway.

Mayor John Tory will lay out his “bold” fiscal plan for the future Thursday in a major speech to the Toronto Region Board of Trade that will include endorsing specific revenue-generating measures, senior city sources say.

The mayor’s office would not say if Tory would support tolling the DVP and Gardiner.

“For too long, we have been under-investing in our city, making life harder for everyone. And that can’t go on,” 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.”

Road tolls would be a tough sell on council. Tory has said in the past they are not his preferred way to pay for road infrastructure.

Wallace will recommend the vehicle registration tax be reinstated, something Tory will not support, senior city hall sources said.

A $60-per-car charge - which council killed in 2011 under the Ford administration - could raise $66 million a year, the Canadian Centre for Policy Alternatives has said.

But Tory will back a tax applied to all hotels and accommodations, including 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.

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.

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, the sources said.

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.

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 $21 million 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 on a voluntary basis. The new tax would be in addition to this existing DMP fee of 3 per cent of hotel room revenues which is earmarked to promote the city.

It is estimated that the DMP contributed $19 million to $20 million towards 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.

Terry Mundell, president and CEO of the Greater Toronto Hotel Association, said imposing a tax on hotel rooms in Toronto, and not in areas surrounding the city, will set up “two different competitive zones.”

Toronto’s 25,000 rooms already pay 13 per cent HST, so “add a hotel tax and whatever the number is you’re going to change the competitive balance.” He added, the “province makes the decision on this, not Mayor Tory.”

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 as well as eliminate the vacant property tax which is mandated across the province.