You can’t have your cake and eat it too, unless you’re on Toronto City Council

I had a fascinating day yesterday (and not just because Wellington Financial announced its new $200M fund and San Fran office opening); if you’ve ever used the Billy Bishop Toronto City Airport, this long and sorted story will be of interest (if not, bail quickly from this long post). And, it’ll probably make you wonder how much “fun” my volunteer Chairmanship at the Toronto Port Authority really is some days. But before I take you there, I need to back up a bit.

For years, it had been impossible for the TPA (owner/operator of the BBTCA) to come to terms with the City of Toronto on the quantum of Payments in Lieu of Taxes that the TPA should pay to the City. The basis of the dispute comes down to the valuations applied by the Municipal Property Assessment Corp. on the TPA’s few remaining parcels of land in the waterfront area. MPAC wants to value (and therefore tax) the BBTCA site as though it was normal industrial land ready to develop as either a condo site or some industrial use, such as a Magna automotive parts plant or gas power generating station. (MPAC has the same view on the TPA’s marine terminal at Cherry Street, for example, even though, according to the Parliament of Canada, it is to be used for purposes that involve the Port, shipping or relevant water-borne activities.)

The TPA’s position on this stuff shouldn’t surprise you.

The airport lands have been used for an airport since 1939. The land was actually “reclaimed” from the harbour waters for that purpose, in fact, on the specific encouragement of VC-holders Billy Bishop and Billy Barker who helped choose the location (for those who find that stuff interesting). It is zoned as parkland in the City of Toronto’s Official Plan, which tells you something about the City’s historical view on the likelihood that it’ll ever be anything other than an airport – how many Toronto parks have been re-zoned and turned into condos or a power plant in the last 50 years?

As a “park”, the BBTCA property has nominal land value for tax purposes. Moreover, the BBTCA is currently governed by something called the Tripartite Agreement (signed by the City, Feds and TPA in 1983), which states that the airport is an airport from 1983 – 2033. As such, no condos or manufacturing plants could be built there in any event by contract, but that hasn’t stopped MPAC from trying to charge the airport taxes at the industrial development rate since 1999.

David Miller got elected as Toronto’s Mayor in 2004, and spent much of his tenure trying to shut the airport down. Eventually, things got calm enough that in 2009, the City and TPA sought advice of an independent Federal PILT DAP Panel; that’s the national body that helps municipalities and Federal agencies figure out the quantum of PILTs that an agency should pay to its host municipality. This independent 2009 DAP Panel concluded that the Billy Bishop airport should be “taxed” in the same way as Pearson Airport: on a per passenger basis.

Unlike the BBTCA, given its unique location, I suppose the Pearson lands could be turned into a real estate development site since it is already surrounded by homes, low rise office towers and light industrial parks. But then there’d be no where to land larger planes. No where for vacationers to hop a flight to a Caribbean clime; no where for an entrepreneur to go to catch a ride to visit a potential customer in a far-off land. That’s why Pearson, and many airports across Ontario (such as Ottawa, London and Thunder Bay), pay a “per passenger” PILT to their host municipality, rather than some imaginary MPAC figure that follows the logic of “if I had wings, I could fly like a Bluebird”.

Using a per-passenger PILT model, these local governments benefit from their airport’s annual traffic growth, while not trying to tax the site as though it is anything other than an airport. That’s what they are, after all, and probably always will be. Airports; not condo sites in waiting.

The 2009 DAP Panel wrote a report and recommended that the BBTCA pay a PILT of $0.80/passenger to the City, as compared to the $0.94/passenger fee that Pearson pays its host municipality. The independent panel accepted the view that Pearson should pay a higher fee on the basis that 30% of Pearson’s air traffic was cargo in nature, which meant that Pearson pays no fees whatsoever on a huge portion of its daily traffic. Since the BBTCA client base is 100% passenger in nature and has no cargo traffic, a modestly lower fee was recommended by the DAP Panel.

Former Mayor Miller didn’t like that outcome, and appealed the DAP ruling to the Federal Court of Canada. The FCC sent the decision back for a new hearing for a bunch of procedural reasons. But the City never asked for a new DAP Panel to be struck. So, in an effort to get the issue finally resolved for the good of BBTCA passengers (who actually pay this PILT as part of their existing $20 Airport Improvement Fee), the TPA offered last year to pay Pearson’s $0.94/passenger rate.

How’s that for tough negotiating on the TPA’s part? Pay the same “tax mill rate” that your neighbor pays going forward. MPAC certainly lives by that sword when it comes to the residential community. As do all Torontonians.

In January of this year, the City Solicitor and Treasurer both accepted that proposal and jointly recommended it to the City’s Government Management Committee on Feb. 12th, 2013. On February 25th, the Government Management Committee, chaired by Councillor Paul Ainslie, approved their staff’s $0.94/passenger proposal and recommended it to the entire City Council. That vote was held yesterday, and I’ll get to those shenanigans in a sec.

I’m sure that no one in Toronto, whether they are a fan or foe of the airport, thinks the BBTCA should be an automotive factory, Co-gen power plant or high rise condo development; 89% love the airport as it is according to a 2012 Ipsos poll, and something like 11% probably want a park. But an automotive factory, Co-gen power plant or high rise condo development on the Toronto Islands? As someone named Jodie Parmar asked rhetorically on Twitter earlier today: “where’s the constituency for that?”

Why then should the site be taxed that way by MPAC?

Earlier this week, an ally of anti-airport Councillor Adam Vaughan (a man who is not fond of real facts) leaked the City Solicitor’s Feb. 12th report to the Toronto Star, which in turn reported that the City would have to write off $26 million if City Council approved this proposed PILT agreement. That’s where this so-called “$26 million tax arrears bill” comes from. And why is there a tax arrears bill, you ask, if the figures hadn’t been agreed to by the parties over the prior 10 years?

Because City Finance staff have been booking, for more than a decade, MPAC’s industrial tax calculations on the BBTCA as City revenue, even though the TPA had never agreed with the basic MPAC land values. Talk about counting your chickens before they’ve hatched.

It’s like a business sending a customer the same flawed invoice each and every year, booking the figures as though they were real revenue and accruing it as an outstanding liability, despite an arbitrator’s advice, and wondering why your external auditors get up in arms about your accounting treatment.

The TPA has already paid the City more than $13 million in PILTs over the years (including millions related to the BBTCA), on the understanding that the City was cashing these PILT cheques “on account” and that they were subject to the final resolution of the MPAC disagreement. However, because City booked these flawed MPAC-BBTCA tax figures each year as revenue, beyond the PILTs that have already been paid, some Councillors believe the $26 million differential is something being given away if the City Staff’s $0.94/passenger recommendation is approved by the entire Council. Since, in essence, the City would now be agreeing that MPAC was wrong, all along.

Funny what happens if people think they’re owed money, even if the foundation of the analysis is flawed. Councillor Gord Perks, a one-time Miller ally and airport opponent of longstanding, told the Toronto Star yesterday: “They should be paying their full share, and the offer we had in front of us wasn’t good enough.”

It took 5+ years of trying, but it was great to finally get an airport PILT deal settled with the City’s staff. Since 2006, passenger volume at the airport has increased from less than 25,000/year to the 2,000,000 being put through there today. There’s $1.9 billion of annual economic impact and 5,700 jobs that rely on the airport. This isn’t the time to play around on this stuff.

And, when you look at the 2012 survey conducted by Ipsos Reid (a representative, randomly-selected sample of 700 adults living in Toronto, including 300 who live downtown, South of Queen Street.), you definitely get the sense that Torontonians love the airport:

• Eight in ten (83 per cent) of those surveyed ‘agree’ that Billy Bishop Toronto City Airport (BBTCA) ‘is great for the economy of Toronto’ – including 85 per cent of those living downtown south of Queen.
• 84 per cent believe the airport is a great gateway, with the majority (87 per cent) saying it is a valuable asset for the city.
• Eight in ten (81 per cent) Toronto residents ‘agree’ that ‘Billy Bishop Toronto City Airport is an important part of Toronto’s future economic growth’
• Eighty seven per cent ‘agree’ that BBTCA is ‘a valuable asset for the city’
• Nearly half of all downtown residents (50 per cent north of Queen; 45 per cent south of Queen) have used BBTCA
• Nine in ten (89 per cent) Torontonians ‘agree’ that ‘the Toronto Port Authority provides important economic benefits to the City of Toronto’

And yet, there’s a fundamental flaw in the thinking of airport fans. The notion that everyone on City Council cares about the airport’s economic impact, job creation, logic, or the fact that 9 of every 10 of their constituents thinks the airport is a “valuable asset for the City”.

Politicians are often accused of following polls. But, when it comes to the BBTCA anyway, 19 of your City Councillors could care less what their constituents think, it seems. As one BBTCA passenger said after yesterday’s vote: “this is why people hate politics”.

To understand why someone would say that, you have to hear how the vote on the City Staff’s proposal went down.

When the Council meeting started at 9:30am, North York Councillor Shelly Carroll (the one-time Budget Chief for anti-airport Mayor Miller) “held” the proposed airport PILT agreement. That meant that the motion would be debated when its turn came up on Council’s agenda.

As lunch was ending just after 2:00 pm, Councillor Carroll “released” her hold on the motion. This meant that the vote on the City Staff recommendation would go ahead immediately without debate or discussion. It also meant that Councillors wouldn’t have a chance to hear from their own City Solicitor and City Treasurer as to why they were both recommending the PILT agreement in the first place. A smart tactic by Carroll, who turned out to be opposed to the motion itself; at first, she holds it up for debate, and then decides to release her “hold” four and a half hours later. What changed, so that Carroll didn’t think a debate was still required?

The City Government Management Committee, made up of a subset of Council, received the Staff briefing on Feb. 25th, and accepted the advice at face value (ie, the Committee voted in favour of the proposal). Whatever the Staff had to say after years and years of work on the topic wasn’t allowed to be heard in the City Council Chamber yesterday. And there was no chance for Councillors to ask questions of Staff about the facts, or debate the merits of the proposal with each other, because of Carroll’s procedural move. Which is strange, since they debate almost everything at Council; exhibit #1 is the three hour discussion later on Wednesday regarding the wisdom of having a Hero Burger joint facing City Hall on Queen Street.

But an airport with $1.9 billion of annual economic impact, that preserved 4,500 CAW jobs at the Bombardier Q400 aircraft plant in Downsview during the recession? Toronto’s largest manufacturing employer. Apparently there’s nothing to be debated on that front; if only that were true, as you’ll find out in a moment.

It goes to a vote, and the Council approves the City Staff recommendation by a 20-11 margin. The 20 who voted in favour were listed as: Paul Ainslie, Maria Augimeri, Raymond Cho, Gary Crawford, Vincent Crisanti, Mike Del Grande, Frank Di Giorgio, Doug Ford, Rob Ford, Doug Holyday, Norman Kelly, Josh Matlow, Mary-Margaret McMahon, Peter Milczyn, Ron Moeser, Frances Nunziata (Chair), Anthony Perruzza, Jaye Robinson, David Shiner and Michael Thompson.

The 11 who voted against were largely the same Councillors who voted against the BBTCA pedestrian tunnel easement in July 2011 (the one where the City saved $10 million in cash on its project to upgrade its utility mains to serve waterfront residents by partnering with the TPA on its privately-financed $82 million pedestrian tunnel project): Shelley Carroll, Janet Davis, Sarah Doucette, John Filion, Paula Fletcher, Mary Fragedakis, Chin Lee, Gloria Lindsay Luby, Pam McConnell, Gord Perks and Adam Vaughan.

There are 44 Councillors plus the Mayor, btw, which means that 14 weren’t there to vote. They were: Ana Bailão, Michelle Berardinetti, Josh Colle, Glenn De Baeremaeker, Mark Grimes, Mike Layton, Giorgio Mammoliti, Joe Mihevc, Denzil Minnan-Wong, Cesar Palacio, John Parker, James Pasternak, Karen Stintz, and Kristyn Wong-Tam.

That was at 2:11 pm.

Rookie Councillor Mary-Margaret McMahon, who represents the Beaches, immediately informed the Speaker that she mistakenly voted in favour of the motion, and asked her Council colleagues if they’d be gracious enough to allow the motion to be voted on again so that she could show her constituents that she voted the way she intended to vote all along. If you live in the Beaches, and use the BBTCA, take note of where she appears to stand on your airport. Josh Matlow has subsequently advised that he also voted in favour of the motion by mistake, and that Councillor McMahon spoke for him as well.

After four minutes, at 2:15 pm exactly, Council voted 36-1 to allow another vote to be held on the proposed BBTCA PILT. This caused no concern, since the original motion had passed the first time by a wide margin of 9 votes, which meant that allowing Councillor McMahon to switch her vote (no one in Council likely knew at the time that her colleague Matlow was relying on her Point of Personal Privilege motion, as well) would have no bearing on the vote’s actual outcome (as in, the motion would still have passed 19-12, rather than 20-11, had McMahon got her act together the first time and voted against rather than in favour).

When the vote was held the second time, also at 2:15 pm, not only did Councillors McMahon and Matlow switch their vote from “for” to “against” the City Staff proposal, they were joined in this move by Councillors Raymond Cho (of Scarborough-Rouge River) and Anthony Perruzza (of York West). Only four short minutes had passed between the first vote and the second vote.

You might wonder what new information arose between 2:11 pm and 2:15 pm that would cause Councillors Cho and Perruzza to reverse themselves, even though the Staff Report on the matter had been available to them for seven weeks at that point. Since there was no debate, and no Staff were allowed to speak to the facts of the deal, it’s unclear what made these key Councillors have a sudden change of heart in the span of four minutes.

Some have suggested the answer to that question lies in the actual vote record that follows.

Between the first vote at 2:11 pm and the second vote at 2:15 pm, six of the 44 Councillors entered the Chamber: Ana Bailão, Josh Colle, Mike Layton, and Joe Mihevc, who voted against the motion on the second go-round, and Councillors Cesar Palacio and Karen Stintz, who voted in favour on round two.

The original 11 votes against the airport motion grew to 15 in number with the four switchers (Cho, Matlow, McMahon and Perruzza), plus another 4 negative votes from four of the pool of six Councillors who weren’t there for the first vote at 2:11 pm (Bailão, Colle, Layton and Mihevc).

Although the Toronto Star described the second vote (the one that served to overturn the first one) as being a function of Councillors returning from a late lunch, in fact those 6 additional “late lunch” votes swung the PILT motion by just a net of two (naysayers Bailão, Colle, Layton, and Mihevc cancelling out Palacio and Stintz, who were in favour). The original vote passed by 9 votes, including McMahon and Matlow’s false start. Five votes with their switches. The anti-airport crowd only picked up net two of those votes via the six late entrants.

It was, in fact, any one of Cho or Perruzza who swung it to the one vote margin against the Staff recommendation (19-18) when they inexplicably switched sides over that short four minute period between the two votes. I’m anxious to hear about the facts that swung these Councillors to vote in favour at 2:11 pm, only to vote against the same motion at 2:15 pm.

Which, interestingly, put them on the winning side each time.

At least Councillor Matlow was clear about his reservations before the big day arrived. According to the Star, Councillor Matlow was dead set against the recommendation of his own Solicitor and Treasurer:

“In general, the TPA would like to pay only a percentage of the arrears that it owes in property taxes and so council has to decide whether or not a negotiated deal is adequate, or should we push for them to pay the many millions of dollars that it owes the city,” said Councillor Josh Matlow, who declined to discuss the proposal in detail.

“Unless I hear a remarkable argument that I haven’t considered yet, I don’t know anyone, including my neighbours, that could get away with telling any government that they’d like to bargain their way to paying less tax than they owe.”

But why did Cho and Perruzza vote in favour of the Staff recommendation the first time? Only Councillor McMahon formally advised the Council that she’d voted in error the first time around (at least as far as the television audience saw); according to her colleague, John Matlow, she spoke for them both. But did Cho and Perruzza also press the wrong voting buttons? And how often does it happen that 13% of Councillors present vote in error on an issue that matters to 2 million airport passengers?

For those who wonder what we’ve been up to over these past five years, the TPA has already paid the City of Toronto one hundred per cent of the amount of PILTs for all of its properties, including the BBTCA, as recommended by the 2009 Federal DAP panel for the 1999 – 2012 period.

But, it appears that some Councillors want to have their cake and eat it to. Do any one of the following Councillors think the BBTCA site should ever be turned into Condos, a Magna auto parts plants or a Co-Gen power plant?: Ana Bailão, Shelley Carroll, Raymond Cho, Josh Colle, Janet Davis, Sarah Doucette, John Filion, Paula Fletcher, Mary Fragedakis, Mike Layton, Chin Lee, Gloria Lindsay Luby, Josh Matlow, Pam McConnell, Mary-Margaret McMahon, Joe Mihevc, Gord Perks, Anthony Perruzza, Adam Vaughan.

Recognizing that I’m just trying to make a point here, but if the TPA applied to City Hall to turn the BBTCA site into high rise condos or an industrial plant and move the existing airport business to Downsview, with its Q400-ready runways, would these 19 Councillors be okay with that? We know, almost for certain, that a subset of them would want a park on the site. But condos or a natural gas generating station? The stuff that generates industrial taxes?

Would these 19 Councillors approve that? No one I know believes that would happen in 100 years.

So, why then do they believe the airport site should have been taxed as a potential condo development or automotive plant for the past 10+ years, and going forward?

Councillor Carroll told the Star that 94 cents/passenger wasn’t enough: “We think we could have done better and so I can’t support it at this time.” What is it about the BBTCA site that suggests passengers should pay more than Pearson? The independent 2009 DAP Panel thought BBTCA passenegers should pay less, in fact.

According to the Toronto Sun, Councillor Vaughan said he wants to ensure the TPA pays its taxes: “There is a casino’s worth of revenue being given away to the federal government. Is the deal as good as it could be? I think it could be a better deal.”

He’s probably the last person who’d be in favour of putting an industrial plant or five high rise towers at the foot of Bathurst Street, but that doesn’t mean he isn’t going to try to grab the taxes on that basis just the same.

And, when he talks about the “Federal government”, although the BBTCA is owned by the Crown, it’s the BBTCA passengers who pay the City PILT. By law, Parliament can’t give the TPA a nickel; it has to be a self-sustaining “business enterprise” and pay its PILTs out of business revenue — and has no taxing authority itself. But, for Vaughan, any deal with the TPA is a bad deal. He needs a piñata to beat to keep his name in the paper in the hopes he’ll have a shot at the Mayoral race should Olivia Chow not run next time around.

And, as regular readers of this space know, Vaughan isn’t interested in the truth in any event, as is evidenced by my nine letters pointing out his falsehoods about the BBTCA over the past five years. So why would he worry about inflated MPAC calculations that happen to serve his political purposes?

Strangely, not one of the 19 Councillors against the deal actually articulated publicly what they thought should be fixed about the Staff proposal. Other than more is better.

They just appear to want BBTCA passengers to personally pay the MPAC industrial tax value, despite there being no chance that these same 19 Councillors would ever allow condos or a natural gas plant to be built there. Somehow, by not rolling over and jacking up the current $20 BBTCA Airport Improvement Fee by between $4 and $11 per outbound passenger to cover MPAC’s crazy calculations, this makes the TPA tax “deadbeats”. Unlike what your Mother once told you, perhaps you can have your cake and eat it, too. At least at City Council.

That’s why the TPA said yesterday that it has “no fear” of a new independent DAP Panel being called to clear the airport PILT up, once and for all. That’s what we did in 2012 when the agency – not the City – asked for a DAP Panel’s advice on all of the other TPA properties (that hearing was in January 2013). If these City Councillors can’t settle on the eminent fairness of Pearson’s $0.94/passenger formula before summer, accepting the advice of their own Solicitor and Treasurer, the TPA will consider requisitioning a new DAP Panel to provide PILT advice on the BBTCA as well.

The wisdom of a panel of independent experts is even more appealing after yesterday’s bizarre chain of events.

To the customers of the airport, all I can say is that we’re trying to do right by you. There are enough fees on each plane ticket as it is. There’s no reason to raise them by another $4-$11/passenger, just to satisfy MPAC’s illogical valuation rationale.

Does that make us “tax deadbeats”? I’d prefer something akin to “customer advocates”.

MRM
— updated on April 5, 2013 from original posted on April 3, 2013 to provide for Councillor Matlow advising his first vote in favour was an error on his part —
— updated on April 8, 2013 from original post to provide for Councillor McMahon advising that her initial mistaken vote was “genuine” and not part of a pre-arranged scheme to delay the vote until enough anti-airport Councillors entered the Chamber to overturn the first vote —

(disclosure – the post, like all blogs, is an Opinion Piece and personal view and does not reflect the views of the TPA, board or staff, or the Federal government.)