Report to/Rapport au :

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

and Council/et au Conseil

23 April 2003/le 23 avril 2003

Submitted by/Soumis par : Kent Kirkpatrick, General Manager/Directeur général,

Corporate Services Department/Services généraux

Contact/Personne ressource : D. H. McCaslin, Manager, Real Estate Services/

Gestionnaire, Services immobiliers

580-2424, ext. 22595, Douglas.McCaslin@ottawa.ca

Ref N°: ACS2003-CRS-RPR-0039

SUBJECT:

OBJET :

AGREEMENT FOR THE PLANNING, DEVELOPMENT, OPERATION, & OWNERSHIP OF THE CARP AIRPORT

ENTENTE CONCERNANT LA PLANIFICATION, L’EXPANSION, L’EXPLOITATION ET LA PROPRIÉTÉ DE L’AÉROPORT DE CARP

REPORT RECOMMENDATIONS

That the Corporate Services and Economic Development Committee recommend Council:

1. Delegate Authority to the General Manager of Corporate Services to negotiate and execute an agreement with West Capital Developments (1514947 Ontario Inc.) for the preparation of a Business Plan regarding the planning, development, operation, and ownership of the Carp Airport as outlined in this report;

2. Continue, after 31 December 2003, the current head lease arrangement with the West Carleton Airport Authority on a month-to-month basis until West Capital Developments has either refused to enter into the agreement or until a final decision can be made by the City upon receipt of the Business Plan.

3. The City consent to any lease extensions for the existing land leases made by the West Carleton Airport Authority for its existing sub-tenants at the airport as outlined in this report;

4. Approve, subject to the criteria outlined in this report, a loan guarantee not to exceed $200,000 for the West Carleton Airport Authority in support of the construction of a 20-bay hangar on the Carp Airport Property.

RECOMMANDATIONS DU RAPPORT

Que le Comité des services organisationnels et du développement économique recommande au Conseil:

1. de déléguer au directeur général des Services généraux le pouvoir de négocier et de signer une entente avec la société West Capital Developments (1514947 Ontario Inc.) en vue de l’établissement d’un plan d’affaires concernant la planification, l’expansion, l’exploitation et la propriété de l’aéroport de Carp, comme le prévoit le présent rapport;

2. de renouveler, après le 31 décembre 2003, le bail principal conclu avec l’administration de l’aéroport de West Carleton de mois en mois jusqu’à ce que la société West Capital Developments ait refusé de conclure l’entente ou jusqu’à ce que la Ville soit en mesure de prendre une décision finale, une fois qu’elle aura reçu le plan d’activités.

3. d’autoriser la Ville à consentir à la prolongation des baux fonciers signés par l’administration de l’aéroport de West Carleton relativement aux sous-locataires actuels de l’aéroport, comme le prévoit le présent rapport;

4. d’approuver, sous réserve des critères énoncés dans le présent rapport, une garantie de prêt pour un montant maximal de 200 000 $ en faveur de l’administration de l’aéroport de West Carleton, pour la construction d’un hangar à 20 baies sur le terrain de l’aéroport de Carp.

BACKGROUND

Recent History of Carp Airport

The Carp airport property consists of 392.2 hectares (962.2 acres) of rural land that is zoned Airport Industrial (MA) and is improved with an airport facility that currently occupies less than half of the site area as shown on Annex A.

In 1996, the main runway and other components of the airport were upgraded at a cost of $2.1 million. This work was carried out under the Canada-Ontario Infrastructure program with the former Regional Municipality of Ottawa-Carleton (RMOC) paying a one-third share of the total costs.

The ownership of this airport was then transferred, by Agreement, from Transport Canada to the RMOC on 14 March 1997 and subsequently to the City of Ottawa when amalgamation took place on 1 January 2001.

The West Carleton Airport Authority (a non-profit Corporation) operates the airport based on annual leases from the City of Ottawa. The current lease is scheduled to expire as of 31 December 2003.

A Board of Directors consisting of seven members (all volunteers) is responsible for the operation. Following regional amalgamation the new City of Ottawa now appoints four members of the Board, with the remaining members elected or appointed by users, residents and local businesses. A General Manager (now an employee of the City of Ottawa) is responsible for the day-to-day operations of the airport.

Significant support is supplied by the City of Ottawa by way of in-kind services, including the supply of vehicles, repairs to equipment, and supply of road signs.

There are ten (10) separate sub-tenant facilities, including one facility just completed in March 2003, located on leased lands at the airport occupying a total land area of only approx. 8 acres. These sub-tenants also lease from the Airport Authority on an annual basis.

The tenants pay rent based on a formula related to the area of land leased and an annual cost adjustment is applied. The tenants also pay an annual Airport Maintenance Charge, which is also shared amongst the tenants based on pro-rated areas. However, only 75% of the maintenance costs are recovered under this formula that was established during the era that Transport Canada owned and operated the airport.

As a result, the airport has operated with annual operating deficits that have required the City to subsidize the operations since the acquisition from Transport Canada with a direct grant each year. While the grant amount has been reduced in recent years, the City still provides a significant amount of in-kind services, including the supply of vehicles, repairs to equipment, etc. The total direct and indirect costs incurred by the City for the airport operations are estimated at approximately $100,000 annually.

The Carp Airport, however, provides direct and indirect economic benefits to the new City in terms of property tax assessment, employment, the service it provides to the aviation community, and the economic spin-off to the overall business community. The unused lands also have additional value potential which could be realized through the completion of a master plan/business plan process and subsequent land leases/sales.

Under the agreement with Transport Canada, the City is required to operate the airport until 14 March 2007. Prior to that time, the City can only dispose of lands that are surplus to the airport’s operational requirements. Any sale proceeds must be directed to a separate account for airport operations and only spent for that purpose prior to 14 March 2007.

However, after this date the City may sell the entire airport property, which could conceivably be with the airport closed, and retain the proceeds of the sale and any unspent funds in the operating account. This means that the City is currently committed to operate the airport only until 14 March 2007 with the result that tenants at the airport have not been able to secure long-term leases for their facilities.

As a result, some tenants are delaying expansion plans until this situation is clarified. This issue is also negatively affecting the ability to market the airport to new tenants, particularly those who may need to make sizeable capital investments in order to operate.

There are also a number of other issues that currently pose a constraint for major development at the Carp Airport as follows:

1. Lack of a Current Master Plan:

The last master plan for the airport was completed in 1977 and was updated in draft form in 1986. This master plan does not take into consideration the events that have transpired at the airport over the last 16 years such as the major infrastructure upgrades in 1996, the location of new buildings and additions nor the technological modifications that affect long term runway alignments and modern aircraft runway requirements.

2. Lack of a Servicing Plan:

Currently, there is no servicing plan, which would detail how water, wastewater, storm water, and other services would be accommodated if there were additional major land development at Carp. This plan is a fundamental requirement of any business park development and is particularly important in rural areas such as the Carp Airport, where there is a reliance on groundwater.

3. Lack of Capital Funding:

The investment in upgrading the airport runway and ancillary systems in 1996 succeeded in stabilizing the operation of the airport and permitted the major tenants to remain in operation. However, there exists no capital funding plan which will ensure that further necessary airside improvements and the servicing required to support major development can be implemented. Capital improvements will be required in the future to attract new investors who will help offset the operating deficit.

Current Planning Designations and Policies

The current planning designations and policies provide for an airport as being the primary use of the Carp Airport property but allow for a potentially wide range of private sector development and economic activity.

RMOC Official Plan:

The property is designated the Carp Airport.

Section 4.1.2.12 of the RMOC Official Plan provides that a study be undertaken as a basis to support increased economic activity at the Carp Airport property and in particular identify:

a) servicing improvements need to support the development of the Carp Airport;

b) permitted uses consistent with the servicing requirements

Section 10.3.8.1 provides for consideration of an extension of central services or the installation of communal services on a large scale, such as for entire villages or for the Carp Airport, provided that a servicing and development study is prepared.

Section 11.6.1 requires detailed noise studies above the 25 NEF/NEP (Noise Exposure Forecast/ Noise Exposure Projection) to ensure compatibility of proposed developments with aircraft noise.

Township of West Carleton Official Plan:

Section 6.12(h) of the Township of West Carleton Official Plan designates the Carp Airport property as Rural Industrial and noted as a Special Airport Area on Schedule A to the OP.

Township of West Carleton Zoning By-law #266-1981:

Under Section 17 of By-law #266-1981, the Carp airport property is designated as an Airport Industrial Zone (MA) with the following permitted uses:

an accessory dwelling house;

an airport;

an airstrip; an assembly plant;

a building for research, design or testing;

a bulk tank;

a business office;

a fabricating plant;

a factory outlet;

a gasoline or aircraft fuel pump island and storage tanks;

a maintenance garage;

a manufacturing plant

a merchandise service shop

an open storage area accessory to a permitted MA use;

a parking lot;

a printing establishment;

a transportation depot; and

a warehouse.

Under Section 17.3(b) of By-law, development of the western part of the property, being Part Lots 13 & 14, Concession 4 Huntley Ward, cannot be developed until such time as the Master Plan for the Carp Airport has been approved and/or the municipality has approved a site plan.

New Official Plan Provisions

Section 2.3.2.4.d of the March 2003 Draft Official Plan provides for the creation of new Public Service Areas to support economic development in unique situations in the rural area, such as for the Carp Airport, where:

1. Alternative servicing arrangements to support the economic development have been evaluated through the environmental assessment and provision of a new Public Service Area is required,

2. The mechanisms for financing capital costs, operating costs and infrastructure replacement reserve costs is established,

3. The definition of the Public Service Area boundary and the terms of provision of service are established.

Section 3.10.2 designates the Carp Airport and sets policies with respect to land use as follows:

1. The Carp Airport is designated on Schedule A to this Plan with the intent of providing airport facilities that serve the general aviation needs in Ottawa.

2. The land uses permitted in the designation are aviation and other land uses associated with an airport.

3. The City will undertake a study of the Carp Airport and lands in the vicinity of the airport in order to explore opportunities to strengthen the local economic and employment role of the facility. The study will consider:

a) The boundaries of the area;

b) Land use in and around the airport;

c) Transportation and servicing issues;

d) Economic benefits to the City.

4. The study referred to in Policy 3 above may also explore the viability of limited residential development adjacent to the airport, where the residential development includes provisions for aircraft storage.

Section 4.8.7.9 provides that for the Carp Airport no noise-sensitive uses will be permitted within the 30 NEF/NEP contour and Section 4.8.7.10 provides that development applications that propose noise-sensitive land uses between the 25 NEF/NEP and the 30 NEF/NEP contour will require noise studies.

Property Assessment & Municipal Capital Facility

The total assessed value of the taxed property is $5,637,000 of which $3,306,550 is exempt (City portion of assessment related to “municipal airport facilities”).

The City’s “municipal airport facilities” portion of the Carp Airport property, which is currently exempt from property taxes, could potentially be transferred to a new owner under a Municipal Capital Facility Agreement (MCFA) as provided by Section 110 of the Municipal Act. This legislation facilitates and provides for substantial flexibility in permitting a municipality to enter into agreement with a private sector “partner” and allowing both parties to utilize their respective corporate advantages. Under a MCFA, the property tax exempt status for the “municipal capital airport” facilities could possibly be maintained.

Section 110 of the Municipal Act includes provisions that:

A Municipality may enter into agreement for the provisions of Municipal Capital Facilities by any person;
The Agreement may allow for the lease, operation, or maintenance of the facilities;
The Municipality may provide financial or other assistance at less than fair market value, or at no cost, and assistance may include: giving or lending money and charging interest; giving, lending, leasing, or selling property; guaranteeing borrowing; and providing the services of employees of the municipality;
Assistance applies only to the facilities set out in the agreement; and
Property on which a municipal capital facility is situated can be made exempt from taxation for municipal & school purposes provided the site is: a) subject to a Municipal Capital Facility Agreement; b) owned or leased by a person who entered into the agreement; and the facility is c) entirely occupied and used for a service or function provided by a municipality.

Ontario Regulation 46/94 further includes provisions that:

A Municipal Capital Facility includes land, as defined in the Assessment Act, works, equipment, machinery and related systems and infrastructure;
The range of permitted uses for Municipal Capital Facilities includes facilities related to the provision of transportation services; and
Municipal Capital Facilities may be the subject of an agreement and tax exemption even if they are contiguous with or part of land or works that are not municipal capital facilities.

There is no requirement under the provisions of the legislation, with respect to a Municipal Capital Facility Agreement for a transportation facility, that the municipality owns or agrees to purchase or will own, on reversion of the property, the municipal capital facility. In the case of the Carp Airport property, the “municipal airport facilities” might be transferred to a private owner with the operations to be provided under a Municipal Capital Facility Agreement.

REQUEST FOR EXPRESSIONS OF INTEREST PROCESS

In view of the interrelationship between developing the lands at the Carp Airport and managing its on-going operation, staff recommended that a single party be responsible for coordinating both of these functions and that a request for expressions of interest be initiated to explore private sector options to address the operational and development issues that have been summarized above in this report.

Council Authority:

On 1 July 2001 City Council directed staff to:

1. prepare and issue an expression of interest document for the management, development, and future ownership of the Carp Airport; and

2. evaluate the proposals received in response to the expression of interest call and bring a recommendation back to the committee on the next steps.

To ensure that a number of important objectives are satisfied in managing and developing the airport, the Council approved report indicated that the EOI document set the following conditions for the chosen proponent:

1. commit to operating the airport at defined levels of service with appropriate maintenance standards;

2. commit to specific capital improvements over time which will benefit the majority of the tenants at the airport;

3. comply with the relevant City regulations and official plan policies;

4. support the City’s efforts to recover the capital and operating investment already made in the Carp Airport;

5. comply with the terms and conditions of the Transport Canada agreement with the City;

6. protect the existing jobs and tenancies at the airport over a reasonable period of time;

7. evaluate and address all environmental related issues associated with developing the Carp Airport lands; and

8. ensure that any proposed development supports the relevant official plan policies for the rural area and the objectives of the rural community including protecting and adding to the employment base in this location.

The report also set out that in order to assess the full potential of the airport, the following planning steps should be completed by the successful respondent:

1. Master Plan:

Prepare a detailed master plan that would translate the prescribed role for the Carp Airport into specific physical requirements, so that lands for new or expanded runways and other airport facilities can be protected and the location of potential development lands can be defined.

2. Servicing Plan:

Development of land at the airport will require building and upgrading services such as roads, water, and wastewater and storm water facilities. This plan will determine how the airside and non-airside lands will be serviced.

3. Investment Plan:

The business plan prepared in 1994 recommended that the sale/lease of lands at the airport be the basis for funding the operation of the airport. The investment plan will dictate how this will be implemented.

4. Marketing Plan:

The Carp Airport Market Assessment study completed in April 1999 for the Regional Government recommended a market strategy and program be designed and implemented for the Carp Airport that would initially focus on the growth of existing tenants and exploitation of any existing business relationships. The market strategy could also be expanded to target new investors for the land uses proposed through the master plan exercise.

The main objective for the Carp Airport property is to increase the economic activity and employment base at this location. In this respect, a proposal for an alternative main use for the airport property after 14 March 2007 was recognized as being a potential result of seeking private sector interest in this property.

Request for Expressions of Interest:

Due to the technical nature of airport operations and adjacent development, the services of LPS Aviation Inc. were obtained to assist in:

1. the review of the various agreements with Transport Canada and Nav Canada, previous studies regarding the Carp Airport, and current Carp Airport operations, and

2. the preparation and issuance of the request for expressions of interest document.

During the preparation of the request for expression of interest document, LPS noted a potential significant constraint on development at the Airport because of the provisions of the Aviation Services and Facilities Agreement (ASFA) with Nav Canada.

While Nav Canada pays its operating costs at the Carp Airport, under the Transport Canada agreements assumed by the RMOC and now the City, it pays no rent. At the same time, Nav Canada has the right to install equipment anywhere on the airport property without incurring additional rent and also an automatic option to renew the ASFA, at no cost, for so long as the airport continues to be managed, operated and maintained as a certified (registered) airport. The ASFA applies to all of the airport property and the rights and obligations of the ASFA will continue to apply to the entire airport property identified even though that property may be leased, licensed, or otherwise divested or severed from the airport itself.

In addition, even if the airport were closed in 2007, Nav Canada would continue to have the right to maintain any En Route Navigational Facilities (e.g. a radio beacon) after that date.

While there has never been a problem between the airport authorities and Transport Canada/Nav Canada and the relationship has in the past, and continues to be, one of mutual cooperation, the continuation of Carp Airport as a viable operation will require the further cooperation of all stakeholders including Nav Canada. Renegotiation of the ASFA might be a critical issue with respect to the viability of future development at the airport.

After consultation with Nav Canada, the request for expressions of interest document was prepared to allow for a full range of responses from maintaining the airport to a completely new development after 14 March 2007. The document included the planning requirements for the projects and its objectives as set out in the 1 July 2003 Council report and also made reference to the potential for a Municipal Capital Facility Agreement.

A notice of the Carp Airport Request for Expressions of Interest was then placed in the 2002 Winter Issue of the Canadian Airport Management Magazine. Advertisements were placed in both local and national newspapers in mid-July 2002 and the request for expression of interest documents were issued by LPS at the same time with a closing date for 23 August 2002. A briefing session was scheduled for 31 July 2002 at the airport.

At the request of some key potential respondents, the closing date was then changed to 27 September 2002 with the briefing being rescheduled for 21 August 2002.

22 people, not including City staff or its consultants, representing 15 different organizations including Transport Canada and Nav Canada, attended the briefing session. At the briefing, a further request to extend the closing date to 11 October 2002 was made and agreed to by all in attendance.

Expressions of Interest

Four (4) expressions of interest were delivered to LPS from the following organizations:

· Carp Airport Authority (CAA),

· NorDan Aviation (NA),

· Shenkman Corporation (SC), and

· West Capital Developments (WCD).

Carp Airport Authority Response

The CAA has the goal of making the Carp Airport a gateway to Ottawa for General Aviation and the Corporate World with the vision of the airport as a showcase for the facilities and capabilities offered by the City to the corporate community.

The plan involves a mix of industry to include the service, manufacturing, and commercial sectors. At the same time, the CAA wants recreational flyers to adopt Carp as their airport of choice within the Ottawa Region. The focus would be on General Aviation with the airport having modern facilities including weather briefing, fuel maintenance, and training facilities.

The CAA’s specific objectives are:

· Financial Self Sufficiency by 2007;

· A positive cash flow and generation of return to the City by December 2003;

· Completion of an Airport Master Plan to be submitted to the City by December 2003;

· Both conventional and package solutions will be reviewed and evaluated as part of a Servicing Plan following development of the Master Plan;

· Sale of surplus land with return of Capital to the City by December 2004 – excess to return of capital to be used for capital airport improvements; and

· Continue to run airport as a non profit operation that will not impose any significant financial burden to the taxpayers.

The CAA proposes a growth strategy to attract more people to the airport based on:

1. Adding further events of interest such as the national Capital Air Show;

2. Building additional hangers;

3. Expanding Fixed Base Operator facilities to supply services required of visiting and resident pilots alike;

4. Working with existing airport businesses such as First Air, Nav Canada, Westair, Helicopter Transport Services Canada to increase business and development activity; and

5. Exploring other opportunities such as:

· a specialized driving centre training centre with a vehicle simulator and high speed track,

· light manufacturing industries, and

· a freight carrier service.

The CAA identifies two (2) main issues:

1. Lack of a Master Plan and the ability to obtain long-term leases from the City of Ottawa to increase investment opportunities at the airport; and

2. Property taxes and increased fees or new user fees that may result from a private sector company taking over the airport and cause hardship to those in the General Aviation Sector that are particularly cost sensitive.

The CAA is aware of, and has acknowledged in their response, West Capital Developments’ proposal. They indicate the proposal has merit and the CAA is willing to work with WCD but is concerned that without meaningful representation on the board, the current tenants may face increased costs from user fees and potentially increased taxes if the airport becomes a private operation.

The CAA, therefore, proposes that the current form of governance for the airport continue. If granted the authority to pursue its vision the CAA would implement the following steps:

1. A Master Plan would be contracted but the indication is that the City would cover the cost of this work based on some previous preliminary discussions with the City.

2. A Marketing Committee would be struck to realize the “Growth Strategy” using members experienced in the sales and development field of aerospace.

3. A detailed business plan will be written and submitted to the City for approval by Council.

NorDan Aviation Response

This response did not respond to the criteria of the Request for Expressions of Interest Document. Rather, it dealt with a suggestion of a new overall Airport Authority governing all airports in the National Capital Region. It also recommends a new Office of Primary Interest to represent the City on the Board of Director’s for the proposed overall Airport Authority.

Shenkman Corporation Response

Shenkman Corporation provided a letter indicating that there are some exciting possibilities with respect to the promotion and development of the Airport Property. They indicated, however, their limitations as a development company in operating an airport. Shenkman would be very interested in pursuing the development aspects in the form of a public/private partnership or some other format, which would allow them to focus on the opportunities, which they are most comfortable with.

West Capital Developments Response

West Capital Developments provided the only response that set out a comprehensive project to own, manage and develop the Carp Airport as a private sector corporation. They indicate a willingness to make a large capital investment to improve and expand the existing infrastructure including extending the runway, provision of water and waste water treatment for the project area and adding additional roads.

Specific areas of operation and development include:

· The Airport,

· An Aviation Business Park,

· A Residential Fly-In Community, and

· Communal Servicing.

WCD indicates a commitment to providing not only the infrastructure improvements at the airport but also to installing a Fixed Base Operator and professional airport management. WCD has indicated that Thunder Bay Airport Services Inc. is part of their team.

The WCD team believes it has developed a comprehensive policy framework to govern the relationships between an elected board and the other essential airport professionals.

WCD proposes that an Aviation Business Park be created on the eastern side of the airport near the Carp Road. The park will be developed with individual parcels ranging from 0.75 to 10 acres. These will host General Aviation hangars, warehouses, manufacturing and distribution centres. Many of the sites will have access to taxiways allowing hangars for business aviation owners, aviation services, and related vendors.

A key theme of the park is to develop test bed and training facilities for the aviation/aerospace industry by striking strategic alliances with organizations such as Nav Canada.

WCD also proposes a Fly-In community on the west side of the airport to cater to the growing number of businesses who make frequent use of aviation. WCD’s strategy is to build on a proven concept to develop the airport and surrounding land into a symbiotic relationship between like, minded neighbours.

In order to efficiently execute the proposed development, WCD will implement a communal servicing plan for the airport and development lands. The intent is to establish a self-contained communal water supply and distribution system complete with fire protection. Servicing would also include a sewage collection, treatment and disposal system for wastewater, which would meet the needs of the project and protect the environment.

WCD proposes that the airport facilities such as runways, taxiways etc. be operated as Municipal Capital Facility under agreement with the City. This agreement would also include the plant for the Communal Servicing. WCD would pay all capital and operating costs for these facilities but would like them to remain property tax exempt in order to keep airport operating costs low for tenants.

Based on their proposed significant capital investment, WCD has suggested that the City transfer the airport property at nominal cost.

WCD proposes to provide the Master Plan, Servicing Plan, Marketing Plan and Investment Plan by October 2003 in order to proceed immediately with the project should the results prove financially viable and if the specific requirements of the City can be met.

WCD has submitted confidential letters indicating their commitment and potential ability to finance both the planning and the long term development of the airport property.

The President of the Canadian Owners and Pilots Association has written to endorse the WCD proposal.

DISCUSSION

The Options

It is clear from the expressions of interest process that the development and economic potential for the Carp Airport property centres around having the airport facilities as a major amenity. The property would have little development potential without the airport facilities. The Official Plan designations essentially make an exception for the airport facility and associated economic generators, which might otherwise not have been the case if the airport had not previously existed.

The Request for Expressions of Interest resulted in four (4) responses but only two (2) comprehensive responses were received being those from the Carp Airport Authority and West Capital Developments.

From the widespread notice of the Request for Expressions of Interest and the resulting feedback through this process, particularly at the briefing session, it is recognized that even two (2) significant responses to operate and develop a local airport such as Carp is considered somewhat of a success.

Both responses indicate development visions, which are in keeping with the current and new OP designations and also the Township of West Carleton’s zoning by-law.

As a result, it would appear that, rather than pursue an RFQ/RFP process, it would be best to deal with one of the two (2) parties that submitted a significant response.

The Carp Airport Authority (CAA) response indicates a willingness to build further on their success and efforts in reducing the operating deficit at the Airport over the years despite being hampered by the lack of an appropriate Master Plan and the inability to make long-term commitment to tenants.

It does, however, rely on the City continuing to own the airport and to support any operating losses and provide services in kind until such time that the airport becomes self-sufficient. It would also appear that it is looking for the City to fund the development of the Airport Master Plan. In return, it is likely that the City would need to make a long term commitment to the Authority in order for them to embark on the self-sufficiency plan. The CAA proposes a status quo arrangement with respect to the governance of the airport.

The West Capital Developments response on the other hand provides an opportunity to have a private sector company undertake all the necessary planning studies technical/investigations at its expense to develop the Master Plan, Servicing Plan, Marketing Plan and Investment Plan. If the project proves viable from these plans and can meet the City’s requirements, West Capital Developments would fund all future capital works and operating costs through their project.

The City can assist the project by entering into a Municipal Capital Facility Agreement with either respondent to keep the basic public aspects of the airport facilities tax exempt.

The City policy for the disposal of surplus properties is to sell all properties at current market value. In this respect, the WCD request for a nominal cost for the land transfer would not conform to this policy and they should be required to pay market based on the developable area and uses set out in the Master Plan.

Essentially, West Capital Developments is looking for a commitment by the City to allow them to spend money and develop plans to demonstrate the viability of their project subject to being allowed an exclusive opportunity to own, operate and develop the airport if they can meet specific City requirements.

The Carp Airport Authority wants to ensure the long term existence of the airport and the lowest possible operating costs. Since the CAA response provides for the airport to continue to operate under the existing arrangements with the City, there appears little risk to the City in allowing the private sector respondent an opportunity to undertake the planning work for the project provided the City’s requirements are well defined at the outset.

In this regard, the City must respect the efforts of the existing Airport Authority and tenants in building an important economic generator and public facility. The tenants need some assurance that they will have sufficient tenure to make investments in their businesses and to ensure that operating costs will not escalate as a result of private ownership of the airport.

First Air & Other Tenants

As an example, the major tenant at the Carp Airport is First Air. They are a tenant pursuant to a lease that predates the former Region’s acquisition of the airport on 14 March 1997. This lease is with the West Carleton Airport Authority and received the consent of the then owner, Transport Canada. The head lease between Transport Canada and the West Carleton Airport Authority was assumed by the former Region in March 1997 and has been extended on a year by year basis since that time.

In order to secure financing, First Air is seeking a longer commitment from the City. Given the interest of the City in economic development and the key role that First Air plays as an employer in the western area of the City, it is the opinion of staff that such a commitment should be given.

First Air is seeking a ten year lease with the option to renew for a ten year period thereafter. First Air is aware of the fact that the commitment of the City to Transport Canada to ensure that the Carp Airport is operated as an airport only continues until 14 March 2007. Thus, they have agreed that it will not be a term of the lease that an airport be present on the lands. Rather, First Air has requested that the lease provide to First Air the option to terminate the lease if the Carp Airport is not operated as an airport.

Such lease extension would, at the current time, be entered into by the West Carleton Airport Authority and require the consent of the City of Ottawa.

The consent of the City of Ottawa to any lease amendment or extension for First Air will require a decision of Council. Staff, further recommend to Council that the City consent to a ten year lease with the option to renew for a ten year period thereafter. Such recommendation would be subject to the condition that the Carp Airport might not be operated as an airport after 14 March 2007. Should the Carp Airport not be operated as an airport after 14 March 2007, staff, recommend that First Air be permitted to terminate its lease on a period of two months notice.

In providing this lease extension, it should be noted that First Air would necessarily have to reach agreement with the head lessee of the airport as to the contribution to be made by First Air towards the operating costs of Carp Airport and for paying a market rent for the extended term.

It also considered equitable to extend the same opportunity for a 10 year lease under the same terms to all other existing sub-tenants at the airport whose tenancy is in good standing under the terms of the lease, and for the City to provide its consent if the Airport Authority wishes to provide such extensions to its tenants.

The existing tenants occupy only approx. 8 acres of the approx. 960 acre airport property and the extensions of the lease does not affect the remaining developable of the site for West Capital and, in fact, provides a stable tenant base.

Continued Development by Airport Authority

The Airport Authority works to serve both recreational and commercial aviation interests. The Authority received numerous requests in the late 1990’s for an increase in the number of hangers available to private users of the airport. As a result, with the assistance in September 2000 of a loan guarantee in the amount of $200,000 by the former Region, a 20-bay hangar was constructed.

This hangar was completed in 2001 and is fully occupied. Fourteen bays have been sold and six bays are owned by the Airport Authority and are being rented out at a total annual rent of $15,000. The amount outstanding on the loan is approximately $43,000. The report approving the original loan guarantee noted that provision was to be made for the construction of two further hangars. The Authority has indeed continued to witness demand for additional hangar bays. As a result, the Airport Authority would like to construct a second hangar. In order to do so, the Airport Authority requires a loan guarantee for a further $200,000.

The estimated cost of the hangar is $420,000. Ten persons have expressed interest in purchasing or renting a bay. The sales price of the unit will be $25,000 and the rental price of a unit will be $4,000 per year with one year prepaid. The West Carleton Airport Authority is confident that a positive cash flow will be achieved. Operating costs will be borne by the occupants, who also will contribute to the overall operating costs of the airport.

The Bank of Nova Scotia has confirmed in writing that it is prepared to lend the amount requested provided the City gives a loan guarantee. Such a guarantee is required as the airport lands are owned by the City of Ottawa and thus cannot be used as security by the West Carleton Airport Authority.

In order to preserve the City’s options with respect to the airport, any agreement for the sale of the hangar bays will be required to permit the re-purchase by the City of the bays at their depreciated value should the City determine to not continue the airport in operation. The City would transfer this condition to West Capital Developments if the City ultimately enters into agreement with them.

Although the proposed hangars by the Airport Authority may not be of the quality of those proposed by West Capital, the proposed users are cost sensitive and it is not expected that these additional facilities will erode the potential market for the proposed facilities by West Capital Developments.

This arrangement allows the Airport Authority to keep moving forward to self sufficiency while waiting to see if West Capital Developments is able to develop a viable business plan that meets the City’s requirements.

Staff therefore recommends as follows:

1. Subject to the confirmation that at least 15 bays have been sold or rented, the provision of a loan guarantee not to exceed $200,000 for the West Carleton Airport Authority be granted in support of the construction of a 20-bay hangar on the Carp Airport Property;

2. That the amortization period of the loan shall not exceed 20 years; and

3. That the terms of the loan and the guarantee shall be to the satisfaction of the Director, Financial Services.

Operating Costs

Currently all existing land lease payments accrue towards the operation of the airport. This arrangement should not be changed under a new ownership arrangement until such time that the new development provides an increased user base to cover the operating costs. This will preclude a new operator from separating the lease revenue from operating recoveries with a resulting spike in the annual operating costs to existing tenants.

At the same time all users should be prepared to pay a full pro-rated share of the operating costs.

In order to ensure fairness to tenants, it is proposed that any Municipal Capital Facilities Agreement that evolves form the business plan process include provision for the City to approve the operating budget.

West Capital Developments Business Plan:

It is recommended, therefore, that the City enter into agreement with West Capital Developments to afford them the exclusive opportunity to develop a business plan for the planning, development, operation, and ownership of the Carp Airport property subject to the following conditions:

1. The Business Plan is completed and forwarded to the City by 1 November 2003;

2. The Plan includes a Master Plan, a Servicing Plan, a Marketing Plan, and an Investment Plan outlining the viability of the project and demonstrating compliance with the City’s requirements and the objectives set out in the 1 July 2001 Council approval and reiterated in this report as follows:

commit to operating the airport at defined levels of service with appropriate maintenance standards;
commit to specific capital improvements over time which will benefit the majority of the tenants at the airport;

· comply with the relevant City regulations and official plan policies;

support the City’s efforts to recover the capital and operating investment already made in the Carp Airport;
comply with the terms and conditions of the Transport Canada agreement with the City;
protect the existing jobs and tenancies at the airport over a reasonable period of time.

· evaluate and address all environmental related issues associated with developing the Carp Airport lands.

· ensure that any proposed development supports the relevant official plan policies for the rural area and the objectives of the rural community including protecting and adding to the employment base in this location.

3. The Business Plan provides for the acquisition of the airport lands at market value, to be established by an accredited real estate appraiser, based on the Master Plan concept;

4. West Capital Developments agrees to take over any buy-out provision related to the unamortized portion of improvements which have been guaranteed by the City;

5. West Capital Developments agrees to provide an operating budget which provides for the rental payments from the existing land leases to accrue towards the operating costs until such time as these rental payments are no longer needed to support the operating costs;

6. West Capital agrees to City approval of the operating budget for the airport under any proposed Municipal Capital Facility Agreement;

7. West Capital Developments accepts that the land leases for existing sub-tenants may be extended for 10 years prior to the transfer of the property;

8. West Capital Developments accepts the Airport Authority as tenant with respect to any facilities owned and operated by the Authority including any T hangars on the same basis as other existing land leases;

9. West Capital Developments provide a governance arrangement that affords existing tenants and Airport Authority Board members the opportunity to participate in decisions affecting the airport facilities covered by under any Municipal Capital Facilities agreement.

10. West Capital Developments commits to paying all costs of developing its business plan and any future capital and operating costs with respect to the project and provides financial information to the satisfaction of the General Manager of Corporate Services that it has the financial ability to do so;

11. The business plan and any subsequent proposed agreements for the transfer of the airport property will be subject to further City Council approval; and

12. Should West Capital decide not to proceed with its business plan, it will provide the City with copies of all studies and reports undertaken as part of the process at no cost to the City.

The City in turn must give West Capital Assurance that:

1. The City will not grant approval or consent to any further capital works at the airport without the consent of West Capital Developments before 1 November 2003;

2. The City will makes its best efforts to obtain any Transport Canada approvals/consents as may be required under the current agreement; and

3. The City will assist West Capital Developments in attempting to negotiate a new long-term agreement with Nav Canada that extends beyond 14 March 2007.

On the basis of the above recommendations, it is believed that the concerns of the Carp Airport Authority have been addressed with respect to West Capital Developments’ proposal and this allows the focus to be on the aspects that the Authority believes have merit and for their cooperation with West Capital Developments.

At the same time, it is believed that the West Capital proposal has not been compromised by the actions to protect the existing tenants’ interests since these provide the current critical mass at the airport and can assist West Capital Developments with implementing the project. Moreover, the WCD proposal is clearly based financially on new development initiatives.

Should West Capital Developments not be willing to proceed on this basis or, if they do, and find their business plan is not viable, then the recommendations of this report have already assisted the Carp Airport Authority in moving towards their goal of long term stability and self sufficiency.

In the meantime, the Airport Authority can continue to operate and manage the airport property until 31 December 2003 and, thereafter, on a month-to-month basis until a final decision can be made by the City upon receipt of the Business Plan from West Capital Developments.

RURAL

The recommendations of this report are based on ensuring that any proposed development supports the relevant official plan policies for the rural area and the objectives of the rural community including protecting and adding to the employment base in this location

ENVIRONMENTAL

Development planning for the Carp Airport property will evaluate and address all environmental related issues associated with developing the Carp Airport lands

CONSULTATION

Copies of this report have been forwarded to the Ward Councillor, Legal Services Branch, and Business Development Branch and all concur with the recommendations in this report.

FINANCIAL IMPLICATIONS

The loan guarantee will assist the Airport authority in generating additional cash flow that will in turn reduce the annual operating deficit.

ATTACHMENTS

Annex “A” – Map of Carp Airport site.

DISPOSITION

Legal Services to prepare the necessary agreements, consents, and guarantees as required for execution with the various parties.

ANNEX A

CARP AIRPORT SITE