The third item in this series continued the examination of the number of permissible flights (slots) at the Billy Bishop Toronto Centre Airport (BBTCA) under 1983 Tripartite Agreement (Agreement).  This instalment looks at taxpayers and the TPA.  http://www.torontoport.com/PortAuthority/media_content.asp?id=439

The TPA version

Fact: This (Taxpayers are funding the BBTCA’s operations, including a planned $900,000 investment in several new noise barriers) is absolutely false. BBTCA operations are funded through revenue received from operators and an Airport Improvement Fee (AIF) paid for by passengers using the airport.
Furthermore, BBTCA actually generates revenue for two levels of government: Last year, the TPA paid approximately $6.2 million in Payments in Lieu of Taxes to the City of Toronto, and $612,000 in royalties to the federal government.

The CommunityAIR version

To believe the TPA’s fact is to believe that no financial activity that came before 2008 has any bearing on their version of the truth.

For the previous nine years their operations lost money.  The federal government set the TPA up to run as a business and all businesses exist to make a profit.  The TPA is no different.  So, how can a business suffer constant losses in the millions of dollars for nine years continue to keep operating?  One reason that stands out is the infusion of tax dollars in one form or other over the years.

Direct method of the infusion of tax dollars

In 2001, the TPA launched a lawsuit against the City over land that the TPA claimed the City had misappropriated.  In 2003, under the terms of a negotiated settlement of the lawsuit, the City paid the TPA tax dollars to the tune of $10 million, which, according to the Tassé Report would provide for TPA self sufficiency.  The City withheld payment to force the TPA to pay $52 million in the equivalent of taxes for the airport lands.  Because of penalties and charges, the $10 million became $11.7 million when they finally settled the matter in 2009.

In 2004, Public Works Canada recommended a payment of $35 million tax dollars to the TPA to settle the fixed link cancellation.  The recommendation came with the observation, “This will again cause the TPA to be self sufficient, which it would have been with the fixed link.”  Clearly someone in the federal government thought TPA self-sufficiency important enough to throw $35 million tax dollars at it.

From 2002 to 2005, the TPA carried $808,000 on its books as grants given under federal government’s Airport Capital Assistance Program.

 Indirect method of the infusion of tax dollars.

As indicated above, the City calculated that the TPA owed $52 million in Payment in Lieu of Taxes (PILTS), a crown corporation responsibility for occupying municipal land.  The charge was from 2002 to 2009.  In 2009 the TPA agreed to pay $6.4 million.  City taxpayers were out $45.6 million.

The 2009 settlement also gave the TPA $.06 for each passenger who uses a City ferry to get to the Toronto Islands since the ferries travel across TPA water.  In 2007, over 1,110,000 passengers travelled to the islands.  At those numbers the City stands to give up over $65,000 much needed tax dollars annually.

The TPA also benefits in paying less tax by offering its airport facilities and services to its principal tenant at a cost far below what Pearson charges, in addition to allowing it an operating monopoly.  To argue that the TPA can charge what it wants is skirting the issue.  To extol the airport’s location, then to undercharge for its use is not only a questionable business practice, it short changes the taxman.

According to figures available on each airport’s website, a full Q400 costs $513.62 more to land at Pearson than at BBTCA.  Porter Airlines, the BBTCA’s main carrier, currently lands about 300 planes a week.  Over a 52-week year, the TPA is missing out on a possible $8,012,472 ($513.62 X 300 landings a week X 52 weeks = $8,012,472) by not matching Pearson’s landing charges.

On the other hand, the TPA makes it up by charging more for departing planes, $350 more than at Pearson.  Porter also currently runs about 300 departures a week.  Over a 52-week year, the TPA makes $5,460,000 more than Pearson on departures ($350.00 X 300 landings a week X 52 weeks = $5,460,000).

The TPA’s annual shortfall is $2,552,472 (landing revenue of $8,012,472 - departure revenue of $5,460,000 = $2,552,472).

The Department of Finance advises that making government assets (in this case the airport) available at below market value is considered a “tax expenditure”, a direct subsidy.  That’s a $2.5 million annual subsidy benefiting the TPA, $2.5 million it is not paying tax on.

Prior to 2008 when the Airport Improvement Fees actually made a difference to the TPA’s bottom line, the airport’s operations were funded through tax dollars.  To infer otherwise, noise barriers notwithstanding, is disingenuous.

As for the approximately $6.2 million in PILTS to the City of Toronto, put another way, the TPA could claim they stiffed the City for $45.6 million.  And the $612,000 in royalties to the federal government is a small return considering all the tax dollars thrown the TPA’s way.

Bob Kotyk