Saskatoon's possible new arena foreshadows revenue boom for hotels, restaurants — and a new tax
Saskatoon city committee to consider funding options this week
Hotels and restaurants are keen to see a new arena in Saskatoon's downtown, but less interested in a proposed tax that swell their customers' costs to fund it.
"We have just come through, arguably, one of the hardest three years in the accommodation sector's history, just coming out of the pandemic, and now this on top of it?" said Jim Bence, president and CEO of Hospitality Saskatchewan, which represents a few hundred hotels, restaurants, pubs and events centres.
Bence is in favour of Saskatoon's prospective new arena, but opposed to the accommodation tax the city is considering ordering to fund it.
In response to a revenue analysis report from consultant firm KPMG, city administration is recommending the governance and priorities committee look at three sources of funding for the arena and event district: the accommodation tax, facility fees and property taxes in the area around the arena through tax increment financing.
If the city takes on tax increment financing, property tax money from new builds would be put toward financing the arena and district, as would tax from the increased value of current buildings.
Another two potential sources — a vehicle rental tax and enforcing parking fees in certain areas on Sunday — were mentioned in the report but scrapped by administration.
Without them, the city could bring in as much as $17.4 million which could be leveraged into debt repayment, the report said.
That still lays the burden on hotel guests. Chief financial officer Clae Hack is predicting hotels will have more heads in beds from the arena and district.
"As opposed to putting the burden of the arena solely on the local tax base or residents it would help to disperse that burden amongst others that are visiting the city," Hack said.
Hack said the other cities have laid out similar policies to haul in revenue for their entertainment districts, but Saskatoon's decision hasn't been set in stone and the full funding plan isn't expected for council until early 2024.
Accommodation taxes elsewhere
Saskatoon wouldn't be unique to enlist an accommodation tax to subsidize large projects.
Winnipeg implemented a five per cent tax in 2008 to support the Winnipeg Convention Centre and Economic Development Winnipeg. In Ontario, several cities adopted a four per cent accommodation tax.
The Saskatchewan government would have to open up the Cities Act to allow Saskatoon to make the change.
Hack said the province has been "receptive" to early discussions about the projects but the city is more focused on ironing out what the funding plan could look like. He expects more detailed requests with the province to follow that plan.
Amending the Cities Act would also open the door to other municipalities to do the same, which Bence fears could lead to unnecessary taxes on the hospitality industry.
In other municipalities like Swift Current or Esterhazy, cities could draw from the veins of hotels to add to their general revenue rather than to larger projects, he said.
"Often times it's for one specific purpose, or that's what's said, but then the tax then continues afterward and just goes back to the general revenue fund," Bence said.
"In Canada, we're one of the few jurisdictions that does not have an accommodation tax or tourism money, those kinds of things, and we've fought really hard to sort of keep that decision in the hands of business."
Bence is advocating for other ways to fund the arena, like a subscription-type payment to get first dibs on seats at the new arena.
Saskatoon's governance and priorities committee is scheduled to meet Wednesday morning with the funding plan on the docket. Mayor Charlie Clark and every city councillor is on the committee.
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With files from Charles Hamilton