Hotel Revitalization Tax Exemption Bylaw: My Take
Gord Fuller: January 28, 2012
There can be no doubt that this tax exemption bylaw only came forward as a result of our Mayor and some others strong beliefs that the only way to up usage at the convention centre would be to entice someone to build a hotel on land we would be willing to give them behind said centre. Initially in bringing forward the bylaw there was somewhat of an outcry from the Hospitality Association and this latest inception is designed to placate the association and bring them on board with the tax exemption.
At council’s meeting on January 23rd these points were approved to be added to the above bylaw:
To include renovations to existing hotels and motels that achieves any one or more of the following:
• adds services
• adds rooms
• improves the quality of the stay for the visiting public;
Also approved was that staff do a report “on the potential for redevelopment of some hotel/motels into nonmarket rent low income housing for the working poor and low income seniors.” As well mention is made that “Council could consider expanding the “downtown” boundaries for revitalization reasons to potentially assist some of the properties currently on the fringes of this boundary.” This one directly related to Development Cost Charges (DCC’s) and the fact that development within downtown boundaries currently does not pay DCC’s.
The report then goes further in talking about “ways that we, collectively, could mitigate the drop in occupancy through increasing visitors to Nanaimo, particularly if the City attracts a hotel partner.” There you have it; the main reason for developing the bylaw in the first place, a hotel for the convention centre.
In looking at the above one would initially see the creation of housing for the working poor and low income seniors as a positive and as an advocate for such one would think I am strongly on side with this point. The fact is that many motels already offer monthly accommodation, though not necessarily affordable at rates of $700.00 and higher. How I ask would the city propose to ensure the cost to monthly renters if redevelopment is done is affordable, affordable being one of those hugely subjective terms. Also in the event the idea is taken up by current owners there would then be a decrease of low cost temporary accommodation that could see many travel straight throughNanaimoinstead of staying a night or two.
Development cost charges are the means by which the city secures funds to put in the infrastructure needed to support development. Many years ago, as a means to promote the revitalization of Downtown Nanaimo these costs were waived by the city to promote development. If these costs are not paid the burden is then put on taxpayers to come up with the costs. If the Downtown boundary is expanded the costs born by taxpayers can only increase.
When added together the loss of DCC’s and revenue as a result of the Tax Exemption would be in the millions and have to be born by the taxpayer, this with no guarantee that a hotel for the convention centre would be built anytime soon.
There is no real, only anecdotal, evidence that a hotel for the convention centre will increase its usage or in any other way, especially with tax breaks, benefit the community. Currently operating at less than 3% capacity; even with the proposed delegate days for 2012 and 2013,mentioned in the report, capacity would still be less than 5%. It will take far more than one hotel to bring about any change that would result in the taxpayer subsidizing the facility any less. Yes if it were built it would add to the abundance of underused 4 or 5 star accommodations in the core but at what cost to the community/taxpayer.
The report on the whole is an interesting read and I would encourage folk to check it out.
January 23, 2012 Council Video http://www.nanaimo.ca/CouncilMeetings/VideoArchive.aspx?clip=C120123V
(Hotel Revitalization Tax Exemption Bylaw 2011 NO. 7143 – pgs 28 – 48) http://www.nanaimo.ca/UploadedFilesPath/Site_Structure/Corporate_Services/Corporate_Administration/2012_Agendas/C120123A.pdf
Posts and Comments on Nanaimo Governance 
From the point of view of the city we are giving up what we don’t have anyway. The tax exemption is on the “improved” part of the tax assessment. The DCC’s are something we don’t collect if the property is not developed. These are not, direct, grants of money; they are just exemptions to encourage construction that wouldn’t happen if we didn’t grant the exemptions.
You are right it pointing out that these exemptions do have hidden costs, but this does increase the chances of investment in a new conference centre hotel. A new hotel, it is believed, will reduce the actual costs of supporting the conference centre.
For now, the city is giving up something it wouldn’t get anyway, in the vain hope that real burden to the taxpayer will be reduced. The costs of the conference centre are extremely high, and for a city this size they cannot be sustained. If this program is effective in producing an investor for the new hotel, then the burden of sustaining the conference centre would be shifted, in part, to the accommodation industry.
The accommodation industry is an even smaller segment of our economy then the general taxpayer. If the general taxpayer cannot sustain the conference centre indefinitely, it is even less likely that the accommodation industry will be able to manage that burden.
This is planning at its very worst, so far. I say, “so far,” because there seems to be no bottom to this. We’ve already dropped below incompetent planning, and we are into that FUBAR area for which the english language has no adequate descriptors, and we are heading to someplace that is even below that.
To sum up exactly how stupid and backward this scheme is: in normal circumstances a conference centre would be built to support the accommodation industry, we are now forcing the accommodation industry to support a conference centre, and we may be forcing this burden to the degree that the accommodation industry is put out of business.
Many years ago, I compared this conference centre project to a marathon runner who decides that he cannot win the big race unless he loses some weight. So to reduce his weight he cuts off his feet. And here we are today, chopping off even more.
The last time I investigated the support the conference centre would receive even if the number of delegate days were to triple. was very minimal.
I think the operator of the centre, wrote the contract, and our ‘top of the line’ managers at city hall, simply signed on.
There never was a competition to manage the centre…… as there was no tender to build it…no tender for the annex either….. yet come councilors simply gush when they speak of the level of quality of city staffers……
Pass the Valium….
Jim Taylor 29 January 2012 at 8 am wrote: “There never was a competition to manage the centre……”
Believe that the City’s partner, hotel developer, Triarc International Inc., of Connecticut and Florida, introduced the operator, Atlific Hotel & Resorts, (the “hotel professionals”), to the City of Nanaimo … (appears that Atlific Hotel & Resorts obtained its business licence from the City in 2006.)
Atlific’s website http://www.atlific.com advises that several new properties opened in 2008, including “the company’s first conference centre – Nanaimo B.C.’s Vancouver Island Conference Centre.”
“One of the areas our meeting focused on was ways that we, collectively, could mitigate the
drop in occupancy through increasing visitors to Nanaimo, particularly if the City attracts a
hotel partner.”
“The NEDC, TLC, NHA, City agree on the need to develop a plan that will create real tangible changes in Nanaimo that will result in, among other things, an improvement in the occupancy rates in Nanaimo.”
1 Aquatic Centre bleachers -these are already included in the 2012 budget.
2 Complete the waterfront walkway to Departure Bay Beach
3 Newcastle Island Accessibility
4 Additional artificial turfs.
5 New festivals.
I look at the above and have to wonder how bleachers and artificial turf will help attract visitors. Do think the others have merit but would the visitors they attract want to stay in 4 or 5 star hotels?
This bylaw and all its little gimics is to attract a hotel but until the economy improves enough to make it viable it ain’t going to happen. We, and the NEDC, should be working on those things above and others that will improve the community without thought for a new hotel. If it happens it happens but it should not be the primary focus.
Had a thought the other day and I wonder if the number of people attending the Church Group at the convention centre every Sunday are included in the delegate days?
By my calculations we would need 320,000 delegate days to reach 50% capacity. That is a hell of a lot of delegate days working out to 876 people per day. Doubt ebven with a new hotel we could accomodate that number and even in the event we were able to get to it would it significantly reduce the subsidy of the taxpayers?
Cyber City is to be demolished!
There goes our star tourist attraction..
Where is the bail out money when you need it?
Germany’s president(?) said the other day, that if Europe doesn’t sort out it’s financial mess, then all of Europe will become a nice place to visit, but little else.
Have you noticed how ALL cities seem to think they are going to be the next Las Vegas?? Even the mayor of Whistler (well known with international rep.) said it was heavy sledding this past few years.
Tourism is one of those slippery things, very hard to quantify…. but can result in tons of money spent, writing reports, designing brochures and advertising spots……. etc. etc. People can pretend to keep very busy chasing tourist dollars, and it is very near impossible to quantify the results….. unlike attracting a new widget factory which clearly has a known economic benefit…. as it is, I would be surprised if the whole tourist budget is simply a wash, and we will be lucky to recover the costs we spent promoting it in the first place……
Not to worry, our crack team of councilors will see we stay on track though….
“Have you noticed how ALL cities seem to think they are going to be the next Las Vegas?? ” Ya but thats not the case in Nanaimo, we are shooting for Disney World:)
Try demolition derby!
For the last two decades a small group of insiders have had an iron grip on Nanaimo’s economic strategy. This clique has been focused almost exclusively on tourism. Millions of dollars have been spent on various efforts including the Conference Centre and the cruise ship dock to kick-drive the industry.
It would be kind to say that the tourism first strategy not been spectacularly successful. Despite pamphlets which promote three different downtown neighborhoods (none of which exist), most people staying at downtown hotels are here on business, not as causal visitors. Despite twenty million plus on a new dock, there are declining numbers of cruise ships making a local stop. The seventy million dollar Conference Centre primarily competes with privately owned local facilities to hold local events.
Then along comes Ruttan’s bizarre notion that the tourism industry is being held back because of the lack of first class rooms, notwithstanding that hotels like the Coast Bastion or the Grande struggle with low occupancy rates even during the summer months. The current form of the property tax exemption bylaw is staggering. If renovations to existing hotels and motels that “add services, add rooms or improves the quality of the stay for the visiting public” qualify for a property tax exemption, then essentially every existing motel and hotel in the City will find a way to qualify. This is a tax measure that for its sheer dumbness could rival the infamous federal Scientific Research Tax Credit program of the 1980’s.
Once again we can observe a consistent pattern of behavior on the part of our local leaders – they are always behind the curve. Tourism worldwide is no longer a growth industry. Canadian tourism is in particularly difficult times as fewer and fewer Americans cross the border. This is not a recession phenomena – American tourism to Canada peaked in 1999 and has been dropping like a stone ever since. Americans are taking less than half the trips to Canada that they took thirteen years ago. This is not likely to turn around either as the border has thickened with passport requirements, soaring fuel prices and in a commodity scarce World, a Canadian dollar now trading at or above parity.
It is questionable whether an economic development strategy is feasible at the municipal level since the course of the local economy is largely out of the control of local politicians. If there are likely drivers for economic growth in this area, however, it is not tourism but rather forestry, the university and retirees. Forestry is no longer a sunset industry with most economists now predicting big run-ups in prices over the next ten years. The university will continue to be an economic positive IF it is successfully able to compete for students. Demographics tell us that there are lots and lots of retirees up and coming in Canada – a portion of whom will relocate to the West Coast. The Central and North Island can compete successfully for those retirees of ordinary means who can not afford Vancouver or Victoria.
A reasonable industrial tax rate is a prerequisite for new wood processing facilities. Affordability is also an obvious key to attracting both retirees and students. Ironically property tax exemptions for one favoured industry, a failed Conference Centre and grandoise municipal building projects are all working against affordability … existing spending initiatives could push property taxes up dramatically over the next decade.
The second attraction for both students and retirees are recreational opportunities – hiking trails, parks, sports facilities, a lively downtown. Underline the last one – a city like Montreal is attractive to students because of the lively street life of St. Laurent and St Denis and other urban neighborhoods. Unfortunately entertainment policy for downtown Nanaimo is basically run by the RCMP. A fraction of the money spent on Conference Centres and Annexes could have made Mt Benson into a hiker’s paradise.
In short making life better for locals; i.e. reasonable property taxes and good recreational facilities, will also make the City more attractive to industry and newcomers.
For the last two decades a small group of insiders have had an iron grip on Nanaimo’s economic strategy. This clique has been focused almost exclusively on tourism. Millions of dollars have been spent on various efforts including the Conference Centre and the cruise ship dock to kick-drive the industry.
I could not agree more. Your comments are a well thought out commentry on Nanaimo’s blight.
It has occured to me that there would seem to be collusion between an influential faction of (some of) Nanaimo’s Council & Staff .
Their infuluence strides over the wishes the voting public & indeed of such backwards uses of legalese such as the alternative voting process.
In short; there are those within Council & Staff that have a mission that is more is self serving than realistiic!
Thanks for a well thought post.
David, I would like permission to post your letter, on the ‘Letters’ page of my news blog, nanaimo-info-blog.com
Thanks for your consideration
Jim
To Jim Taylor.
Sure
Well said David.
“In short making life better for locals; i.e. reasonable property taxes and good recreational facilities, will also make the City more attractive to industry and newcomers.”
This is something many of us have been saying for years but unfortunately there is a top down approach taken by the City that has community input placed at the bottom. For the most part the general community only gets input through open houses, not easily accessible for all, showing a plan already determined by vested interests.
A perfect example being on the Water Treatment Plant. One public open house at one location with three people eventually signing the Alternate Approval process form against moving forward.