For the next two years, NOTL residents can expect major upgrades to the roads and places tourists and locals use every day, including the $1.32 million reconstruction of one of Old Town’s main roads, thanks to $1.71 million in funds from the town’s hotel tax.
Over the past three years, tourists have brought more than $4.46 million into Niagara-on-the-Lake through its municipal accommodation tax, with half of it going to the municipality itself, after administration costs. Now, the town has decided how its share of that money will be spent.
The municipal accommodation tax, which started in 2022, adds a fee to hotels, motels, inns, resorts, cottages, villas, country inns and vacation rentals, currently at four per cent.
The town will use its funds to improve roads, sidewalks, travel direction signs, parks and public washrooms, said Kyle Freeborn, the town’s treasurer, in an email to The Lake Report.
From now until 2027, all of the town’s share will go toward repairing and upgrading spaces in areas that see heavy tourist traffic, including Mississagua Street, one of Old Town’s most prominent roads. Running through the middle of the settlement at 1.27 kilometres long, visitors and residents regularly use it to get to Queen Street.
“(Municipal accommodation tax) funds will fund the reconstruction of Mississagua Street, including the road, storm and streetlighting infrastructure,” he said.
The town has budgeted $1.32 million for this project, with construction expected to start this fall, he added.
The goal is to spend money on things that will not only improve the visitor experience but will also help manage tourism’s impact on the town, minimizing the effects on both residents and the town itself, said Coun. Maria Mavridis in an interview.
General repairs or upgrades, high-risk projects with unclear benefits, or ideas meant to balance taxes or replace existing budget items are not recommended by staff for funding.
“The policies are that it has to be tourism-related,” said Mavridis, adding that things which are mainly meant to primarily benefit residents, like a community pool, would not qualify — even if tourists may use it, too.
“One resident’s idea was that we get the indoor pool funded through (municipal accommodation) tax. You can’t do that,” said Mavridis.
As part of this year’s budget, council approved $51,000 of the town’s share to help cover the annual debt for the Mississagua Street road reconstruction.
The budget also has $32,571 to pay for a quarter of the economic development, government relations and tourism budget, including salaries.
NOTL’s hotel tax rate started at two per cent in 2022, rose to three per cent in 2024 and hit four per cent this year.
As of the end of last year, the amount made from the tax was $4.46 million, before administration costs — expenses of running the program, like staff time to collect and manage funds, software, or future audits — according to a Feb. 18 staff summary report.
The tax applies to stays of 28 consecutive days or less in accommodations with five or more rooms to rent, unless exempt, like some bed & breakfast operators.
All the money made from the tax is split between the town and Tourism Niagara-on-the-Lake, the municipality’s official destination marketing organization, independent from the town, which promotes the area to visitors.
“The hotels are collecting it on behalf of the town, handing it all over to the town, and then the town issues a check for the split — for the shared amount — to whatever entity that we have an agreement with. And right now, it’s Tourism NOTL,” said Mavridis.
After the split and administration costs, the town’s total as of Dec. 31, 2024 was $2.21 million. But after using $500,000 last year for the museum’s expansion, $1.71 million remains — a number that could change after the town finishes its financial auditing for 2024 and finds any figures that haven’t been recorded or that need to be changed.
Starting in 2027, the town’s portion will then be divided: 20 per cent for repairing and upgrading town spaces with heavy tourist traffic, 20 per cent for grant projects under $100,000, and 60 per cent for grant projects over $100,000. Grant applications will open that year.
Community groups, event organizers and town departments can apply, but grant projects must also clearly benefit tourism and align with at least one of the four goals (pillars) outlined in the town’s strategic plan — and the new tourism strategy, once it is finalized.
Staff will manage all the funds, subject to council’s final approval for spending and approval within the town’s budget cycle.
Originally, the municipal accommodation tax committee proposed splitting the funds into 20 per cent, 20 per cent, and 60 per cent right away. But staff recommended allocating all the money this and next year to town spaces with heavy tourist traffic.
Freeborn explained to council that the town needs more time to figure out how the grant system will work.
But Couns. Wendy Cheropita and Gary Burroughs still raised concerns at the meeting about the future funding split.
Cheropita suggested putting more money toward town spaces with heavy tourist traffic long-term and less toward grants, but council ultimately stuck with the proposed split for 2027.
While the town’s share has been set aside for future tourism initiatives until now, Tourism NOTL executive director Kathy Weiss told The Lake Report that its portion is used for advertising and promotion.
This includes a rebrand of its website, which is expected to go live within the next four weeks, she said.
“That was an expensive endeavour,” Weiss said. “So we have a marketing plan that we follow.”
With all these criteria now approved, staff will report back by July 31 with a list of tourism-related town repairs and upgrades proposed for 2025 and 2026 — and again by Dec. 31 with more details about what resources are needed to roll out the program.
Staff will also create a municipal accommodation tax investment program, which will involve designing rules, setting up grant applications and procedures and informing council of evolving program needs.
To ensure the public keeps benefiting, staff will consider who owns and takes care of any projects funded by this tax in the long run.
