REVIEW OF TORONTO PORT AUTHORITY REPORT By: Roger Tassé, O.C., Q.C. Gowling Lafleur Henderson LLP Barristers & Solicitors October 2006 TABLE OF CONTENTS Page OVERVIEW ..................................................................................................1 INTRODUCTION ..........................................................................................5 PART I THE EARLY DAYS.......................................................................................8 • The establishment of the Toronto Harbour Commission, 1911......8 • THC Responsibility and Corporate Structure...................................8 • Development of the Waterfront..........................................................9 • The arrival of airplanes.......................................................................9 THE 1983 TRIPARTITE AGREEMENT...................................................... 12 THE ROYAL COMMISSION ON THE FUTURE OF THE TORONTO WATERFRONT (CROMBIE COMMISSION)............. 13 • Its mandate and its recommendations............................................ 13 THE RESPONSE TO THE CROMBIE COMMISSION REPORT................ 15 • The City of Toronto Response......................................................... 15 • The Federal Government Response................................................ 16 TOWARDS A NATIONAL MARINE POLICY............................................. 19 • Bill C-44 – in the House of Commons ............................................. 20 • Bill C-44 – in the Senate ................................................................... 22 • Bill C-9 – in the House of Commons ............................................... 23 • Bill C-9 – in the Senate ..................................................................... 24 • The question of financial self-sufficient reviewed again by Transport Canada........................................................................ 27 Page THE CANADA MARINE ACT..................................................................... 28 THE TORONTO PORT AUTHORITIES’ LETTERS PATENT .................... 30 THE TPA’s INITIAL DECISIONS ............................................................... 31 THE TORONTO PORT AUTHORITY’S COURT PROCEEDINGS AGAINST THE CITY OF TORONTO.......................................................... 35 THE 2003 SETTLEMENT AGREEMENT ................................................... 37 • Benefits for the City.......................................................................... 38 • Benefits for the federal government ............................................... 39 • Benefits for the TPA ......................................................................... 40 THE ELECTION OF DAVID MILLER AS MAYOR OF THE CITY OF TORONTO..................................................................... 40 THE NEGOTIATION OF A SETTLEMENT ................................................ 47 • Overall Settlement ............................................................................ 51 • Aecon Settlement.............................................................................. 51 • Stolport Settlement........................................................................... 52 • RegCo Settlement............................................................................. 53 • TPA Settlement ................................................................................. 57 • The Commercial Carrier Operating Agreement (CCOA)................ 58 • Porter Airlines Inc............................................................................. 61 PART II Page THE AECON BRIDGE CONSTRUCTION CONTRACT ............................. 64 • The TPA contract with Aecon ......................................................... 64 • The Toronto Municipal Election Campaign ................................... 65 THE ENVIRONMENTAL ASSESSMENTS ................................................ 68 ALLEGATIONS OF MUNICIPAL POLITICAL INVOLVEMENT................. 75 RESPONSE TO THE COMMENTS OF THE INCOMING PRIME MINISTER ...................................................................................... 78 PART III THE NOISE FACTOR................................................................................. 81 PAYMENT IN LIEU OF TAXES (PILTs)..................................................... 82 THE TPA’S BOARD OF DIRECTORS ....................................................... 84 • Director Qualifications..................................................................... 86 • Director Compensation ................................................................... 86 • General Observations...................................................................... 86 PART IV DOES THE TORONTO HARBOUR QUALIFY AS A NATIONAL PORT?........................................................................... 88 • Does the Toronto Harbour meet the test of financial self-sufficiency under the Canada Marine Act Schedule? ........... 88 • Is the Port of Toronto a National Port? .......................................... 90 THE TPA, THE ISLAND AIRPORT AND THE TORONTO WATERFRONT .......................................................................................... 92 Page TPA ACCOUNTABILITY & COMMUNITY RELATIONS............................ 95 • Accountability and Transparency .................................................. 95 • Community Relations ...................................................................... 98 PART V GENERAL OBSERVATIONS AND RECOMMENDATIONS.................... 100 1. The island Airport corporate arrangements.................................... 100 Recommendation I 2. Community Relations........................................................................ 101 Recommendation II 3. Appointment of Directors ................................................................. 101 Recommendation III 4. The federal interests in the Toronto Harbour and the TCCA ......... 102 Recommendation IV ATTACHMENTS 1) Partial list of meetings 2) Terms of Reference 3) Executive Summary - Forensic Accounting Review by Jeffrey C. Smith of BDO Dunwoody LLP 4) TPA - Composition of the Board of Directors 5) 1990 Lands owned by theTHC 6) 2006 Lands owned by the TPA 1 TORONTO PORT AUTHORITY REVIEW OVERVIEW • In the years that followed its establishment in 1911, the Toronto Harbour Commissioners (THC) played a determinant role in reclaiming from Lake Ontario hundreds of acres of priceless land on the Toronto Waterfront. This was done without political direction from federal, provincial or municipal authorities. • Beginning in the early 1930s, the THC also played a key role in the setting up and development of the Toronto Island Airport, which in the 1960s had become one of Canada’s busiest airports. • In the late 1970s and early 1980s, with the advent of Short Take-Off and Landing (STOL) aircraft, municipal authorities worked with the federal authorities to establish a framework for the management and operations of the Toronto Airport. These efforts led to the signing of the 1983 Agreement between the City of Toronto, Transport Canada and the THC, an Agreement that sought to define the conditions under which the Island Airport would operate to ensure it would not dominate Waterfront activities to the detriment of other stakeholders. The Tripartite Agreement is still in place and will terminate only in 2033. • In the late 1980s, the City of Toronto who, like the THC, also owned considerable lands on the Waterfront, became concerned with the land development activities of the THC. The City, after the Crombie Royal Commission Report recommended the THC divest itself of certain lands, decided to use power it thought it had over the THC through its appointment power of three out of five THC Commissioners, to effectively start implementing unilaterally the policy direction and recommendations of the Commission. • Up until that time, THC activities were largely funded by the rental revenues it was collecting from the leasing of its large pieces of lands on the Waterfront, about $6-million annually. • The City, by a first Lease Purchase Agreement in 1991, was able to effectively transfer from the THC to the City and one of its subsidiaries, the Toronto Economic Development Operation (TEDCO), through the control it exercised on the majority of THC Board members, large land holdings of the THC (more than 300 acres). The 1991 Lease Purchase Agreement provided for an annual payment of about $1.5-million, a substantial decrease in the annual amount the THC was collecting through the rental of the very same land transferred to the City. 2 • In 1994, the City entered into a second Lease Purchase Agreement transferring another 300 acres of THC land to the City and TEDCO. An amended Subsidy Agreement increased the amount to be paid to the THC to $2.8-million, which was much less than the $6-million collected on the rentals of the land the THC originally owned. Moreover, soon after having entered the Agreement, the City, however, defaulted on its 1994 undertaking, creating further financial difficulties for the THC. • These transfers were made over the objections of THC management and the non-City appointed directors, who consistently maintained that these transfers were not in the best interests of the THC. • In mid-1990s, the federal government entered into a program to modernize Canadian harbours and ports, which lead eventually to proposals for a new Canada Marine Act (CMA). The legislative proposals were debated in Parliament over a couple of years before and