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HomeMy WebLinkAboutCAO-003-26Staff Report If this information is required in an alternate accessible format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. Report To: General Government Committee Date of Meeting: April 13, 2026 Report Number: CAO-003-26 Authored By: Glen Macfarlane; Paul Pirri Submitted By: Mary-Anne Dempster, CAO By-law Number: Resolution Number: File Number: Report Subject: Municipal Accommodation Tax Program Recommendations: 1.That Report CAO-003-26, Municipal Accommodation Tax (MAT) Program, be received; 2.That the Clerk be directed to bring forward the Municipal Accommodation Tax By- law, attached as Attachment 1, to establish a Municipal Accommodation Tax at a rate of five per cent (5%), effective July 1, 2026; 3.That Council approve the eligibility‑based Traditional Bed & Breakfast (B&B) exemption framework included in the draft By‑law, and direct staff to operationalize the exemption application and verification process, including maintaining the initial list of pre‑approved establishments on a Schedule administered by the Director of Economic Development. 4.That the Director of Economic Development in consultation with the Deputy CAO, Finance & Technology/Treasurer be authorized to execute an agreement with the Ontario Restaurant, Hotel & Motel Association (ORHMA) to act as the Municipality’s MAT collection agent, including all documents ancillary thereto, in a form satisfactory to the Municipal Solicitor, and that the associated costs (one‑time $3,000 onboarding fee and ongoing collection fees of 1.8% for hotels/motels and 5% for short‑term rentals) be recognized as reasonable administration costs under O. Reg. 435/17; 5.That staff be authorized to request and obtain any required consents from the Regional Municipality of Durham related to the incorporation of the Municipal Services Corporation, pursuant to Section 11(4) of the Municipal Act, 2001, S.O. 2001, c.25, as amended; GG-068-26 Municipality of Clarington Page 2 Report CAO-003-26 6. That Council approve the Tourism Municipal Services Corporation (MSC) Business Case Study (Attachment 2), and authorize staff to incorporate a tourism ‑focused Municipal Services Corporation, named “Experience Clarington” if available, pursuant to Section 203 of the Municipal Act, 2001 and Ontario Regulation 599/06; and that the Deputy CAO, Finance & Technology/Treasurer be authorized to execute any supporting documents required to obtain consent for incorporation, including any documents required by the Regional Municipality of Durham or the Province, as applicable; 7. That Council approve a one‑time start‑up loan in the amount of $15,000 to support incorporation and initial operations of the tourism‑focused Municipal Services Corporation, to be repaid from the Corporation’s future share of Municipal Accommodation Tax (MAT) revenues; and that the Deputy CAO, Finance & Technology/Treasurer be authorized to execute any documents required to administer the loan, in a form satisfactory to the Municipal Solicitor. 8. That for the purposes of incorporation, Council appoint the following positions as interim incorporators/first directors of the Municipal Services Corporation: one Member of Council (as appointed by the Mayor), the Director of Economic Development, the Deputy CAO, Finance & Technology/Treasurer, and up to two additional municipal staff; and that staff report back to Council with recommendations on the permanent Board composition, corporate by-laws, financial accountability agreement, asset transfer policy, annual budget, and other documents necessary to operationalize the Corporation; 9. That the Director of Economic Development be granted the authority to enter into agreements with the Municipal Services Corporation, includin g all ancillary documents, respecting reasonable financial accountability matters required under Ontario Regulation 435/17 to ensure MAT funds provided to the Corporation are used for the purpose of promoting and supporting tourism in Clarington, all in a form satisfactory to the Municipal Solicitor; 10. That a Municipal Accommodation Tax (MAT) Reserve Fund be established to receive the Municipality’s share of net MAT revenues, and that staff bring forward a MAT Reserve Fund Policy for Council approval; 11. That staff report back to Council in Q1 2027 on MAT program implementation and MSC set-up status. Municipality of Clarington Page 3 Report CAO-003-26 Report Overview MAT administration, collection, and compliance, building on Council’s 2025 d ‑ 1. Background 1.1 At its meeting on October 6, 2025, General Government Committee c onsidered Report CAO‑016‑25, Proposed Municipal Accommodation Tax Program, which provided an overview of the Municipal Accommodation Tax (MAT) framework, including a jurisdictional scan, policy context, and proposed implementation approach. 1.2 Following its review of Report CAO‑016‑25, Council endorsed the proposed Municipal Accommodation Tax and directed staff to undertake additional work to advance the program. The Council directions included:  That the proposed Municipal Accommodation Tax be endorsed;  That staff develop a Municipal Accommodation Tax By-law in accordance with the proposed MAT framework; and  That staff complete a business case to support the implementati on of a tourism‑focused Municipal Services Corporation (MSC). 1.3 The October 2025 report provided Council with a detailed explanation of the MAT, including its purpose, common rates and practices across Ontario, and the provincial regulatory requirements governing MAT revenue allocation. This information remains unchanged and is not repeated here. 1.4 In accordance with Council’s directions, staff have prepared a draft MAT By-law that establishes the structure, administration, collection requirements, exemptions, and compliance mechanisms for the local program. Staff have also completed the business case for a tourism‑focused Municipal Services Corporation, which is required to serve as the eligible tourism entity under Ontario Regulation 435/17. 1.5 This report brings forward both documents for Council’s consideration and provides an overview of the key elements of the draft MAT By-law that will guide the implementation of the Municipal Accommodation Tax in Clarington. Municipality of Clarington Page 4 Report CAO-003-26 2. Overview of Draft Municipal Accommodation Tax (MAT) By- law Purpose and Legislative Authority 2.1 The draft by-law establishes a Municipal Accommodation Tax (MAT) for transient accommodations in Clarington under the authority of s. 400.1 of the Municipal Act, 2001 and Ontario Regulation 435/17 (Transient Accommodation Tax). It sets out the rules for application, exemptions, collection and remittance, enforcement, and administration of the MAT. The by-law is presented to implement Council’s October 2025 direction to prepare a MAT by-law and bring it forward for consideration. Scope of Application and Rate 2.2 The MAT applies to the purchase of transient accommodation of up to twenty-nine (29) consecutive days in an establishment where accommodation is provided, including in cases of cancellation where the purchase price remains payable. The proposed tax rat e is five per cent (5%) of the purchase price, excluding HST, aligning with many other municipalities across Ontario. The “continuous period” rule clarifies that switching rooms/beds within the same establishment does not reset the count. 2.3 To provide regional context, several lower-tier municipalities within Durham Region have established MAT rates in recent years. The City of Oshawa and the Town of Ajax each apply a 5% MAT, while the Town of Whitby and the City of Pickering currently apply a 4% MAT. Staff are aware of ongoing discussions in various Ontario municipalities regarding increasing MAT rates to align with the increasingly common 5% rate. Clarington’s proposed 5% MAT rate is therefore consistent with the prevailing approach within Durham Region and aligns with the rate adopted by many municipalities elsewhere in Ontario. Exemptions 2.4 Exemptions align with provincial practice and comparable municipal by-laws. The MAT does not apply to accommodations provided by:  The Crown and Crown agencies;  School boards, universities, colleges and specified post‑secondary institutions;  Public and private hospitals, long‑term care homes, retirement homes, homes for special care, and hospices;  Treatment centres supported under the Ministry of Community and Social Service s Act;  Houses of refuge or lodging for the reformation of offenders; Municipality of Clarington Page 5 Report CAO-003-26  Charitable or non‑profit emergency shelters, and rooms used by the Municipality, the Regional Municipality of Durham, or their service providers for shelter purposes in hotels/motels.  Hospitality rooms used for meetings, displays, or entertaining;  Group bookings with contracts entered into prior to the effective date;  Campgrounds, tourist camps, trailer parks, including Non‑Serviced Roofed Accommodation within such facilities;  Non‑Serviced Roofed Accommodation in any location;  Employers providing accommodation to their employees in premises operated by the employer; and  Traditional Bed & Breakfast (B&B) establishments that meet the eligibility criteria in Section 3.2 of the draft by-law (see 2.4 below) Traditional Bed and Breakfast (B&B) Exemption (Eligibility Based) 2.5 The draft by-law includes an eligibility-based exemption for Traditional Bed and Breakfast establishments. This exemption is included because Traditional B&Bs operate very differently from hotels, motels, and commercial short-term rentals such as Airbnb or Vrbo. Traditional B&Bs in Clarington are usually small, owner operated businesses located within a principal residence. Operators live on site during guest stays, offer a home-based hospitality experience, and typically operate with low occupancy levels and limited administrative resources. 2.6 Requiring these small operations to collect, track, and remit the Municipal Accommodation Tax would create an administrative workload that is disproportionate to their size and revenue. Hotels and motels already maintain the type of financial and occupancy records required for MAT compliance, and short-term rental platforms provide automated systems for collecting and separating tax amounts on behalf of hosts. Traditional B&Bs do not have these systems, and imposing the same administrative expectations on them would create an unnecessary burden and potentially discourage the continued operation of these small businesses. The exemption therefore supports these local operators and ensures the MAT program is implemented in a fair and proportional way. 2.7 To qualify for this exemption, a Traditional Bed and Breakfast establishment must:  Meet the applicable zoning definition under By-law 84-63 or hold legal non-conforming status.  Operate within the operator’s principal residence, with the operator or designated staff living on the property during all guest stays.  Provide breakfast as part of the accommodation, either as a hot meal prepared and served by the operator or as perishable ingredients supplied for guests to prepare a hot breakfast. Public health requirements apply where mandated. Municipality of Clarington Page 6 Report CAO-003-26  Offer a direct booking method, such as telephone, email, or an operator maintained website, in addition to any third-party platform listings.  Maintain private liability insurance for the accommodation operation, obtained directly by the operator, and provide proof to the Municipality upon request. 2.8 A list of pre‑approved Traditional Bed and Breakfast establishments will b e included within the final by-law. This list will be based on direct engagement with known B&B operators to confirm that they meet the eligibility criteria. All other operators may apply for the exemption by demonstrating compliance with the criteria. The list included at the time of enactment will reflect the operators that have been verified through this process, and it may expand over time as additional eligible establishments apply. Collection and Remittance 2.9 Providers are required to collect the MAT at the time accommodation is purchased and show the MAT as a separate line item on invoices or receipts. Hotels, motels, and other traditional accommodation providers must remit collected MAT on a monthly basis by the fifteenth (15th) day of the following m onth. Short‑term rental operators who use platforms such as Airbnb or Vrbo must remit on a quarterly basis, also by the fifteenth (15th) day following the end of each quarter. Providers must submit accompanying statements in a format determined by the Municipality or its collection agent, outlining booked nights, amounts charged, MAT collected, and any other required information. Accommodation providers will be provided training on how to collect and remit prior to MAT implementation. Delegation of Authority 2.10 If Council approves the recommendations in this report, the Treasurer would be authorized to administer and enforce the by‑law, including approvals, appeals, enforcement actions, and the issuance of interpretation guidelines. 2.11 Subject to Council’s approval, the Director of Economic Development would be authorized to enter into agreements with an eligible tourism entity to ensure that MAT revenues are used for tourism‑related purposes in accordance with provincial requirements. These delegations support efficient administration and timely implementation. Interest, Fees, and Liens 2.12 The Treasurer may apply interest of 1.25 per cent per month on late or outstanding MAT amounts. Additional fees apply for dishonoured payments in accordance with the Municipality’s User Fee By-law. Past‑due MAT, including interest and penalties, may be added to the tax roll of any property owned by the provider and collected in the same manner as property taxes, though without priority lien status. Municipality of Clarington Page 7 Report CAO-003-26 Audit, Inspection, and Record-Keeping Requirements 2.13 Providers must maintain books and accounts sufficient to verify MAT collection and remittance for a minimum of seven (7) years. Providers must permit audits and inspections by the Municipality and must answer questions, provide documents, and make records available upon request. Providers are prohibited from falsifying, altering, destroying, or concealing documents related to MAT reporting. Assessment, Reassessment, and Refunds 2.14 The Treasurer may determine or reassess MAT amounts owing if a provider has not remitted as required. Assessments may be issued within three years of the date the MAT was due, with no time limit in cases involving misrepresentation or fraud. Refunds may be issued where MAT has been remitted in error, provided an appl ication is submitted within twenty‑four months. Offences and Penalties 2.15 The by-law establishes offences for non‑compliance, including failure to remit MAT, providing false information, obstructing audits, or attempting to evade the tax. Penalties include fines for first and subsequent offences, continuing offences, and multiple offences, consistent with ranges used by other Ontario municipalities. Effective Date and Short Title 2.16 The by-law may be cited as the Municipal Accommodation Tax By-law and is proposed to take effect on July 1, 2026. The effective date is intended to provide sufficient time between Council endorsement and implementation to train accommodation providers on how to collect and remit the MAT, and to complete onboarding with the designated tax collection agent. The effective date may be adjusted by Council based on implementation requirements and coordination with the collection agent. 3. Stakeholder Engagement 3.1 To support the development of the draft Municipal Accommodation Tax By-law, staff carried out focused stakeholder engagement with accommodation providers and industry partners. Economic Development staff visited all of Clarington’s hotels and motels on site to inform them of the proposed MAT, answer questions, and encourage participation in the online survey hosted through Clarington Connected. 3.2 Staff also worked with short-term rental platforms, including Airbnb and Vrbo, to ensure that hosts in Clarington received consistent information about the MAT and knew how to access engagement materials and provide feedback. Municipality of Clarington Page 8 Report CAO-003-26 3.3 Traditional Bed and Breakfast operators were engaged directly to discuss their unique operating contexts and to review and comment on the draft exemption criteria. Their feedback helped refine the eligibility-based exemption included in the by-law. 3.4 In addition to direct outreach, staff reviewed feedback collected through the online survey. Input from survey respondents and accommodation operators helped shape the clarity, structure, and administrative requirements of the draft b y-law. 3.5 To ensure alignment with best practices, staff also connected with several Ontario municipalities that have already implemented a Municipal Accommodation Tax. In addition, staff worked closely with the Ontario Restaurant, Hotel and Motel Association, which serves as the MAT collection agent for many municipalities and provided valuable insight into program administration and implementation considerations. 4. Overview of Tourism Municipal Services Corporation (MSC) Business Case Study Purpose and Regulatory Context 4.1 The Business Case Study has been prepared in accordance with Section 6 of Ontario Regulation 599/06 under Section 203(4) of the Municipal Act, 2001. It evaluates the establishment of a not‑for‑profit Municipal Services Corporation to act as Clarington’s Eligible Tourism Entity for the purposes of receiving and investing MAT revenues, as required by Ontario Regulation 435/17. Mandate and Role 4.2 The proposed Corporation will promote tourism and lead tourism product development initiatives in Clarington. It will use MAT revenues to deliver destination marketing, product development, and visitor experience initiatives, including placemaking enhancements that directly support the visitor experience, coordinated with municipal economic development priorities. A proposed Tourism Development Officer funded by the municipal portion of MAT revenue would support implementation and coordination with the Corporation’s board. Governance Approach 4.3 The Corporation would be incorporated under the Not ‑for‑Profit Corporations Act, 2010. An interim set of incorporators would guide incorporation and foundational documents, followed by the appointment of a term‑based Board of Directors. Council, as the sole voting member, would select and elect the Board and receive regular reporting. Detailed recommendations on composition, by‑laws, accountability agreement, and related policies will return to Council. Municipality of Clarington Page 9 Report CAO-003-26 Funding and Use of MAT Revenues 4.4 Under Ontario Regulation 435/17, the Municipality is required to provide 50 per cent of Municipal Accommodation Tax revenues, less the Municipality’s reasonable costs of collecting and administering the tax, to an Eligible Tourism Entity. The proposed Municipal Services Corporation would therefore receive this portion of MAT revenues to support its tourism promotion mandate. The Municipality intends to establish a dedicated MAT Reserve to receive its share of revenues. 4.5 One potential use of the municipal portion that staff may explore in future is the establishment of a Tourism Development Officer position to support the work of the Corporation and advance Clarington’s tourism objectives. Should Cou ncil wish to consider this option, staff would bring forward a formal proposal as part of the 2027 budget process, with funding to be drawn from the municipal share of MAT revenues. 4.6 The Corporation’s share of MAT revenues will be directed toward implementing tourism initiatives, including marketing, partnerships, and product development. The Ontario Restaurant, Hotel & Motel Association (ORHMA) is contemplated as the collection agent that would remit MAT revenues to the Municipality, after which the required allocation would be transferred to the Corporation. 4.7 In the initial implementation period, the Municipality will collect MAT and allow the MAT Reserve to build while the Corporation is being established, with 50 per cent of net MAT revenues transferred to the eligible tourism entity no later than 60 days after the end of the fiscal year, in accordance with Ontario Regulation 435/17. Financial Estimates and Tools 4.8 The Business Case Study outlines preliminary revenue estimates for the Municipal Accommodation Tax (MAT) based on projected occupancy levels and MAT rate assumptions. These estimates demonstrate that MAT revenues will provide a sustainable source of funding to support both municipal and tourism ‑focused initiatives once the program is operational. 4.9 To support the legal incorporation and initial setup of the tourism ‑focused Municipal Services Corporation (MSC), staff are recommending that Council approve a one ‑time start‑up loan of $15,000, as reflected in the recommendation section of this report. This loan will fund necessary expenses such as legal incorporation fees, corporate by‑law development, policy and governance documents, and initial administrative tools required for the Corporation to become operational. The loan will be repaid through the MSC’s future share of MAT revenues, consistent with the requirements of Ontario Regulation 435/17. Municipality of Clarington Page 10 Report CAO-003-26 4.10 The Corporation will maintain an operating budget and a discretionary reserve and will present audited financial statements at its Annual General Meeting to en sure transparency, accountability, and appropriate oversight of MAT revenues. Accountability and Reporting 4.11 The Corporation will operate transparently and report to Council at least annually, outlining activities undertaken and the use of MAT revenues. A financial accountability agreement with the Municipality will ensure compliance with provincial requirements and alignment with municipal priorities. Rationale in Brief 4.12 Creating a tourism‑focused MSC satisfies the provincial requirement for an Eligible Tourism Entity, provides a clear and accountable structure for MAT investment, and enables timely, locally responsive tourism initiatives that support economic development in Clarington. 5. Implementation Plan & Next Steps 5.1 Subject to Council approval of this report’s recommendations, staff will undertake the following steps to implement the Municipal Accommodation Tax (MAT) and establish the tourism‑focused Municipal Services Corporation (MSC):  Execute the MAT collection agreement with ORHMA.  Implement the MAT By‑law upon adoption and coordinate the onboarding and training of accommodation providers (including STR providers) in advance of the effective date, including training delivered through ORHMA.  Publish a MAT webpage with FAQs and operator guidance in advance of the effective date.  Operationalize the Traditional B&B exemption by vetting and publishing the initial pre‑approved list and providing a simple application path for other eligible establishments.  Obtain the required consent of the Regional Municipality of Durham to incorporate the MSC, pursuant to Section 11(4) of the Municipal Act, 2001.  Complete incorporation activities for the MSC: conduct the corporate name search, file articles of incorporation, and prepare initial corporate by‑laws and foundational governance documents. Some documents may be prepared by external legal counsel, funded through the approved $15,000 start‑up loan.  Open a dedicated MSC bank account through the Finance Department to support initial operations and financial controls. Municipality of Clarington Page 11 Report CAO-003-26  Establish the MAT Reserve Fund and bring forward a MAT Reserve Fund Policy for Council consideration, consistent with the revenue allocation framework under O. Reg. 435/17.  Prepare the required agreements between the Municipality and the MSC (e.g., financial accountability agreement under O. Reg. 435/17), engaging external legal support where appropriate.  Recruit and bring forward a term‑based Board of Directors and remaining governance particulars (e.g., corporate by‑laws, accountability agreement, asset transfer policy) for Council approval.  Bring forward, as part of a future budget process, any recommended municipal staffing required to support the Corporation and the administration of the MAT.  Report back to Council in Q4 2026 on program implementation, initial MAT collections, and the status of MSC setup. 6. Financial Considerations MAT Revenue Estimates and Required Allocation 6.1 Based on projected hotel and motel occupancy rates of 50 to 75 per cent, the Municipal Accommodation Tax (MAT), applied at a rate of five per cent, is estimated to generate between $428,364 and $642,546 in total annual gross revenue for the program. Under Ontario Regulation 435/17, at least 50 per cent of net MAT revenues (after reasonable administration and collection costs) must be transferred to the Eligible Tourism Entity, meaning the Municipality will retain approximately half of the total revenue. These estimates are based on the Business Case Study for the Tourism Municipal Services Corporation (Attachment 2) and do not yet include additional MAT revenues anticipated from short‑term rental accommodations (e.g., Airbnb, Vrbo) or any potential additions to Clarington’s hotel/motel inventory. 6.2 To support implementation and provide a transparent mechanism for revenue management, staff propose to establish a dedicated Municipal Accommodation Tax (MAT) Reserve Fund, housed within the Economic Development budget. The Reserve will receive the Municipality’s share of MAT revenues and may be used to support tourism‑related initiatives, including the potential funding of a full‑time Tourism Development Officer whose role would support the workplan of the proposed tourism‑focused Municipal Services Corporation (MSC). During the MSC incorporation period, all MAT revenues will be held in the Reserve. Transfers to the MSC will occur no later than 60 days after the end of the fiscal year, as required by Ontario Regulation 435/17. Municipality of Clarington Page 12 Report CAO-003-26 ORHMA Collection Costs 6.3 As identified in Report CAO‑016‑25, staff recommend engaging the Ontario Restaurant, Hotel & Motel Association (ORHMA) as the Municipality’s MAT collection partner. ORHMA provides centralized remittance services to over 30 municipalities and supports implementation through municipal staff training, provider onboarding, by‑law review, and data reporting. 6.4 Associated costs include:  A one-time setup fee of $3,000 to onboard the Municipality; and  Ongoing collection fees of 1.8% of MAT collected from hotels and motels; and  Ongoing collection fees of 5% of MAT collected from short-term rentals. 6.5 These percentage‑based fees are deducted from gross MAT collections before the net amount is remitted to the Municipality. For example, $400,000 in hotel/motel MAT revenue would generate approximately $7,200 in ORHMA fees. Given the cost‑effective nature of this model and the lack of internal capacity to deliver these services more efficiently, staff recommend partnering with ORHMA for MAT collection. Tourism Municipal Services Corporation (MSC) Start-Up Costs 6.6 To support the legal incorporation and initial setup of the tourism ‑focused Municipal Services Corporation, staff are requesting Council approval for a one ‑time start‑up loan of $15,000, as outlined in the Business Case Study. This loan is proposed to be funded from the Economic Development Reserve Fund, and will provide resources for incorporation fees, external legal review, the drafting of foundational governance documents, and initial administrative tools or systems not otherwise available through the Municipality. 6.7 This amount is consistent with costs incurred by comp arator municipalities, including the Town of Whitby, which reported similar legal and start‑up expenses during its establishment of the Whitby Tourism Development Corporation. The loan will be repaid through the Corporation’s future share of MAT revenues, ensuring no impact to the municipal tax levy and aligning with the revenue allocation framework required under Ontario Regulation 435/17. Overall Financial Impacts 6.8 There are no direct impacts on the municipal tax levy resulting from the approval of this report. The $3,000 one‑time ORHMA setup fee required to onboard the Municipality will be funded through the Economic Development Reserve Fund, as outlined in Report CAO‑016‑25. Ongoing ORHMA collection fees, along with other MAT administration costs, will be funded directly through MAT revenues. If Council approves the Municipality of Clarington Page 13 Report CAO-003-26 recommended $15,000 start‑up loan to support incorporation of the tourism‑focused Municipal Services Corporation, that loan would be repaid through the Corporation’s future share of MAT revenues, consistent with the revenue allocation requirements set out in Ontario Regulation 435/17. 7. Strategic Plan 7.1 This report supports Priority G.1.2: Continue to support business and industry to thrive by providing a direct funding source to support Clarington’s tourism industry and tourism businesses. 8. Climate Change Not Applicable. 9. Concurrence This report has been reviewed by the Deputy CAOs for both the Finance and Technology Department and the Legislative Services who concur with the recommendations. 10. Conclusion 10.1 The draft Municipal Accommodation Tax By‑law and the Tourism Municipal Services Corporation Business Case Study presented through this report complete the work directed by Council in October 2025 to advance a local Municipal Accommodation Tax program. Together, these documents establish the administrative, financial, and governance framework required for implementation, ensuring the MAT program is compliant with provincial legislation and aligned with Clarington’s economic development objectives. 10.2 The proposed approach provides a clear structure for MAT collection, remittance, and oversight; introduces an exemption for Traditional Bed and Breakfast establishments that reflects local operating contexts; and outlines the mechanism through which MAT revenues will support tourism promotion through a dedicated Municipal Services Corporation. Subject to Council’s endorsement of the recommendations contained in this report, staff will proceed with the next steps required to prepare for program launch and support the orderly implementation of the Municipal Accommodation Tax in Clarington. It is respectfully recommended that the report be received and it’s recommendations be approved. Municipality of Clarington Page 14 Report CAO-003-26 Staff Contact: Paul Pirri, Director, Economic Development, Ppirri@Clarington.net Glen Macfarlane, Economic Development Officer, Gmacfarlane@Clarington.net Attachments: Attachment 1 – Draft Municipal Accommodation Tax (MAT) By-law Attachment 2 – Tourism Municipal Services Corporation (MSC) Business Case Study Interested Parties: The following interested parties will be notified of Council's decision:  Ontario Restaurant, Hotel & Motel Association (ORHMA)  Regional Municipality of Durham  Clarington hotels and motels  Known traditional Bed & Breakfast establishments  Short-term rental platforms including Airbnb, Vrbo, and Booking.com Attachment 1 to Report CAO-003-26 If this information is required in an alternate format, please contact the Accessibility Coordinator at 905-623-3379 ext. 2131. The Corporation of the Municipality of Clarington By-law YYYY-NN Being a By-law to establish a Municipal Accommodation Tax. Whereas Subsection 400.1(1) of the Municipal Act, 2001, S.O. 2001, c. 25 (“Municipal Act”) as amended, authorizes a local municipality, by by-law, to impose a direct tax in respect of the purchase of transient accommodation in the municipality; and, Whereas pursuant to section 400.1 of the Municipal Act and Ontario Regulation 435/17 (Transient Accommodation Tax) under the Municipal Act, the Council of the Corporation of the Municipality of Clarington (“Council”) wishes to establish a municipal accommodation tax to be levied on the purchase of transient accommodation within the Municipality of Clarington; and, Whereas pursuant to subsection 400.1(3) of the Municipal Act, Council may establish and use such enforcement measures as Council considers appropriate if an amount assessed for outstanding tax, penalties or interest remains unpaid after it is due ; and, Whereas Council has adopted the recommendations contained in Staff Report LLL- NNN-YY; Now therefore the Council of the Corporation of the Municipality of Clarington enacts as follows: 1. Definitions 1.1. For the purposes of this By-law, unless stated otherwise or the context requires a different meaning: a. “Accommodation” means Lodging, and the right to use Lodging, that is provided for consideration, whether or not the Lodging is actually used ; b. “Books and Accounts” includes books, accounts, bills, receipts, invoices, financial statements, and records in any format; c. “By-law” means this by-law and any amendments made thereto, including schedules; d. “Council” means the Council of the Municipality of Clarington; e. “Director of Economic Development” means the Municipality’s Director of Economic Development, or their designate. f. “Eligible Tourism Entity” has the meaning given to it in Ontario Regulation 435/17, as amended; g. “Establishment” means the physical location, a building or part of a building that provides Accommodation; h. “Lodging” includes: i. the use of a bedroom, a suite of rooms containing a bedroom, or the use of a bed within a bedroom, domicile, or other physical location; and, ii. the use of one or more additional beds or cots in a bedroom or suite; i. “Multiple Offence” means an offence in respect to two (2) or more acts or omissions each of which separately constitutes an offence and is a contravention of the same provision of this By-law; j. “Municipal Accommodation Tax” means the tax imposed under this By- law; k. “Municipal Solicitor” means the Deputy CAO, Legislative Services/Solicitor, or their designate; l. “Municipality” means the Corporation of the Municipality of Clarington, or its geographical area, as the context requires; m. “Non‑Serviced Roofed Accommodation” means a roofed structure intended for temporary overnight stays that does not have both continuous electricity and potable running water. Non‑Serviced Roofed Accommodations are not considered Accommodation under this By-law. n. “Person” includes an individual, a corporation, a partnership, a sole proprietorship, a trust, a joint venture, an association or any other organization or entity of any kind and their respective heirs, executors, administrators, successors, assigns or other legal representatives of a person to whom the context can apply according to law; o. “Provider” means a Person who sells, offers for sale, or otherwise provides Accommodation, and includes agents, hosts or any others who sell, offer for sale or otherwise provide Accommodation. Where a Provider cannot be easily determined, the owner of a property providing Accommodation is deemed to be the Provider; p. “Purchase Price” means the price for which Accommodation is purchased, including the price paid and other consideration accepted by the Provider in return for the Accommodation provided, including all fees and surcharges for additional occupants and beds, but does not include the harmonized sales tax imposed by the Government of Canada or by the Province of Ontario; q. “Purchaser” means a Person who purchases Accommodation; r. “Treasurer” means the Deputy CAO, Finance and Technology/Treasurer, or their designate. 2. Application 2.1. Subject to the exemptions set out in section 3 of this By-law, a Purchaser shall, at the time of purchasing Accommodation, pay the Municipal Accommodation Tax in the amount of five per cent (5%) of the Purchase Price of Accommodation provided for a period of twenty-nine (29) consecutive days or less in an Establishment where Accommodation is provided, including in the event of cancellation where the Purchase Price is payable. For greater certainty, the continuous period is not disrupted by the purchase of different rooms, suites, beds, or other Lodging in the same Establishment in the course of the continuous period. 3. Exemptions 3.1. The Municipal Accommodation Tax does not apply to Accommodation provided by: a. the Crown, every agency of the Crown in right of Ontario, and every authority, board, commission, corporation, office or organization of persons a majority of whose directors, members or officers are appointed or chosen by or under the authority of the Lieutenant Governor in Council or a member of the Executive Council; b. every board as defined in subsection 1(1) of the Education Act; c. every university in Ontario and every college of applied arts and technology and post-secondary institution in Ontario whether or not affiliated with a university, the enrolments of which are counted for purposes of calculating annual operating grants entitlements from the Crown; d. every hospital referred to in the list of hospitals and their grades and classifications maintained by the Minister of Health and Long-Term Care under the Public Hospitals Act and every private hospital operated under the authority of a license issued under the Private Hospitals Act; e. every long-term care home as defined in subsection 2(1) of the Fixing Long- Term Care Act, 2021 and every hospice; f. Any retirement home as defined in the Retirement Home Act, 2010; g. Any home for special care within the meaning of the Homes for Special Care Act; h. a hotel or motel used by the Municipality, Regional Municipality of Durham or its service providers for shelter purposes; i. a treatment centre that receives private funding or provincial aid under the Ministry of Community and Social Services Act; j. a house of refuge or Lodging for the reformation of offenders; k. a charitable, non-profit philanthropic corporation organized as shelter for the relief of the poor or for emergency; l. a tent or trailer site supplied by a campground, tourist camp or trailer park, including any Non-Serviced Roofed Accommodation located within such facilities; m. Non-Serviced Roofed Accommodations, regardless of location. n. employers to their employees in premises operated by the employer; o. a hospitality room in an establishment that may or may not contain a bed and is used for displaying merchandise, holding meetings or entertaining; or, p. group bookings with contracts that are entered into prior to the date that this By-law takes effect. q. traditional Bed & Breakfast Establishments, subject to the eligibility criteria set out in Section 3.2. 3.2. To qualify as a Traditional Bed & Breakfast Exemption, the following shall apply: a. The Establishment complies with Zoning By‑law 84‑63 or 2005-109 (“Zoning By-laws), as amended or replaced from time to time, including any provisions related to the use of the property as a Bed & Breakfast as defined in the applicable Zoning By-law; b. The Establishment is operated within the operator’s principal residence, and the operator (or designated staff) resides on the property during all guest stays; c. A breakfast is included as part of the accommodation experience, consisting of either a hot meal prepared and served by the operator, or perishable ingredients supplied for guests to prepare a hot breakfast themselves. Only breakfasts requiring cooking or refrigeration qualify for this exemption; pre‑packaged or shelf‑stable snacks do not. Health inspections are required only where mandated by the Durham Region Health Department. d. The Establishment provides guests with a method to book directly with the operator (including but not limited to telephone, email, or an operator‑maintained website), demonstrating that it operates as a traditional small-business Bed & Breakfast rather than exclusively through online travel platforms; e. The Establishment maintains private liability insurance for the accommodation operation, obtained directly by the operator and not through a short‑term rental platform or other third‑party intermediary. Proof of insurance shall be provided to the Municipality upon request ; f. The Establishment must be included in the Traditional Bed & Breakfast Registry maintained by the Director of Economic Development. 3.3. The Schedule shall be maintained by the Director of Economic Development and updated administratively as Establishments are verified, added, or removed based on compliance with subsection 3.2. 3.4. At the discretion of the Director of Economic Development, an Establishment may be added to the Traditional Bed & Breakfast Registry if the Establishment has demonstrated compliance with section 3.2. 4. Collection and Remittance 4.1. A Provider shall collect the Municipal Accommodation Tax from the Purchaser at the time the Accommodation is purchased. 4.2. A Provider shall identify the amount of the Municipal Accommodation Tax as a separate item on a bill, receipt, invoice or similar document issued by the Provider in respect of the Accommodation on which the tax is imposed and shall identify the item as “Municipal Accommodation Tax”. 4.3. A Provider shall be responsible for the collection and remittance of HST directly to the Government of Canada and/or the Province of Ontario. 4.4. A Provider operating a hotel, motel, or other traditional accommodation shall, on or before the fifteenth (15th) day of the month, remit to the Municipality, or its tax collection agent, the amount of the Municipal Accommodation Tax collected for the previous month and shall submit monthly statements in a form required by the Municipality which details the number of Accommodations sold, the Purchase Price of each Accommodation, the amount of the Municipal Accommodation Tax collected and any other information as required by the Municipality for the purposes of administering and enforcing this By-law. 4.5. A Provider offering short-term accommodations through platforms such as Airbnb, Vrbo, or similar services shall remit the Municipal Accommodation Tax on a quarterly basis. Remittance shall be made to the Municipality, or its tax collection agent, on or before the fifteenth (15th) day of the month following the end of each calendar quarter. Specifically, remittances shall be due on April 15 for the first quarter (January 1 to March 31), July 15 for the second quarter (April 1 to June 30), October 15 for the third quarter (July 1 to September 30), and January 15 for the fourth quarter (October 1 to December 31). The Provider shall also submit a quarterly statement, in a form required by the Municipality, detailing the number of nights booked, the total amo unt charged to guests for the accommodations, the amount of Municipal Accommodation Tax collected, and any other information required by the Municipality for the purposes of administering and enforcing this By-law. 5. Delegation of Authority 5.1. The Treasurer is authorized to administer and enforce this By-law, including but not limited to approvals, appeals, enforcement, collection, and for instructing legal counsel to take such legal action as may be considered appropriate. 5.2. In administering this By-law, the Treasurer, or their designate, may issue interpretation bulletins and guidelines as deemed necessary or advisable from time to time. 5.3. The Director of Economic Development, or their designate, is delegated the authority to enter into agreements, including all necessary documents ancillary thereto, with an Eligible Tourism Entity(ies) that receives an amount of the Municipal Accommodation Tax, respecting reasonable financial accountability matters, in order to ensure that the amount paid to the entity is used for the exclusive purpose of promoting tourism in Clarington, and the agreements may provide for other matters, all in a form satisfactory to the Municipal Solicitor. 6. Tax Collection Agent 6.1. The tax collection agent for the Municipality under this By-law is the Person who is designated in an agreement with the Municipality to collect the Municipal Accommodation Tax as an agent for the Municipality. 6.2. The Director of Economic Development in consultation with the Treasurer, may designate additional tax collection agents for the Municipality and is delegated the authority to enter into agreements with such designated tax collection agents. 6.3. The tax collection agent(s) shall collect and administer the Municipal Accommodation Tax as an agent for the Municipality in accordance with this By- law and the agreement between the Municipality and that tax collection agent. 7. Interest and Fees 7.1. The Treasurer may impose a monthly interest charge of one and one-quarter per cent (1.25%) of the Municipal Accommodation Tax that remains outstanding, beginning on the day after the tax payment is due and on the sixteenth day of each month thereafter, until the Municipal Accommodation Tax, including all charges and interest owing, is paid in full. 7.2. If the amount of Municipal Accommodation Tax owed to the Municipality cannot be determined, the interest charge of 1.25% would be based on the full occupancy of the Establishment. 7.3. The Treasurer shall charge a fee for all payment remittances that are not honoured by the financial institution upon which it is drawn in an amount as set out in the Municipality’s User Fee By-Law 2023-044, as amended. 8. Liens 8.1. All Municipal Accommodation Tax, interest, and penalties that are past due will be deemed to be in arrears and may be added to the tax roll for any real property in the Municipality of Clarington that is registered in the name of the Provider to be collected in the same manner as property taxes and will constitute a lien upon the lands, but such lien will not be a priority lien for the purposes of subsections 1(2.1), (2.2) and (3) of the Municipal Act and such lien will not have a higher priority than it would otherwise have in law in relation to other claims, liens or encumbrances. 9. Audit and Inspection 9.1. A Provider shall keep all Books and Accounts that are sufficient to furnish the Municipality, or its representative, with the necessary particulars of sales of Accommodations and the amount of the Municipal Accommodation Tax collected, payable and remitted, for no less than seven (7) years from the date of the sale of the Accommodation. 9.2. A Provider shall permit the Municipality, or its representative, at all reasonable times, entry into any premises where any business is carried on, where any property is kept, where anything is done in connection with any business, or where any Books and Accounts are or should be kept and shall permit the Municipality or its representative to audit and inspect all Books and Accounts of the Provider. A Provider shall produce copies of any Books and Accounts that may be required by the Municipality or its representative for the purposes of administering and enforcing this By-law. 9.3. A Provider shall: a. give the Municipality or its representative all reasonable assistance with the audit or inspection; b. answer all questions relating to the audit or inspection either orally or, if the Municipality requires, in writing, on oath or by statutory declaration; and, c. attend at the premises with the Municipality or its representative for the purposes of giving reasonable assistance and answering questions relating to the audit or inspection. 9.4. A Provider shall comply with a written demand from the Municipality or its representative for information or for the production on oath or otherwise of any Books and Accounts as the Municipality or its representative considers necessary to determine compliance with this By-law. A Provider in receipt of such a demand shall comply with the demand within the time specified in the demand. 9.5. No Person shall make, participate in, assent to or contribute to the making of false or deceptive statements or entries in a report, statement, form, Books and Accounts, or other document that is prepared, submitted or filed under or for the purposes of the By-law. 9.6. No Person shall destroy, alter, mutilate, hide or otherwise dispose of any Books or Accounts in order to evade payment or remittance of any amounts owing under this By-law. 10. Determination of Amount 10.1. The Treasurer may determine an amount of the Municipal Accommodation Tax that is required to be remitted, together with any interest imposed upon any Municipal Accommodation Tax that is outstanding, if a Provider who is responsible for the payment or remittance of the Municipal Accommodation Tax fails to pay or remit as required by this By-law. 10.2. The Treasurer may assess or reassess for any Municipal Accommodation Tax that is payable by the Provider within three (3) years from the day the Municipal Accommodation Tax was remittable, except that where the Treasurer establishes that a Provider has made any negligent or wilful misrepresentation or has committed any fraud in supplying, or omitting to supply, any information under this By-law, then the Treasurer may assess or reassess, for any time that the Treasurer considers reasonable, the Municipal Accommodation Tax payable. 10.3. A Provider shall pay the amount of the Municipal Accommodation Tax and any interest set out in the notice of calculation made unde r this section 10 of this By- law within thirty (30) days from the date of mailing of the notice of calculation. 10.4. Liability to pay an amount is not affected by an incorrect or incomplete assessment or by the fact that no assessment has been made. 10.5. The Municipality is not bound by any information delivered by or on behalf of a Provider responsible for the payment of tax and may, notwithstanding any information that has been delivered or if no information has been delivered, assess the tax payable. 10.6. This calculation, subject to being varied or adjusted due to an objection or appeal and subject to a recalculation, shall be deemed to be valid and binding despite any error, defect or omission in the assessment or in any proceeding related to it. 11. Refunds 11.1. Where a Provider has paid or remitted an amount not payable under this By-law, the Municipality may, upon receipt of satisfactory evidence, determine that the amount was wrongly paid or remitted. If such a determination is made, the Municipality shall refund or credit all or part of the amount. However, no refund shall be issued unless an application for refund is submitted within 24 months of the payment date. 11.2. Where a Provider has applied for a refund in accordance with this By-law, and the claim is denied in whole or in part, the Municipality shall deliver to the Provider a statement specifying the denied amount and the reasons for the denial. 12. Offences and Penalties 12.1. Every Person is guilty of an offence under this By-law who: a. makes, participates in, assents to or contributes to the making of false or deceptive statements in a report, statement, form or other document that is prepared, submitted or filed under or for the purposes of this By-law; b. destroys, alters, mutilates, hides or otherwise disposes of any Books and Accounts in order to evade payment or remittance of any amounts owing under this By-law; c. makes, participates in, assents to or contributes to the making of false or deceptive entries, including omitting to enter an entry, in any Books and Accounts; d. hinders, obstructs or interferes with any audit or inspection conducted by the Municipality or its representative under this By-law; e. willfully, in any manner, evades or attempts to evade: I. paying the Municipal Accommodation Tax; II. remitting the Municipal Accommodation Tax; or, III. otherwise complying with this By-law; or, f. conspires with any other Person to commit an offence described in subsections 12.1 (a) through (e) of this By-law. 12.2. Pursuant to the authority established in section 429(2) of the Municipal Act, 2001, S.O. 2001, c. 25, every Person who contravenes any provision of this By- law is guilty of an offence and upon conviction pursuant to Part III of the Provincial Offences Act, R.S.O. 1990, Chapter P.33, as amended, shall be subject to the following penalties: a. upon a first conviction, a fine of not less than $300.00 and not more than $50,000.00 if the Provider is a Person other than a corporation, and not less than $500.00 and not more than $100,000.00 if the Provider is a corporation; b. upon a second or subsequent conviction for the same offence, a fine of not less than $500.00 and not more than $100,000.00; c. upon conviction for a continuing offence, a fine of not less than $500.00 and not more than $10,000.00 for each day or part of a da y that the offence continues and the total of all of the daily fines for the offence is not limited to $100,000.00; and, d. upon conviction for Multiple Offences, for each offence included in the Multiple Offence, a fine of not less than $500.00 and not more than $10,000.00 and the total of all fines for each included offence is not limited to $100,000.00. 13. General 13.1. If any section or portion of this By-law is found by a court of competent jurisdiction to be invalid, illegal, unenforceable or of no force and effect, then it is the intention of Council that all remaining sections and portions of this By-law continue in force and effect to the fullest extent possible according to law. 14. Short Title 14.1. This By-law may be referred to as the “Municipal Accommodation Tax By-law”. 15. Effective Date 15.1. This By-law shall come into force and take effect on July 1, 2026. Passed in Open Council this XX day of MMMM, YYYY. _____________________________________ Name, Mayor _____________________________________ Name, Municipal Clerk By signing this by-law on XXXX XX, YYYY, Mayor ADRIAN FOSTER will not exercise the power to veto this by-law and this by-law is deemed passed as of this date. Business Case Study – Tourism Municipal Services Corporation Prepared according to Section 6 of Ontario Regulation 599/06: Municipal Services Corporations as per section 203(4) of the Municipal Act, 2001, S.O. 2001, c.25 as amended. 1.0 Purpose The Municipality of Clarington is proposing to incorporate a not-for-profit Municipal Services Corporation, tentatively named “Experience Clarington”, to serve as Clarington’s designated Eligible Tourism Entity. This Corporation will be responsible for promoting tourism within Clarington, in accordance with the requirements of Ontario Regulation 435/17. More specifically, the Corporation’s role will be to utilize Municipal Accommodation Tax (MAT) revenues to support tourism promotion activities, which will include destination marketing and the development of tourism products. In accordance with Section 6 of Ontario Regulation 599/06, made under Section 203(4) of the Municipal Act, 2001, this Business Case Study has been prepared to assess the feasibility and benefits of establishing the Corporation. The regulation requires municipalities to adopt such a study prior to exercising their powers to incorporate a Municipal Services Corporation. This document outlines the proposed Corporation’s mandate and strategic objectives, governance structure, funding sources, accountability mechanisms, reporting frameworks, and implementation strategy. The establishment of this Corporation is intended to ensure that MAT revenues are reinvested locally to enhance tourism promotion and economic development in Clarington. 2.0 Defined Terms “Eligible Tourism Entity” is a non-profit entity whose mandate includes the promotion of tourism in Ontario or in a municipality and may include the development of tourism products. “Municipal Accommodation Tax (MAT)” is a tax on the purchase of transient accommodation in the municipality which funds tourism promotion and other projects that will benefit the local economy. “Municipal Services Corporation” is a corporation that is established by a municipality or by a municipality and one or more other public sector entities and whose purpose is to provide a system, service, or thing that the municipality itself could provide. Attachment 2 to Report CAO-003-26 Page 2 “Ontario Restaurant Hotel & Motel Association (ORHMA)” is the largest provincial hospitality association in Canada that represents over 5,000 members and more than 11,000 hospitality establishments across the province. “Transient Accommodation” is accommodation for a continuous period of stay of 29 nights or less; this continuous period is not disrupted by the purchase of different rooms, suites, beds or lodging in the same licensed establishment, such as a hotel, motel or short-term rental. 3.0 Background Tourism provides meaningful contributions to the economic, social, and cultural vitality of communities across Ontario, delivering valuable benefits to local businesses and residents. On December 1, 2017, the Province of Ontario introduced Ontario Regulation 435/17: Transient Accommodation Tax, authorizing municipalities to levy a tax on transient accommodations for the purpose of supporting tourism growth and development within their communities. Under the authority of this regulation, the Municipality of Clarington intends to implement a Municipal Accommodation Tax (MAT) on Transient Accommodations in Clarington, including hotels, motels, and short-term rentals. Ontario Regulation 435/17 requires municipalities to allocate a minimum of 50% of MAT revenues (less the Municipality’s reasonable costs of collecting and administering the tax) to an entity designated as an Eligible Tourism Entity. The Municipality of Clarington does not have its own Eligible Tourism Entity to receive these funds as mandated by the Province of Ontario. To meet this requirement, the Municipality of Clarington intends to incorporate a not-for-profit Municipal Services Corporation to serve as the Eligible Tourism Entity for the purposes of the MAT. The entity will be named “Experience Clarington”, subject to name availability at the time of incorporation. This Business Case Study is presented to fulfill the requirements of Ontario Regulation 599/06. 4.0 Mandate and Objectives 4.1 Context and Rationale Until December 2022 the Municipality of Clarington operated an internal tourism team known as Clarington Tourism. This team was responsible for promoting Clarington as a destination and supporting tourism product development. In early 2023, Clarington Tourism was transitioned into Invest Clarington, which adopted a broader focus on advancing key economic sectors including Future Energy, Agri-Food, Advanced Manufacturing, and Downtime Destinations. Page 3 Although tourism continues to be represented within the Downtime Destinations sector, Clarington no longer has a dedicated group focused solely on tourism promotion and product development. In January 2025, the Municipality adopted a refreshed Economic Development Action Plan to be implemented throughout 2025 and 2026. A key component of this strategy is the implementation of the Municipal Accommodation Tax (MAT), which will serve as the catalyst for re-establishing dedicated tourism support in Clarington. 4.2 Mandate The proposed Municipal Services Corporation will serve as Clarington’s designated Eligible Tourism Entity under Ontario Regulation 435/17. Its mandate is to promote tourism within Clarington using MAT revenues allocated for this purpose. The Corporation will operate independently but in close coordination with the Municipality, ensuring that tourism promotion efforts are aligned with local economic development priorities. It is proposed that the Tourism Development Officer would be a municipal employee funded through the Municipality’s share of MAT revenues. Under this model, the Officer’s primary responsibility would be to support and implement the work of the Corporation, including coordination with the Corporation’s board, execution of strategic initiatives, and facilitation of collaboration across municipal departments and tourism stakeholders. The Corporation will be responsible for developing and executing a comprehensive Tourism Strategy, guiding its activities and investments in tourism promotion, product development, and visitor experience enhancement. 4.3 Strategic Objectives 4.3.1 Guiding Objectives The following guiding objectives will inform the Corporation’s decision-making throughout its lifecycle, regardless of changes in leadership, strategy, or operational priorities: 1. The Corporation will act as the steward and receiver of MAT funds allocated to Clarington’s Eligible Tourism Entity. 2. The Corporation’s activities will be guided by a Tourism Strategy and aligned with Clarington’s broader economic development plans. 3. The Corporation will engage in tourism promotion and tourism product development within Clarington. Page 4 4. The Corporation may serve as a vehicle for distributing tourism-related funding to third parties, where such funding complements but does not replace existing municipal support. 5. The Corporation will report to Council at least annually, or as otherwise stipulated in its by-laws. 6. The Corporation will operate transparently and accountably, with decision- making processes that deliver community-wide benefits. 4.3.2 Operational Objectives To fulfill its mandate, the Corporation will pursue the following operational objectives: 1. Develop and implement a comprehensive Tourism Strategy for Clarington. 2. Promote Clarington as a destination through coordinated marketing and branding initiatives. 3. Support tourism product development and placemaking efforts that enhance visitor experiences. 4. Invest in tourism-related infrastructure and amenities. 5. Build strategic partnerships with local businesses, organizations, and regional tourism bodies. 6. Ensure the responsible and effective use of MAT revenues in accordance with Ontario Regulation 435/17. 5.0 Analysis 5.1 Benefits of a Municipal Services Corporation (MSC) The benefits of the Municipality establishing a Municipal Services Corporation include: 1. Satisfying the Province’s requirement for a non-profit tourism entity to serve as an Eligible Tourism Entity that utilizes a minimum of 50% of MAT revenues; 2. Adopting an MSC model, which provides accountability, corporate responsibility, and reasonable controls through the role of the voting members; 3. Ensuring Council, as sole voting member, will be responsible for selecting and electing the Board of Directors (which will include staff and Council representatives) that establish the governance framework for business plans, expenditures and Corporate policies. Page 5 4. Allowing municipal staff to continue operating within the existing organizational structure, ensuring seamless transition and delivery of tourism initiatives. 5. Providing strategic oversight of MAT spending through an elected Board of Directors, whose decisions will guide the execution of tourism programming and promotional activities. 6. Creating a transparent and accountable mechanism for reporting on the use of MAT revenues to Council, tourism stakeholders and the public. 7. Supporting local economic development by attracting visitors to Clarington, generating direct financial benefits for accommodations, restaurants, event venues, retailers, and cultural organizations. 8. Enhancing placemaking efforts that improve public spaces, support community vibrancy, and create amenities that benefit both visitors and local residents. 9. Enabling the Corporation to operate with the flexibility and responsiveness often required in the tourism sector, allowing for timely decision-making and efficient execution of initiatives that support Clarington’s tourism goals. As Clarington does not currently have a designated Eligible Tourism Entity, establishing a Municipal Services Corporation offers the most effective and locally controlled mechanism for managing and investing MAT revenues in tourism promotion and development. 5.2 Governance Structure and Incorporation To proceed with the establishment of the Municipal Services Corporation, the Municipality must submit an application to the Province to incorporate a not-for-profit corporation under the Not-for-Profit Corporations Act, 2010 (Ontario). The Corporation will be created by way of articles of incorporation which will be drafted with the assistance of the Municipality’s Legislative Services Department and/or external legal support. The application will include the following information: 1. Name of the Corporation: Experience Clarington 2. Address of Head Office: 40 Temperance Street, Bowmanville, Ontario L1C 3A6 3. Incorporators: Staff propose the following positions to be the incorporators who will act as the Interim Board of Directors of the Corporation: • Member of Council, as appointed by the Mayor • Director of Economic Development Page 6 • Deputy CAO, Finance and Technology/Treasurer • Up to two additional municipal staff The Board of Directors will have oversight and critical decision-making roles concerning the operation of the Corporation. Staff will bring a report back to Council with final recommendations regarding the governance structure of the Corporation. This report will include proposed Board composition, organizational by-laws, a financial accountability agreement, asset transfer policy, budget, terms of reference and other foundational elements required to bring the Corporation into full operation. In the interim, the positions listed above will serve as the incorporators and act as the initial Board of Directors, guiding the legal incorporation process and developing the core agreements and policies necessary to establish the Corporation in compliance with provincial regulations. Once the first term-based Board of Directors has been appointed, the incorporators may continue to serve as voting or non-voting members, as determined through the forthcoming governance structure report to Council. Those not serving as voting members may be invited to attend meetings in an advisory capacity to support continuity and provide institutional knowledge during the Corporation’s early stages of operation. 4. Objects of the Corporation include the delivery of, and support for, tourism promotion in Clarington. 5. Special Provisions: • The Corporation is limited to providing services to members of the Corporation on behalf of The Corporation of the Municipality of Clarington in place of the Municipality providing those services. • Directors shall serve without renumeration, and no Director shall directly or indirectly receive any profit from their position as such, provided that a Director may be reimbursed for reasonable expenses incurred in performing their duties. A Director shall not be prohibited from receiving compensation for services provided to the Corporation in another capacity. • Upon the dissolution of the Corporation and after payment of all debts and liabilities, the Corporation’s remaining property shall be distributed, or disposed of, to The Corporation of the Municipality of Clarington. The Corporation’s Articles of Incorporation and By-laws will define its powers, membership structure, and the process for making changes to its governance Page 7 framework, in accordance with the Not-for-Profit Corporations Act, 2010 (Ontario). 5.3 Funding, Budget and Collection of MAT Funds 5.3.1 Financial Impact of the MAT It is anticipated that the Municipal Accommodation Tax (MAT), applied at a rate between 4% and 6%, will generate approximately $342,691 to $771,055 in new annual revenue for the Municipality. These figures are based on projected hotel and motel occupancy rates ranging from 50% to 75%. The total revenue will be split equally between the Municipality and the Municipal Services Corporation, less the Municipality’s reasonable costs for administering and collecting the tax. Notably, these estimates do not yet account for revenue from short-term rental accommodations (e.g., Airbnb, Vrbo), which will also be subject to the MAT once implementation is complete. Appendix A provides a detailed breakdown of MAT revenue scenarios by rate, occupancy level, and associated ORHMA collection costs. 5.3.2 Municipality of Clarington MAT Reserve Fund With the implementation of the Municipal Accommodation Tax (MAT), staff will seek Council approval to establish a dedicated MAT Reserve Fund to receive the Municipality’s portion of MAT revenues. It is proposed that this reserve be housed within the Economic Development budget to ensure alignment with Clarington’s broader economic development objectives. Once the reserve fund has accumulated a sufficient buffer, Economic Development proposes to allocate a portion of the funds toward hiring a full-time Tourism Development Officer. This position will be dedicated to supporting the workplan of the Municipal Services Corporation and advancing Clarington’s tourism objectives. The role is intended to be funded on an ongoing basis through the Municipality’s share of MAT revenues, providing a sustainable source of support for tourism programming and coordination. During the initial implementation period, the Municipality will collect MAT and allow the MAT Reserve to build while the Corporation is being established, with 50 per cent of net MAT revenues transferred to the Corporation no later than 60 days after the end of the fiscal year, in accordance with Ontario Regulation 435/17. 5.3.3 Corporation Annual and Multi-Year Operating Budget The Corporation will be funded from a minimum of 50% of the proceeds of the Municipal Accommodation Tax (MAT) revenues. Similar to the Municipality, the Corporation will establish a discretionary reserve fund to support its operations and strategic initiatives. Page 8 Responsibility for creating and managing both an annual and multi-year operating budget will rest with the Corporation’s Board of Directors. These budgets will guide the Corporation’s investments in tourism promotion, product development, placemaking initiatives, and visitor experience enhancements, as outlined in its strategic plan or workplan. Given that the Municipality intends to use its portion of MAT revenues to fund a full-time Tourism Development Officer, the Corporation’s portion will be primarily directed toward implementing tourism initiatives and programs. Operating costs may include marketing and branding efforts, partnership development, event support, and other contractual or professional services that align with the Corporation’s mandate. The Corporation may also invest in modest capital costs associated with placemaking initiatives, such as enhancements to public spaces, wayfinding, visitor amenities, and other improvements that support both resident and visitor experiences, where such expenditures align with the Tourism Strategy. The Corporation will report audited financial statements at its Annual General Meeting, ensuring transparency and accountability in the use of public funds. 5.3.4 Loan from the Municipality for Startup Costs To support the legal incorporation and initial operations of the Municipal Services Corporation, staff will seek Council approval for a one-time startup loan of $15,000. This loan is intended to cover essential incorporation and startup costs, including legal fees to incorporate the MSC, incorporation filing fees, and any required administrative tools or services not already available through the Municipality. Staff will bring forward a recommended repayment framework for Council’s consideration as part of the MSC implementation report. 5.3.5 Financial Accountability Agreement The Corporation will enter into an agreement with the Municipality respecting reasonable financial accountability matters to ensure the amounts paid to the Corporation are used for the sole purposes of promoting tourism and developing or enhancing tourism products in the Municipality of Clarington. The agreement may also provide for other matters. 5.3.6 Collection of Funds MAT-eligible accommodation providers, including hotels, motels, and short-term rentals, will collect the Municipal Accommodation Tax (MAT) from guests at the time of booking and remit these funds to the Ontario Restaurant Hotel & Motel Association (ORHMA), which will act as the Municipality’s collection agent. Before collections begin, the Municipality will pay ORHMA a one‑time implementation fee of $3,000. Once collections are underway, ORHMA will deduct its ongoing administration fees, which are equal to 1.8 per cent of the MAT collected on hotel and motel accommodations and 5 per cent of Page 9 the MAT collected on short‑term rentals. ORHMA will remit the remaining net proceeds to the Municipality. In accordance with Ontario Regulation 435/17, the Municipality will then remit 50 per cent of the net MAT revenues, after deducting reasonable collection and administration costs, to the Corporation. Detailed rate, occupancy, and fee impact scenarios are provided in Appendix A. 5.4 Accountability and Reporting Upon incorporation, the Corporation will develop a tourism strategy to serve as its guiding document and ensure alignment with Clarington’s Strategic Plan. It is anticipated that reporting to Council by the Corporation would take place at least once a year or as otherwise stipulated in the Corporation’s by-laws. Such report shall inform Council of the tourism activities and promotion undertaken by the Corporation in Clarington and how MAT revenue supported those activities. 6.0 Conclusion This Business Case demonstrates the rationale for establishing a Municipal Services Corporation (MSC) dedicated to promoting tourism in Clarington, in compliance with Ontario Regulation 599/06 and Ontario Regulation 435/17. Creating a tourism-focused MSC will enable the Municipality to allocate 50% of Municipal Accommodation Tax (MAT) revenues to an Eligible Tourism Entity, ensuring these funds are reinvested locally to strengthen tourism promotion and product development. The Corporation will play a critical role in advancing Clarington’s strategic goals, enhancing visitor experiences, and supporting economic growth through a transparent, accountable, and sustainable governance model. Page 10 Appendix A – Municipal Accommodation Tax (MAT) Revenue Scenarios and Collection Cost Analysis To assess the potential financial impact of implementing a Municipal Accommodation Tax (MAT) in Clarington, a preliminary revenue forecast has been developed based on available data for hotel and motel accommodations. This forecast provides a foundational understanding of the revenue-generating potential of the MAT and informs decisions regarding resource allocation and tourism investment. Assumptions The following assumptions were used in the financial model: • Number of hotel and motel rooms = 288 • Average nightly rate = $163 • MAT rate = 4% - 6% • Administrative fee: 1.8% of gross MAT revenue (charged by ORHMA) • Occupancy scenarios = 50% and 75% • Calculation period = 365 days per year Note: This is a preliminary calculation based on Clarington’s current inventory of hotel and motel rooms only. The revenue potential will increase further as short‑term rentals and additional hotel rooms are incorporated into the accommodation inventory. Revenue Calculation Methodology The estimated MAT revenue is calculated using the following formula: Estimated Gross MAT Revenue = (Number of Rooms x Average Nightly Rate x Occupancy Rate x 365 Days) x MAT Rate Net MAT Revenue = Gross MAT Revenue – Administrative Fee (1.8%) Municipality and Tourism Entity Shares = Net MAT Revenue ÷ 2 Revenue Estimates MAT Rate = 4% • 50% Occupancy Gross MAT Revenue = (288 rooms x $163 x 0.50 x 365 days) x 0.04 = $342,691 Page 11 Admin Fee = $342,691 x 0.018 = $6,168 Net MAT Revenue = $342,691 - $6,168 = $336,523 Municipal & Tourism Entity = $336,523 ÷ 2 = $168,261 each • 75% Occupancy Gross MAT Revenue = (288 rooms x $163 x 0.75 x 365 days) x 0.04 = $514,037 Admin Fee = $514,037 x 0.018 = $9,253 Net MAT Revenue = $514,037 - $9,253 = $504,784 Municipal & Tourism Entity = $504,784 ÷ 2 = $252,392 each MAT Rate = 5% • 50% Occupancy Gross MAT Revenue = (288 rooms x $163 x 0.50 x 365 days) x 0.05 = $428,364 Admin Fee = $428,364 x 0.018 = $7,711 Net MAT Revenue = $428,364 - $7,711 = $420,653 Municipal & Tourism Entity = $420,653 ÷ 2 = $210,326.50 each • 75% Occupancy Gross MAT Revenue = (288 rooms x $163 x 0.75 x 365 days) x 0.05 = $642,546 Admin Fee = $642,546 x 0.018 = $11,566 Net MAT Revenue = $642,546 - $11,566 = $630,980 Municipal & Tourism Entity = $630,980 ÷ 2 = $315,490 each MAT Rate = 6% • 50% Occupancy Gross MAT Revenue = (288 rooms x $163 x 0.50 x 365 days) x 0.06 = $514,037 Admin Fee = $514,037 x 0.018 = $9,253 Net MAT Revenue = $514,037 - $9,253 = $504,784 Municipal & Tourism Entity = $504,784 ÷ 2 = $252,392 each • 75% Occupancy Gross MAT Revenue = (288 rooms x $163 x 0.75 x 365 days) x 0.06 = $771,055 Admin Fee = $771,055 x 0.018 = $13,879 Net MAT Revenue = $771,055 - $13,879 = $757,176 Municipal & Tourism Entity = $757,176 ÷ 2 = $378,588 each Page 12 Summary Table MAT Rate 50% Occupancy 75% Occupancy Gross: ORHMA Fee: $6,168 Gross: ORHMA Fee: $9,253 Gross: ORHMA Fee: $7,711 Gross: ORHMA Fee: $11,566 Gross: ORHMA Fee: $9,253 Gross: ORHMA Fee: $13,879 Implications These revenue projections demonstrate the potential for the MAT to generate significant funding to support tourism development and placemaking in Clarington. Even under conservative occupancy assumptions, annual revenues could range from approximately $343,000 to $771,000, depending on the selected tax rate. Half of these funds would be allocated to a dedicated tourism entity, with the remainder retained by the Municipality to support tourism-related staffing and/or programming.