TICO proposes Compensation Fund Rate increase, effective July 1

TICO proposes Compensation Fund Rate increase, effective July 1

TORONTO — The TICO Board of directors has put forth a proposal to increase the Compensation Fund contribution rates from $0.15 to $0.25 per thousand dollars of Ontario travel sales. If enacted, the rate increase will be effective on July 1, 2016.

The CF Rate has changed three times since TICO’s inception in 1997, two of which were rate reductions. This new proposal results in a CF Rate equal to the rate charged to retailers in the year 2000.

A Consultation Paper has been sent to all registrants and is posted on tico.ca. According to the Paper, without a rate increase, TICO is projecting an operating deficit and the potential for the Compensation Fund to fall below the targeted balance of $20 million. In addition, a number of strategic initiatives in support of TICO’s Mission/Vision will be delayed or otherwise adversely impacted.

With a July 1, 2016 implementation, it will take a full year for this revised rate to become fully effective across all registrants. Once fully implemented, an additional $1.5 million of revenue will be generated and be directed towards strategic priorities reflected in TICO’s three-year business plan, which is reviewed and approved annually by the Board of Directors.

To make a submission on TICO’s proposed Compensation Fund rate increase, forward your comments by April 15 to ticoconsultation@tico.ca.

The following are a few frequently asked questions and answers prepared by TICO:

When did TICO last increase fees?

TICO last increased the CF Rate approximately three years ago, with the revised rate effective May 1, 2013. The Board of Directors approved a phased-in increase to the CF Rate over three years (2013, 2014 and 2015) with the final CF Rate of $0.30 per thousand of Ontario sales. The 2012 fee review resulted in an increase in the CF Rate from $0.05 to $0.15 per thousand dollars of Ontario Travel Sales.

Will there be additional CF Rate or other fee increases this year, or next?

TICO does not expect to change the Compensation Fund rate in the foreseeable future. However, all fees are subject to a Fee Framework and guiding principles, as required by legislation (this Framework and principles can be found in TICO’s Administrative Agreement with the Ministry of Government and Consumer Services at www.tico.ca/legislation). These principles reflect a general cost-recovery objective, fairness and equity for all Ontarians. If there were future changes to the current industry model, a change in guiding principles and/or a large claim(s) against the Compensation Fund, TICO will need to reconsider its fees accordingly.

Why does TICO need to increase fees when the current economy is so uncertain?

TICO appreciates the additional burden this proposed rate increase places on many Registrants. Unfortunately, the environment in which TICO regulates is becoming increasingly more challenging and requires new and continued investment in technology, regulatory reform, skills development and a continued drive for efficiencies. The incremental CF revenues will be directed to these initiatives and more while maintaining the Compensation Fund at appropriate levels. Recognizing current economic challenges, TICO has held off on changing the CF Rate as long as possible.

How does TICO intend to use the additional revenues raised with this rate increase?

These additional funds will be directed towards: (i) increased investment in consumer awareness programs, including TICO’s ongoing consumer and registrant awareness campaign, (ii) increased resources required for compliance, stakeholder relations, education and technology, and (iii) various technology enhancements focused at streamlining operational processes and addressing challenges noted above. These investments will be supported by business cases directly linked to TICO’s strategic priorities.

Are other TICO fees changing too?

TICO is not proposing changes to other fees at this time, or the foreseeable future. TICO will, however, continue to collaborate with the government on more effective consumer protection models and fee frameworks.

Why did TICO not change registration and/or renewal fees or fees associated with the Education Standards program?

TICO does levy registration, renewal and exam fees. Based on projected investments and sustaining needs, increases to these fees would have been significantly higher in order to generate the required funds. The analysis suggested that such increases were not practical.

With a July 1st proposed effective date for the CF Rate, how do I remit my fees if my year-end is different?

The CF Rate is assessed twice per year; once after six months and again at the registrant’s year-end. CF assessments must be remitted to TICO no later than 90 days following these period-ends. Therefore, for entities that have a year-end that does not coincide with July 1, a calculation under both the old rate and new rate will be required. TICO will provide a form and guidance to facilitate the calculation of amounts due.

What is TICO doing to control costs?

TICO remains committed to being an efficient and effective regulator, including robust fiduciary responsibilities. One of TICO’s four overarching strategic priorities is ‘Organizational Effectiveness’, which encompasses people, process and systems. With this principle firmly in mind, TICO continues to review all core processes and systems with the goal of increased productivity and/or lower unit costs. TICO is also reviewing its technology platform(s) to find additional cost efficiencies and is committed to more effective processes through the business plan horizon.