Council OKs hiking hotel tax to help cover FIFA hosting costs

Toronto's hotel tax will rise, temporarily, to help pay for the city's 2026 FIFA World Cup hosting duties.

City council approved the increase at a meeting this week, voting 21 to four to hike the municipal accommodation tax rate from six per cent to 8.5 per cent. The hike will come into effect next summer and last until the games in July 2026. 

"We made a commitment that we were done taking property taxes to fund the World Cup," budget chief Shelley Carroll said.

Federal and provincial funding will cover the majority of the expenses, while the city is responsible for 47 per cent of total costs. The hotel tax increase is expected to raise about $56 million dollars to cover part of a $95-million funding gap that exists within the budget for the games. The city says sponsorships and other measures will be used to cover the remainder.

Overall, the cost for Toronto to host six tournament games is $380 million.

That price tag has ballooned since the city first pitched hosting the games in 2018. Back then, a city report estimated the cost at between $30 million and $45 million. 

Carroll said raising the municipal accommodation tax is a way to ensure that people coming to Toronto to enjoy the World Cup help pay for the hosting costs.

"This is a user-pay model that says, 'if you're a high roller and you can afford to get on a plane from any old place that qualifies for the cup … we'd like you to contribute to make sure that we have a fabulous games,'" she said.

The charge will apply to all hotel rooms and short-term rentals in the city during that period.

Several associations that represent hotel operators have expressed concern about the increase. They've said the increase makes them less competitive with hotels just outside of the city limits.

Coun. Stephen Holyday, one of four councillors who voted against the measure, said that the data suggests only around $10 million of the $56 million the tax increase will raise is expected to come from FIFA attendees. 

"Don't think for one minute that this is free, easy money," he said. "And it may be politically expedient to tax visitors to this city because they're not constituents and electors, but there's a larger economic impact."

Holyday said the  tax, which staff estimate will add about $3.42 more to the cost of an average city hotel room, will hurt hotel operators. He also expressed doubt about council's stated intent that the fee increase will be temporary.

"Let's hope … that it comes out as planned, and that nobody moves a motion to keep it later on," he said.

According to a city report from February, the games are expected to give Toronto an economic boost of roughly $392 million in GDP, along with a $456-million boost for Ontario. The report also says holding the games is expected to create about 3,500 local jobs. 

Deputy Mayor Mike Colle criticized councillors expressing negativity about the city's hosting duties. The World Cup is a major event for soccer fans that will be a big draw for Toronto tourism, he said.

"Let's do our best to undertake this adventure," Colle said. "It's not going to be easy. It's not always going to be without cost. But let's have faith in the people of Toronto and their ability to get things done."