Proposed Tax Could Devastate Toronto OOH Industry

Gail Chiasson, North American Editor

“A proposed tax on billboards – including outdoor digital boards – will have a devastating impact on Toronto’s outdoor advertising industry if passed,” says Rosanne Caron, president of the Out-of-Home Marketing Association of Canada.

Five of OMAC’s members, who represent 90% of the outdoor advertising revenue generated in the City of Toronto, would be directly affected by the proposed tax of CA$16 million – a late addition to the City’s development of a new harmonized sign by-law. The suggested tax will amount to a 25% charge on all advertising income earned from billboards. Directly affected would be OMAC members: Astral Media Outdoor, CBS Outdoor, Outdoor Broadcast Network, Pattison Outdoor, and Titan Outdoor, as well as several smaller non-member firms.

The $16 million is a far cry from the recommendation in the Hemson Report commissioned by the City in 2007 which, in its investigation of alternatives for generating revenue, proposed a maximum tax of $2.7 million per year on billboards to fund bylaw enforcement.

Since learning of the $16 million, OMAC commissioned an independent study by Altus Group Economic Consulting to examine the Toronto out-of-home advertising industry and analyze the economic consequences of the proposed billboard tax brought forward in March by the Buildings Department of the City of Toronto at the Planning and Growth Committee.

The economic study shows that the new tax will be an unfair burden on small businesses, advertisers and employees.

“It appears that the new billboard tax put forward by the City sign by-law project team will be imposed in Toronto without proper consultation with the industry and without a basic awareness of the industry’s financial fundamentals,” says Caron. “This tax threatens the survival of the outdoor advertising industry in the City, which puts at risk significant revenue earned by the City of Toronto and many small businesses who receive income from our members.”

The Altuss study, released May 21/09, shows that, in 2008, OMAC members:
• earned $64.8 million in combined net revenue before operating costs;
• will contribute $36.8 million in average annual revenue to the City through current agreements;
• contributed $28.4 million in annual revenue to private property owners;
• contributed $6 million in free space to over 95 charities and non-profits;
• contributed $2.2 million in free space to promote City programs
• annual earnings before interest and taxes were $8 million.

The Altus study questioned why the sign by-law project team ignored guidance from the Hemson Report; noted that the $16 million is a dramatic increase for which no explanation or rationale has been provided; and found the new tax to be a threat to local charities that depend on outdoor marketing companies for free public service advertising. Further, competitive media such as street furniture and the Toronto Transit Commission will be tax exempt, creating another
disadvantage for billboard advertisers.

“The tax rates being proposed by the City Staff are discriminatory, generally confiscatory and lack any sense of reality,” says Dr. Frank Clayton, author of the Altus study and a tax expert with more than 40 years consulting experience.

The outdoor advertising industry provides direct and indirect employment to thousands of Toronto residents who would be impacted by a reduced or even prohibited industry.

The addition of a billboard tax to considerations of a new harmonized sign by-law creates one more uncertainty for OMAC members who were already concerned about the lack of clarity around numerous new regulations which could impact outdoor advertising within the City.

“We support the development of a new harmonized sign by-law,” says Caron. “The industry needs clear governance from the City to replace the current patchwork of inconsistent rules and enforcement. We want to be a part of the solution, but so far have been frustrated in our attempts to participate in the process, despite repeated efforts to provide relevant and accurate information. Our fear is that regulations and a new tax will be imposed on us without a full understanding of our industry and the negative repercussions for the Toronto economy.”

The new sign bylaw is expected to harmonize into one the six different sets of bylaws that were in place in the different boroughs prior to their amalgamation into the Greater Toronto Area. Only one of the boroughs, Scarborough, is believed to have had any type of a billboard tax.

On June 2, the $16 million tax will be tabled at a meeting of Toronto’s Executive Committee, and on June 4, the new sign bylaw draft – details of which are are unknown – will be brought forward at the meeting of the Planning and Growth Management Committee. Caron and OMAC member representatives will be at both meetings in full force, hoping to have the whole process put on hold while the city investigates how the tax and bylaws will impact the industry.

A worst case scenario would be if the City ignored the industry economic study and pushed their plans through to the City Council for passage, possibly as early as July.

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