Review of the Governance Structure and Issues at Muskoka Airport

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Review of the Governance Structure and Issues at Muskoka Airport Review of the Governance Structure and Issues at Muskoka Airport Prepared for The District Municipality of Muskoka 10 November 2016 Contents 1 Introduction ............................................................................................................ 1 2 Background Information on Muskoka Airport ...................................................... 2 2.1 Airport Overview .......................................................................................................... 2 2.2 Current Governance Model ......................................................................................... 3 3 Governance Issues ................................................................................................ 5 4 Review of Different Governance Models .............................................................. 6 4.1 What is Airport Governance? ...................................................................................... 6 4.2 Types of Governance Models ...................................................................................... 6 4.3 Select Examples of Airport Governance Models ......................................................... 9 5 Governance Issues Moving Forward .................................................................. 12 Appendix A: A Brief History of Muskoka Airport ...................................................... 13 Appendix B: Governance Models at Other Ontario Airports.................................... 14 i 1 Introduction The purpose of this report is to provide some background on the issues around governance of Muskoka Airport. The District of Muskoka has retained InterVISTAS Consulting to engage the community in a dialogue regarding the future governance structure of the airport. Additionally, as part of this engagement, InterVISTAS will provide recommendations on the best governance model for Muskoka Airport to achieve its goals and objectives going forward. In order to provide relevant context for the community dialogue, this report provides a brief background on Muskoka Airport and some of the issues that have arisen. These issues primarily involve District financial support for the airport’s operations and investments, and decision making processes. The report provides a discussion of what is meant by airport governance and describes alternative governance options that might be considered. 1 2 Background Information on Muskoka Airport 2.1 Airport Overview Muskoka Airport (IATA code: YQA) is located in the District of Muskoka at the north end of the Town of Gravenhurst. It is a key piece of infrastructure for the District and plays a critical economic and social role in the region. The airport provides vital connectivity for the District for businesses, tourism, medical services, agricultural services, and forest monitoring / firefighting. Several employers are located at the site. The airport opened in 1936. During World War II it served as an air force training base, not only for the Royal Canadian Air Force but also for the Royal Norwegian Air Force, earning the “Little Norway” nickname for the airport, memorialized today in the Little Norway Memorial. Appendix A is an excerpt on the history of the airport from T.M. McGrath’s History of Canadian Airports. The airport was sold by Transport Canada to the District of Muskoka in 1996 which has operated and invested in the facility since then. This was part of nationwide policy under which Transport Canada divested itself of virtually all of the national/regional/local/arctic airports that it had been operating in the Post World War II era. Muskoka Airport serves as a general aviation airport, supporting private and charter flights into and out of the region. It has a 6,000 foot paved main runway and a 2,199 foot grass strip runway for light aircraft. The paved runway can accommodate aircraft as large as the Boeing 737 and Airbus A320. The airport operates 24 hours per day, seven days per week. Nav Canada has classified the airport as an Airport of Entry and Canada Border Services Agency (CBSA) officers are available on-site to facilitate the arrival of international flights. In terms of the current passenger profile, during the summer of 2013 Muskoka undertook a visitor survey of arriving aircraft passengers that used the airport to access the Muskoka region and adjoining areas. Of the 594 people interviewed: 66% were passengers, 34% were flight crew. Nearly half (48%) were destined for the Muskoka Lakes area. 71% originated from the United States, 28% originated from Canada and 1% from overseas. 39% were cottage owners, 28% were tourists, and 26% were visiting friends and relatives (VFR). 51% arrived on an air carrier such as an air taxi, in contrast to those arriving in private (44%) or corporate (4%) aircraft. The airport saw 13,165 aircraft movements in 2015, roughly 36 per day.1 1 Statistics Canada, Table 401-0021: Monthly aircraft movements, by class of operation and type of operation, airports without air traffic control towers. 2 2.2 Current Governance Model Muskoka Airport is owned and operated by the District of Muskoka, which assumed operation of the airport in 1996 during Transport Canada’s divestiture program. Prior to 1994, the vast majority of Canadian airports, including the regional ones, were owned and operated by the Government of Canada. Divestiture of the regional airports was supported by the 1994 National Airports Policy (NAP). The NAP was part of a broader wave of federal government devolutions of infrastructure and operations that included the creation of Nav Canada, the commercialization of ports and the St. Lawrence Seaway, and the privatization of Air Canada and CN Rail. The NAP divided airports into categories. The National Airports System (NAS) airports comprised the 26 large airports that handled 94% of passengers in Canada. Other airports were classified as: Regional/Local airports (Muskoka Airport is classified as a regional/local airport) These were sold at a nominal fee to provincial or local governments, airport commissions/societies or private interests and have access to a national Airports Capital Assistance Program (ACAP) if the airport has year round scheduled commercial air service; Small airports These were sold to local interests and cut off from federal funding of any kind; Remote airports which continue to receive federal support, but cost efficiencies were required; and Arctic airports which were transferred to territorial governments under an already existing program. Governance structures differ among and within the airport classes. For the NAS airports, most were created as not-for-profit no-share companies under the Canada Corporations Act. For the regional/local airports, a variety of models were used. Some airports were acquired by local government (city, county or district) and operate as departments within those cities (e.g. Muskoka). Others were created as societies (e.g. Fort St. John), authorities (e.g. Fort McMurray), or as an airport development corporation (e.g. Sault Ste. Marie). For small airports, there are cases of private sector ownership/operation. A few airports operate via a lease of city/district owned facilities to a private sector company. In the case of Muskoka Airport, it is operated as a municipal function of the District. The Planning and Economic Development Committee oversees airport operations via the Chief Administrative Officer and the Commissioner of Planning and Economic Development, who are responsible for airport operations and reporting to the Committee/District. In the past, there was an Airport Advisory Committee whose Chair also reported to the Planning and Economic Development Committee, and represented the District and airport stakeholders (committee was not re-appointed after the last municipal election in 2014). The airport is funded through a combination of fees to users, land rents/fees, and District tax revenues. Fees include jet fuel sales and ramp usage fees. There is some income, in the form of a maintenance charge, from land that is leased or owned by airport tenants and other customers. Some land was sold, generating cash that could be used for airport investments, though land sales have been restricted for the time being in favour of land leases. Specifically, Council decided (by resolution in 2014) that the lease of lands is preferred to sales, unless significant benefits to the airport or the community are demonstrated. 3 A portion of the tax revenue collected from each municipality in the District is put towards the airport for operational and capital costs. The 2006 Strategic Business Plan describes the key roles the airport plays in contributing to the local region’s economy: “The premise under which Muskoka assumed the Airport remains valid today – the Airport contributes significantly to the Muskoka economy and also provides valuable transportation infrastructure. The benefits of the Airport are felt throughout Muskoka in terms of usage and/or spin off effects. The Economic Impact Report prepared in 2005 indicated that the Muskoka Airport contributes over $31 million to the economy annually with a direct impact of approximately $5.4 million per year. The cost to Muskoka to operate the Airport in 2005 was $335,000.” 2 It should be noted that in 2009 an update to the economic impact study was performed. The findings from this update were that the direct economic impact had increased to $7.2 million (a 25% increase over the 2005 estimate after adjusting for inflation). 2 Strategic Business
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