The Town of Osoyoos is stepping away from its role administering local provincial tourism taxes, relinquishing the responsibility to Destination Osoyoos.
Osoyoos Council voted 3-2 Monday to, for all practical purposes, identify the local destination marketing organization as the Town’s “Designated Recipient” for Municipal and Regional District Tax (MRDT) funding, currently a two-percent charge added to sales of short-term accommodations (ie., motel, hotel, resort stays) in the community.
A Designated Recipient is the organization responsible to the Province for looking after MRDT funding within an accommodation area.
“A Designated Recipient can be a municipality, a regional district, or an Eligible Entity,” information provided by DestinationBC indicates. “An Eligible Entity is typically a not-for-profit society such as a Destination Marketing Organization (DMO).”
Previously, Destination Osoyoos was an Eligible Entity — a designation that could also be applied to any local current or future not-for-profit business association “actively engaged in tourism marketing, programs, or projects in the designated accommodation area.”
The decision to promote the DMO to Designated Recipient status came following a report from Town CAO Barry Romanko that suggested the Town relinquishing control of the administrative process in collecting the tax would save Town staff about two days of work each year.
“The associated actions of receiving and providing the funds consumes approximately 16 hours of staff time annually,” he told Council. “Additional time is spent linking with the province to ensure that annual reports are completed on schedule.”
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Mr. Romanko noted the reporting process has become “very encompassing and measurement related.”
He expected the workload to increase with an expected Destination Osoyoos (DO) application to move the MRDT amount collected locally to three percent.
Increasing the amount of MRDT collected to three percent would “equate to approximately $150,000 in additional MRDT funds” — or a 35% increase to the Destination Osoyoos marketing budget — Kelley Glazer, DO’s executive director, writes in a November 1, 2018, letter to Mr. Romanko.
“This change would allow Destination Osoyoos to more efficiently manage its budget as the funds would be received directly and on schedule,” she writes in the letter.
Coun. Jim King expected the increase would provide Destination Osoyoos “more than half a million” in MRDT funding once it was implemented.
Council will retain some input on DO decision-making.
The change is included in a Destination Marketing Agreement delivered to Council Monday that begins January 1, 2019, and runs through December 31, 2023.
The agreement requires the Society to “use the Tax Funds solely for the purposes outlined in the Work Plans approved by the Town” and stipulates the funds will not be used:
- to provide any direct or indirect funding or assistance to a business;
- to pay any officer, director, employee, contractor or agent of the Society (except to the extent necessary to carry out the purposes outlined in the Work Plans); or
- as a form of security for any liabilities or obligations of the Society but may include the purchase of any insurance necessary and/or desirable to carry out the Work Plan.
An annual work plan would be delivered to the Town for approval no later than November 30 of each year.
Another agreement also approved by Council Monday will allow Town representatives to function as voting members of the DO Board — and provide some oversight to DO decision-making, including its use of MRDT funding.
“Previous municipal conflict of interest legislation didn’t allow for Council representative voting members,” reported Mr. Romanko. “Current legislation allows Council appointed board members to vote on board matters and continue the information conduit function.”
Mr. Romanko also noted the Town is protected by a termination clause, although he conceded the Town would be “out of the loop” through the year — even as DO received regular payments from the province.
That appeared to be important to at least two councillors — Coun. King and Coun. CJ Rhodes — who both voted against entering into the agreement.
“When it comes to taxation and dollars and how it flows from one level of government to another, I always have a higher level of comfort when it’s filtered through the town system, so to speak,” said Coun. Rhodes. “I don’t really see the big advantages of (the change).”
He noted the association is a “pretty solid organization.”
“But what if that organization changes in some negative way?” he asked. “Then, I would feel very comfortable and very glad that we did make the decision to keep the money flowing through the town.
“I think we need to do our due diligence.”
Coun. King also spoke against the change.
“I understand it would cost us some staff time, but I think it’s prudent for us to receive the money and pass it through to them,” he said.
Mr. Romanko, in an email statement, said the Town — through the Destination Marketing Agreement to be signed with DO — will have continued oversight at the planning stage as well.
“If Council doesn’t approve the expenditure as identified by DO, then there is the opportunity to have DO work with Council to develop a plan that council will approve.
“Council still retains the ultimate authority on MRDT expenditure.”
The motion to approve the change got off to a bit of a rocky start, with councillors initially reluctant to propose a required motion before Coun. Myers Bennett finally stepped forward.
Mayor Sue McKortoff seconded the motion after none of the other four councillors agreed to support it.
MRDT funding is required by the province to be used for tourism marketing, programs and projects, although some designated recipients have been allowed to use revenue for other purposes.
As well, the provincial government earlier this year announced that affordable housing initiatives could be funded through MRDT revenues, although that change was walked back somewhat following significant blowback from tourism operators and supporting agencies.
Now, only the portion gathered from online accommodation platforms located outside of BC can be used for affordable housing.
Provincially, MRDT funds are collected in 39 designated accommodation areas. In a number of jurisdictions, eligible entities are named as designated recipients — with some jurisdictions comprised of several designated accommodation areas and multiple eligible entities sharing the funding for a particular jurisdiction.
DestinationBC has also provided a number of jurisdictions special dispensation to use MRDT funds for other projects, including improvements to a harbour pathway, construction of a visitors centre, expansion of an exhibition and convention centre, improvements to tourist-related destinations and facilities and even to construct a road.