CommunityAIR public meeting:
Time: Thursday November 16, 8:00 pm, Harbourfront Community Centre
This meeting has been called to discuss the glaring lack of democratic representation on the Toronto Port Authority (now renamed Ports Toronto) Board of Directors. The following report summarizes the issues.
What Happened to the Liberals’ Promise to Reform the Toronto Port Authority?
A Report by CommunityAIR
October, 2017
… The Toronto Port Authority needs to start acting as an agency of the federal government, and by extension, concerned about the public interest. It needs to deal fairly and openly with the City of Toronto and all Torontonians and stop acting as a business agent for a private, for-profit company.”
- The late City Councillor Pam McConnell, in a Media Statement April 10, 2013
“The Toronto Port Authority is the single greatest impediment to a rejuvenated waterfront.”
- The late Jane Jacobs, internationally acclaimed urban planning sage, The Globe and Mail, June 5, 2004
1. Promise Made and Ignored
It wasn’t just the jets.
The Toronto Port Authority (TPA), recently rebranded as Ports Toronto, has been the major impediment to the development of Toronto’s waterfront in the public interest since it was created in controversy in 1999.
It operates in secret, has no accountability to the residents and users of the waterfront, or to the City, and has consistently pursued an agenda that focusses on the best interests of its primary tenant, Porter Airlines.
It treats the waterfront as an “airport sacrificial area[1]”, inflicting noise, pollution, and congestion on its neighbours.
For all those reasons, community leaders pressured both the NDP and the Liberals in the 2015 federal election for TPA reform.
Both delivered a rock‑solid promise to do so, as well as promises to stop the threatened Porter jets.
Here’s Adam Vaughan, on September 16, 2015 (his full letter appears as an Appendix to this Report):
The Liberal Party has also promised to reform the Port Authority and amend the letters patent to reform the federal agency. We are committed to making sure that the Port Authority holds its meeting in public and publishes its agendas and minutes as part of each meeting. The Liberal Party will ensure that the new Port Authority will be comprised of actual waterfront stakeholders with residents, waterfront businesses, port users and recreational and cultural organizations all represented.
Vaughan repeated the promise, as reported in the Toronto Star on November 17, 2015:
With a Liberal majority government, change is coming, said Vaughan (Spadina-Fort York).
“Our goal is not to appoint campaign managers and fundraisers (to the board) but people who need the port, the waterfront and the lake for daily life, and want it to be available to all those who need to use it,” he said.
Vaughan offered no details, but noted long-time chair Mark McQueen resigned in August and said: “I believe there are some vacancies coming up.”
Two years have elapsed.
The only action taken by the Liberal government to date has been to appoint one TPA director, Darin Deschamps, an Oakville resident with no discernable relationship to Toronto’s waterfront. He is Co-Head of Wells Fargo Securities Canada, Ltd. and Head of Investment Banking and Capital Markets Canada for Wells Fargo Securities. He is said to have donated $5,000 to the Trudeau Liberals.[2]
That’s not what was promised.
2. The Need for Reform
2.1 TPA Foisted onto Toronto Against Its Wishes
In 1999, the Toronto Harbour Commission, which was controlled by a majority of City appointees, was replaced by the TPA, despite the City’s opposition and contrary to the advice of Transport Canada’s own advisor, Nesbitt Burns.
The TPA governance structure effectively gave a small group associated with commercial port operations and the Island Airport, a powerful federal agency that would promote their special interests over those of the broader city.
That was the fear of Toronto politicians when the TPA was created and that is exactly how it has turned out.
Removing the port from City planning control and from the “threat” of waterfront rejuvenation was a primary goal of the port and airport businesses as they lobbied intensively to gain Toronto status as a federal port.
These few, but obviously powerful, businesses were supported in this endeavour by the federal Liberal caucus in the Toronto region.
The indignity of giving the TPA the power to put the interests of that narrow group over the interests of the City and the millions of waterfront users was then, and continues to be, magnified by the fact that the commercial port does not count for much within the local or national economies.
The Canada Marine Act was intended to confer federal port authority status on ports with strategic national significance. The Port of Toronto, at 38th in total shipping volume in Canada[3], did not meet, and has never met, that criterion.
2.2 Harper’s Appointments Made Things Worse
The original governance model for the TPA handed its control to a narrow group of specified port and airport related businesses.
But, after its initial appointments in 1999, the Martin government failed to make any further appointments as directors’ terms expired, causing the number of directors to dwindle down to three, then two ‑ one of whom had a conflict on Island Airport matters.
This, at the time all of its deals were being made with the Porter Airline’s founder, Robert Deluce.
The Harper Government made things worse by filling those vacancies with individuals with no connection to waterfront communities – their most common trait was their affiliation with or support for the Conservative Party of Canada[4].
Once again, there are now four positions vacant on the nine‑member TPA board, with no appointments in sight.
2.3 There is No Public Interest Requirement
The Canada Marine Act requires only that a port be financially self-sufficient. It does not impose any duty on the TPA Board of Directors to act, or even consider, the public interest.
At a minimum, then, any new appointments to the TPA Board should demonstrate a past commitment to pursuit of the public interest, as well as strong roots in waterfront communities.
3. TPA Governance Has Failed Our Waterfront
It is not a surprise that, given the sorry story of past appointments to the TPA Board, the public interest has been ignored, replaced by a consistent practice of applying its public assets for the benefit of a private business, Porter Airlines.
There are many ways in which that has been effected to date. These are some of them:
a. The Cozy 2005 Deals
By 2005, the Island Airport had been all‑but abandoned by Air Canada. Losing a lot of money, and facing a choice of closing it down or finding a way to expand its use, the TPA latched onto Robert Deluce as its Island Airport saviour.
That put Mr. Deluce in a very strong bargaining position that he used, and continues to use, with vigour. The TPA did everything it could to support Deluce’s brand new Porter enterprise, including;
- Evicting Air Canada
- Giving Porter exclusive rights to operate the Airport terminal
- Purchasing two new ferries and building new ferry terminals, at a cost of about $20M
- Handing Mr. Deluce $20M of the $35M received as “compensation” for the cancellation of the proposed bridge[5]
b. Porter Gets Virtual Exclusivity
For its first five years of operation, Porter Airlines had exclusive use of the Island Airport. It now has 172 of the currently available 202 slots [landings and takeoffs per day], with Air Canada restricted to 30 slots which may be used only for flights to and from Montréal.
c. TPA Tells U.S. Porter Doesn’t Have Exclusivity
Porter needed a license to fly to the U.S. To get it, it needed to satisfy the US Department of Transport that American airlines had the right to fly to the Island Airport.
The only evidence the Department relied upon to establish equitable access was a single letter from Lisa Raitt, then CEO of the TPA. Ms Raitt’s letter suggested the TPA was open to US Airways operating out of the Island Airport.
Porter got the licence.
But no U.S. airline has ever served the Island Airport. The reason – Porter got exclusivity, as confirmed by this report:
Porter’s agreement with the authority barred regional carriers, including Jazz Air, from flying between the airport and New York, Chicago, Boston, Washington, Philadelphia, Cincinnati, Detroit and Cleveland.[6]
Porter’s license to fly to the US expired on July 10, 2011, but was extended until a decision is made on an application for extension of the licence.
Six years later, no decision on that application has appeared.
d. Emergency Access Ignored
A 1993 report on emergency access to the Island Airport, prepared by an intergovernmental panel of experts (obtained by CommunityAIR, through FOI, and available here), calls for a bridge as the only way to get the required…
“64 emergency vehicles and 201 personnel to access an aircraft crash within 20 minutes. In addition, ambulances with the critically injured must be capable of· returning to the mainland within a 30 minute period of time.”
Those requirements were based on an assumed 50-passenger aircraft crashing on Airport land.
No bridge was built. But Porter was allowed to commence operations anyway, using a substantially larger aircraft.
Results of our Freedom‑of‑Information request to the TPA establish that no subsequent study was carried out to confirm that that required access can be provided in the absence of a bridge.
That Freedom‑of‑Information request also confirmed that when the ferry service, which provides limited emergency vehicle access, is disrupted, Airport operations continue unabated.
As the recently-opened tunnel can be used only by pedestrians, it cannot be used to justify the absence of effective emergency access.
Emergency access concerns should not await a disaster to be acted upon.
e. Physical Constraints Ignored
The TPA’s 2012 Airport Master Plan, revealed only at the insistence of the City in 2014, detailed many shortcomings of existing operations (parking, landmass, facilities, access) that can’t be resolved, given the Airport’s tight physical constraints.
f. Bullied the City to Avoid Property Tax
For many years the TPA resisted paying its fair share of property taxes to the City of Toronto for the extremely valuable 215 acres of the Island Airport. The arrears, based upon that normal regime, exceed $50,000,000[7].
The TPA’s failure to pay amounts to a massive subsidy of the Island Airport operations by the taxpayers of the City of Toronto.
While the City of Toronto had vigorously pursued these arrears, with several favourable judgments in the Courts[8], Toronto City Council recently inexplicably capitulated, agreeing to a modest per passenger fee, if the province approves.
The Federal Court of Canada, on this precise issue, in City of Toronto v. Toronto Port Authority considered the TPA’s preference for such a “per passenger” fee and stated:
“The TPA attempted to enjoy the benefits of [ a per‑passenger fee]. …The … legal error is compounded by the absence of any explanation as to the merits of the quantum of the per passenger amount.
“Therefore, the [per‑passenger fee] … is not sustainable as a matter of jurisdiction nor as a matter of reasonableness.”
Both the City and the TPA consider the matter resolved, even though the Province has avoided giving the required approval for three years now.
g. Terminal Lease Extended ‑ No Apparent Public Benefit
The TPA readily agreed to extend its lease of the Airport Terminal lands to Porter past the expiry of the Tripartite Agreement on June 30, 2033, without any apparent public benefit in return, and no public consultation, solely to facilitate Porter’s sale of its terminal.
h. Sweetheart Deal for Airport Use
The TPA signed a twenty‑year Commercial Carrier Operating Agreement with Porter that requires the TPA to give free use of the Island Airport ‑ its most valuable public asset[9] –without any payment beyond reimbursement for a portion of operating costs. It has bound itself to collect from Porter only that portion of those costs that are unpaid by other users of the Airport.
Part of those 215 acres is directly owned by the TPA, having received it free when the City‑controlled Toronto Harbour Commission’s ownership was converted by the federal government to the federally‑controlled TPA[10].
A substantial portion of those 215 acres is owned by the City, but leased rent‑free to the TPA until 2033[11].
Having received ownership of much of the Island Airport land without any payment, and the balance rent‑free from the City, the TPA has chosen to pass on to Porter the benefit of the public assets it obtained for free (save a portion of operating costs)[12].
Worse, it has agreed that any capital costs incurred by the TPA in relation to the Airport may only be charged to Porter’s customers (as Airport Improvement Fees) if Porter has previously consented to that charge – or a tortuous consultation has been completed.
In essence, the TPA operates the Airport as Porter’s subsidiary, with all profit generated from Island Airport lands belonging to Porter, and not the TPA.
i. Porter Not Charged Full Operating Costs
Airport Improvement Fees, collected from passengers using the Island Airport, are only to be used for Airport capital costs.
The TPA, however, counts them as operating income even though they can only be used for those capital costs.
When those Fees are deducted, the TPA consistently operates at a loss, eroding its capital in lieu of charging Porter the full operating costs of the Airport[13].
The board should cease to be a cheerleader for Porter, and instead be accountable to the waterfront communities and the citizens of Toronto for its activities.
This is an egregious case of regulatory capture.
4. The Vision
Five of Toronto’s most influential community leaders[14] have suggested this vision for our waterfront:
It is our waterfront. From south Etobicoke to the Scarborough Bluffs and beyond, what is emerging all along the Toronto waterfront is one of the most remarkable transformations of its kind anywhere. The revitalization of these strategically located, obsolescent lands is providing new and improved places for the public to enjoy: parks and trails, a linked series of neighborhoods, places to live and work, and places of recreation, repose and natural beauty.
We agree. That vision can only be realized through reform of the TPA. It is there that our efforts must be focused.
5. Why Has the Trudeau Government Broken Its Promise?
Transport Minister Garneau is particularly sensitive to the wishes of Canada’s aviation industry, and was severely criticized by it for his quick decision to forbid jets at Toronto’s Island Airport. He would be reluctant to upset it again.
Clearly, Trudeau’s political strategists don’t yet appreciate the depth of disgust Toronto voters hold for the TPA’s dealings, particularly in the ridings along the waterfront.
But, as Adam Vaughan himself has noted in his perceptive Foreword to Bill Freeman’s recent book, Democracy Rising: Politics and Participation in Canada [15]:
…Democratically empowered communities have always had to fight against the entrenched power of a few. … the act of organizing people to wage campaigns for change is exactly how societies are formed.
It’s how healthy and progressive democratic governments are both created and sustained.
Only by waging an effective campaign for TPA reform well in advance of the next election will whatever government is in power take the case for reform seriously.
6. Conclusion
The TPA was created in controversy, operates in secret, and its airport inflicts noise, pollution and congestion on its neighbours.
Despite the Canada Marine Act requirement that the board be made up of community members, airport, and harbour users, it has been loaded with Conservative and Liberal political appointments who have worked to provide Porter Airlines with a near monopoly of the Billy Bishop Airport. Today there are four positions on the board that are vacant, but no community members have ever been appointed.
The TPA has engineered cozy land deals, emergency access issues at the airport have been ignored, the city was bullied into reducing property taxes on the airport, and a sweetheart deal was made with Porter for the use of the airport. Porter is not even charged the full operating costs.
What happened to the Liberals’ promise to reform the TPA?
Appendix
Letter from Adam Vaughan
September 16, 2015
Mr. Brian ller, Chair
Community Air
7th Floor, 150 John Street
Toronto, ON M5V 3E3
Dear Brian:
Thank you for your letter dated September 11th and your acknowledgement of my support for
your work on Island Airport issues.
The Liberal position hasn’t changed since the by-election. The Liberal Party will not re-open the
tripartite agreement. No Jets. No Expansion. Period. This position was confirmed in a letter sent
by the Liberal GTA Caucus, chaired by myself, to Mayor John Tory and City Councillors on June
4th. I have attached a copy for your reference.
The Liberal Party has also promised to reform the Port Authority and amend the letters patent
to reform the federal agency. We are committed to making sure that the Port Authority holds its
meeting in public and publishes its agendas and minutes as part of each meeting. The Liberal
Party will ensure that the new Port Authority will be comprised of actual waterfront stakeholders
with residents, waterfront businesses, port users and recreational and cultural organizations all
represented.
The same letter also commits to funding for Waterfront Toronto’s next phase and supports
removing the Gardiner.
Thank you so much for your years of consistent leadership on the waterfront, I look forward to
building on our shared vision of a clean, green waterfront: a vision that defends the residential
communities who live along the lake and the thousands of Toronto residents who visit the
harbour and the island every year.
Yours truly,
Adam Vaughan
Liberal Candidate
Spadina-Fort York
FOOTNOTES
[1] A relatively new term for areas overwhelmed by noise and pollution from Airports. From http://www.truth-out.org/news/item/42161-the-collateral-damage-of-the-us-s-airport-sacrifice-zones:
A sacrifice zone is a geographic area — most commonly found in low-income and minority communities — that has been permanently impaired by environmental damage or economic disinvestment.
It’s sacrificed, in theory, for the “greater good”.
[2] See https://openparliament.ca/debates/2017/4/4/kelly-block-1/
[3] Statistics Canada data indicate that Toronto is 36th in Canada in terms of volume of goods passing through its port – 1, 797,800t, 0.39% of total goods through Canadian ports
[4] These directors were:
Craig Rix, was an aide to Finance minister Jim Flaherty when he was a member of the Mike Harris government in Ontario.
Christopher M. Henley, was a donor to the Federal Conservatives – $1000 to federal Tories in 2006.
Douglas Reid, teaches and conducts research in business strategy at Queen’s School of Business, Queen’s University.
Krista L. Scaldwell, worked for the Ontario Conservatives at Queen’s Park.
Colin D. Watson who, with Robert Deluce, was a director at Spar Aerospace in 2002. Spar gave $4,000 to the Conservatives prior to the ban on corporate donations. Although admittedly a friend of Deluce’s, the federal Ethics Commissioner found that there are friends, and there are friends, exonerating him from voting to support Mr. Deluce’s business as a TPA director
Mark McQueen worked as an executive assistant and advisor in the Office of the Prime Minister of Canada – Brian Mulroney.
[5] According to a leaked Transport Canada document, the compensation was based on an assumption that without the bridge only 120 slots would be available, compared to 167 with the bridge. Porter currently has 172 slots There is no bridge.
[6] According to a report published by Bloomberg
[7] At a meeting of Toronto and East York Community Council on March 20, 2012, a City Finance official stated that the City had billed $58M in property taxes on the Island Airport lands for the period to the end of 2010, while the TPA had paid only $9M
[8] The City of Toronto successfully intervened in two cases in the Supreme Court of Canada:
In the first case, decided in 2010, Montréal (City) v. Montreal Port Authority, the Court stated:
“Parliament intended Crown corporations and managers of federal property to make payments in lieu on the basis of the existing tax system in each municipality, to the extent possible as if they were required to pay tax as owners or occupants.[para. 42]
“Thus, the purpose of the PILT Act is to establish a system of payments in lieu that reflects the actual tax situation in the places where federal property is located.” [para. 46]
In the second case, decided in 2012, the Court in Halifax (Regional Municipality) v. Canada (Public Works and Government Services) stated:
“Just as fairness to the Federal Crown demands that the Minister retain the discretion to come to his own opinion on property value, fairness to municipalities demands that the Minister’s opinion be informed by the tax system that would apply to the federal property in issue if it were taxable …
“But the Act is directed to fair and equitable PILTs with reference to what taxes would be payable if the site were taxable” …
“The Minister’s position is also at odds with the broader policy of the PILT Act, which is to treat municipalities fairly. It can hardly be thought either fair or equitable to conclude that 42 acres in the middle of a major metropolitan centre has no value for assessment purposes.
The City, having won at the Federal Court of Canada on this precise issue in 2010, hasn’t taken that Court’s decision back to the Disputes Resolution Tribunal, in relation to the Island Airport lands.
[9] According to City property tax assessment records, the Island Airport lands had a market value of $144,423,000 in 2012
[10] That didn’t stop the newly created Port Authority from suing the City for compensation for certain port lands transferred by the Harbour Commission to another city‑controlled agency prior to the TPA’s creation. Surprisingly, the City capitulated, agreeing in 2003 to pay the TPA $48M over the next ten years – another subsidy of the TPA by the people of Toronto..
[11] The lease of the City lands is known as the Tripartite Agreement, and contains a number of provisions intended to constrain the Airport’s impact on the other uses on Toronto’s waterfront – constraints that, for the most part, are ignored by the TPA and unenforced by the City.
[12] It may be that Air Canada has a similar arrangement with the TPA for its 15% share of the use of the Airport. And it maybe that this huge level of government subsidy is common in the airline industry. What makes it so glaring here is the Island Airport’s location – on some of the most valuable land in the City. There’s a reason airports are usually located well outside of urban areas, where land is far cheaper, and there aren’t alternative uses that are far more economically productive
[13] This table, compiled by CommunityAIR from the Port Authority’s annual audited financial statements, shows what happens when the Airport Improvement Fees (and City subsidies) are deducted from the Port Authority’s reported Net Income:
| Year
|
Net Income from Operations, before PILTs | City Operating Payments Owed Under Settlement[13] | Net Income after deducting City subsidies | AIFs, shown as income, but only to be spent on capital[13] | Net Income after deducting AIFs and City subsidies |
| 2004 | ‑$6,378,000 | $4,000,000 | ‑$10,778,000 | ‑ | ‑$10,778,000 |
| 2005 | ‑$5,201,000 | $4,000,000 | ‑$9,601,000 | ‑ | ‑$9,601,000 |
| 2006 | ‑$6,583,000 | $4,000,000 | ‑$10,583,000 | $140,000[13] | ‑$11,123,000 |
| 2007 | ‑$2,543,000 | $2,859,000 | ‑$5,402,000 | $1,983,000 | ‑$7,385,000 |
| 2008 | $253,000 | $2,475,000 | ‑$2,222,000 | $3,877,000 | ‑$6,099,000 |
| 2009 | $3,634,000 | $2,821,000 | $813,000 | $5,636,000 | ‑$4,823,000 |
| 2010 | $7,150,000 | $2,932,000 | $4,218,000 | $9,962,000 | ‑$5,744,000 |
| 2011 | $13,207,000 | $2,793,000 | $10,414,000 | $14,645,000 | ‑$4,231,000 |
| 2012 | $17,665,000 | $2,932,000 | $14,733,000 | $17,867,000 | ‑$3,134,000 |
| 2013 | $13,350,000 | ‑ | $13,350,000 | $18,000,000 | ‑$4,650,000 |
| 2014 | $14,938.000 | ‑ | $14,938.000 | $18,746,000 | ‑$3,808,000 |
| 2015 | $6,053,000 | $19,442,000 | ‑$13,389,000 |
[14] Ken Greenberg, Anne Golden, David Crombie, Jack Diamond, and Paul Bedford, writing in the Toronto Star on Feb 9, 2014
[15] Published by Dundurn Press, 2017