In a response to the civic demand for a downtown arena and entertainment district, the city is contemplating five plausible sources of income to fund this ambitious project. An extensive analysis from the renowned accounting firm KPMG is slated to be revealed to the city’s governance and priorities committee on Wednesday, outlining five feasible methods for financing the project while avoiding drastic hikes in property taxes.
The comprehensive 60-page report by KPMG parsed 19 potential fundraising options down to five, which comprise of: an accommodation tax, a facility fee, tax-increment financing, a vehicle rental tax, and modifications to parking fees. Projected revenues from these methods are estimated to vary from $6.7 million to $21.4 million annually, contingent on the approach the council agrees upon.
A frequently implemented tool in many Canadian cities, an accommodation tax, is a compulsory fee levied on short-term rentals such as hotels, hostels, and online platforms like AirBnB and VRBO. An accommodation tax of three per cent could approximately yield $1.6 million annually at its most conservative estimate, whereas a six per cent tax could potentially result in around $4.7 million per annum, as suggested by the report.
Nevertheless, Hospitality Saskatchewan, a conglomeration of hotels and stakeholders in the tourism industry, though supportive of the new arena, strongly opposes the implementation of a new tax on hotels. “The reaction has been overwhelming,” confessed Hospitality Saskatchewan President Jim Bence, implying that while advantageous to Saskatoon and Regina, it may not translate into the same benefits for other parts of the province.
Bence highlighted that the association’s anti-tax stance has been persistent for decades, majorly due to the reluctance of hoteliers to pass on the additional cost to customers and also the necessity to modify Saskatchewan’s Cities Act to allow the new tax. This change could hypothetically grant municipalities greater tax authority and potentially lead to future disputes with hoteliers over tax increases.
Opposition to this tax has been noted in rural parts of Winnipeg and Ottawa Valley where hotel operators perceive it as detrimental to the tourism industry. Counselling caution on this path, Bence questioned the fairness and sustainability of this model, arguing that funding should stem from multiple aspects of the tourism industry and not merely one.
Other options proposed by KPMG also necessitate amendments to provincial legislation, such as tax-increment funding. This method partitions property tax revenues earned within designated boundaries into two streams: ‘base,’ directed to general municipal use, and ‘growth,’ aimed at offsetting the redevelopment expenditure. This mechanism could potentially generate anywhere between $2 million to $9 million annually.
City administration meanwhile has expressed disapproval of KPMG’s proposal to extend parking hours and raise rates, as it intends to construct a parking structure furnished with 526 publicly accessible parking stalls on city-owned land at 22nd Street and Idylwyld Drive. It also rejected KPMG’s idea for a vehicle rental tax, requiring provincial legislation, a concept currently employed only in British Columbia.
Among the proposed ideas, a facility fee – adding a direct cost to every ticket sold at the arena, doesn’t require any new or revised laws. This concept can yield about $2.3 million per annum and potentially rise to $3.7 million if the ticket fee is increased to $7.50. Current establishments such as TCU Place and SaskTel Centre apply a similar charge.
City administration is determined to propose an overall funding project to the council by early 2024, continually reiterating its commitment to avoiding placing the financial burden of the project on property tax since the first deliberations in 2018.
