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“No more Island Airport subsidies” they promised. What’s going on?

Press release: July 19, 2023

On the Friday before the holiday weekend, Transport Canada announced it will provide up to $30M to “to build a new pre-clearance facility … for United States-bound travellers” at Toronto’s Island Airport [1]. But promises were made when Ports Toronto was created in 1998 that port authorities, including Ports Toronto, would no longer be subsidized. That was enshrined in the Canada Marine Act.

The Toronto Island Airport terminal
The Toronto Island Airport terminal

In debates when it was being considered in the House of Commons, in 1997, it was clear that the Act was intended to put an end to government subsidies that were rampant in Canadian ports.


Here’s what was said:

Any port can apply to become a port authority, CPA as we affectionately call it. To be accepted it has to meet four criteria. It has to be financially self-sufficient (our emphasis), it must have diversified traffic, it must have strategic significance to trade and a link to a major highway or railway line.”

Perhaps the most important accountability mechanism in the bill is the provision that ports will have to go to the private sector for financing(our emphasis). As a result, all port related development plans requiring investment will be subject to commercial risk assessment.”

“overall levels of subsidization, direct and indirect, will be significantly reduced or eliminated.”

“Perhaps the most important accountability mechanism stems from the fact that ports will have to raise their financing in the private sector. Port development aspirations will be subjected to ordinary measures of commercial risk. The law ensures that with few exceptions, appropriations cannot be made for port deficits. This means they have to be more efficient than they are today, and that the government will not cover their liabilities.”

Mr. Stan Keyes on December 3, 1997:



This new subsidy would appear to contravene that prohibition [2].


“This is, really, a subsidy for the Airport’s terminal owner, Nieuport Aviation, that wildly overpaid to buy the terminal, and is now, with Porter transitioning to Pearson, facing a significant decline in its expected business.” said Brian Iler, spokesperson for Parks not Planes. “There is no other tenable explanation. Is that a wise use of scarce taxpayer dollars – let alone a permitted one?”


Nieuport, whose only business is owing and operating that terminal, paid an estimated $700M in 2015 for a terminal that Porter Airlines built in 2010 for approximately $49M [3].


Why pre‑clearance?

US Customs pre‑clearance is preferred by the US government as it enables US authorities to exclude inadmissible passengers and prohibited goods before a flight commences, avoiding the difficulty of dealing with them on U.S. soil [4].

Why would our government pay?


US Customs staff costs for the Island Airport are estimated at $10M per year, which has to be paid by someone.


If Porter has 450,000 passengers travelling to the US (as it did pre‑COVID), that comes to ~$22 per passenger.


Now, even though the Airport was supposed to be free of subsidy, Canadian taxpayers are going to subsidize passengers to the US from the Island Airport.


Air Canada and other airlines operating out of Pearson objected to customs pre‑clearance at the Island Airport back in 2010 [5], when it was being pushed by Porter, on the ground that it might take valuable resources away from Pearson.

Airport lease has less than ten years left

A lease (called the Tripartite Agreement) for an essential portion of the Airport lands expires on June 30, 2033, and there is no indication the landlord, the City of Toronto, is contemplating renewing it.


“Why would anyone invest $30M – let alone taxpayers’ money ‑ in a business like Nieuport’s that has less than ten years – at best – before the Airport’s lease expires?” Iler asked.

Maybe less …

Even before 2033, the future of the Island Airport is not assured:

CYTZ airport arrivals and departures


Not the only subsidy

This new proposed subsidy comes in addition to a $36 million City subsidy derived from a special property tax regime that allows the Island Airport to pay far lower taxes than most other property owners have to.


Parkland, not a noisy polluting climate‑damaging airport

In 2033 the Tripartite Agreement ends. We need a bigger vision of what the 215‑acre airport land could bring to a rapidly expanding city desperately in need of more park space.


It is incongruous to still be operating an island airport that generates noise, pollution and traffic in a waterfront increasingly devoted to recreation, when we now have quick train links to Pearson Airport.


“When the devastating impact of burning fossil fuels is increasingly obvious each day, why would anyone spend money to encourage flying, the most climate‑damaging form of transportation? Why hasn’t the federal government applied a climate lens to decisions like this?” asked Iler.


For further information on the Island Airport and its future, please see Parks not Planes’ Briefing Note.


Contact:

Brian Iler, Spokesperson

Parks not Planes



 

[1] According to Porter (See its 2010 failed preliminary prospectus, at page 8), “Space required for U.S. customs preclearance at BBTCA has already been built within the new terminal facilities and will be available if customs preclearance is approved by the U.S. government.” If so, just what is the feds’ $30M being spent on?


[2] Section 25 of the Canada Marine Act provides:

Even if the port authority or subsidiary is an agent of Her Majesty in right of Canada as provided under section 7, no payment to a port authority or a wholly-owned subsidiary of a port authority may be made under an appropriation by Parliament to enable the port authority or subsidiary to discharge an obligation or liability unless


(a) the payment

o (i) is made under the Emergencies Act or any other Act in respect of emergencies,

o (i.1) is a loan made by the Canada Infrastructure Bank under the Canada Infrastructure Bank Act,

o (ii) is a contribution in respect of the capital costs of an infrastructure project,

o (iii) is a contribution in respect of environmental sustainability, or

o (iv) is a contribution in respect of security, or


(b) the authority for the funding of Her Majesty’s obligations is an agreement that was in existence before March 1, 1999.



[4] While serving as Secretary of Homeland Security, Jeh Johnson explained this in September 2014 to the Council on Foreign Relations: "To use a football metaphor, I'd much rather defend our end zone from the 50-yard-line than from our 1-yard-line". [from wikipedia]


[5] Globe and Mail August 17, 2010 “Porter’s Growth Strategy Thrown for a Loop”.


[6] In a revealing letter, Deluce also said that the company’s business was affected by the success of the Union-Pearson Express train, which whisks passengers to Pearson in 25 minutes. Recall the earlier failures of City Express, and Air Ontario, at the Airport. If, now, three efforts have not achieved financial success, and given the immense support Porter has been given by Ports Toronto, it is difficult to make the case that the Airport has been, or can be, financially successful.


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