How the city could pay for a new arena, entertainment district

The city is looking at five potential revenue streams to fund a downtown arena and entertainment district.

An in-depth analysis from accounting firm KPMG will be presented to the city's governance and priorities committee Wednesday, looking at five ways to pay for the arena and district that would avoid steep property tax increases.

In its 60-page report, KPMG whittled 19 potential revenue options down to five, consisting of: an accommodations tax, a facility fee, tax-increment financing, a vehicle rental tax and parking fee adjustments.

Revenue estimates range from $6.7 million a year to $21.4 million a year, depending on what council decides.

An accomodation tax -- a mandatory charge applied to short-term hotel, motel, hostel or short-term online rentals like AirBnB and VRBO, has been implemented in many cities across Canada.

An accommodation tax of three per cent added on to a stay could generate roughly $1.6 million per year on the low end, with a tax of six per cent generating approximately $4.7 million per year as a high estimate, according to the report.

Hospitality Saskatchewan, an association of various hotels and other tourism and hospitality members, is in favour of a new arena, but is opposed to a new hotel tax to pay for it.

"The phone has been ringing off the hook," Hospitality Saskatchewan president Jim Bence said. "We have many members that are very opposed to it, and keeping in mind that what's good for Saskatoon and Regina, it might not be good for the rest of the province."

Bence said the association has had this anti-tax stance for decades, not only because hotels don't want to pass on a new cost to customers, but because Saskatchewan's Cities Act would have to be changed to allow the new tax, potentially opening up municipalities to increased tax authority.

"For the municipalities that do have that kind of authority, the hotels are in pitch battles with those municipalities because of increases now to that tax efficient piece. So once you go down this road, it is a very slippery slope," Bence said.

KPMG listed struggles and opposition in rural Ottawa Valley and Winnipeg where some hotel operators saw the tax as harming the tourism industry and an extra tax lever.

"Municipalities can pretty much do what they want if they're given that latitude," Bence said. "Who is responsible for paying for (an arena)?"

"There's lots of ways to build arenas or infrastructure, and it doesn't necessarily have to be specific to one aspect of the tourism industry."

Other options presented by KPMG would also require amendments to provincial legislation.

Another option posed by KPMG, is tax-increment funding is a mechanism that divides property tax revenue earned on properties within a defined boundary, seperated into a "base" stream and a "growth" stream.

For a set period of time, the base stream would be directed to general municipal use while the growth stream would help repay the costs of the redevelopment.

KPMG says this could raise anywhere from $2 million to $9 million per year, but for the city to generate any more than $2 million , it would need to extract revenue from the library portion of the property tax and the provincial education property tax.

In order to do that, The Cities Act and the Education Property Tax Act would need to be amended by the provincial government.

City administration says it doesn't support KPMG's idea of extending parking hours and increasing rates because it plans on building a parking structure and providing 526 publicly accessible parking stalls on city lands at 22nd Street and Idylwyld Drive. Costs, hours of parking and revenue will be examined later.

Administration is also advising against KPMG's suggestion of introducing a vehicle rental tax, which would also need provincial legislation. British Columbia is the only Canadian province which has such a tax.

One option the city wouldn't need new or amended laws for is a facility fee. Adding $4.50 on every ticket sold at the arena would generate $2.3 million per year, which could increase to $3.7 million per year if the city were to add $7.50 per ticket. TCU Place and SaskTel Centre currently charge a facility fee.

Administration will continue to work towards an overall funding plan that will be presented to council in early 2024.

Since discussions for a new arena began in 2018, council and city administration have stated a desire to rely on property tax as little as possible to cover the cost of the project.