Ask TPR Vol. 1

Ask TPR Vol.1

April 26, 2018
One year ago, we raised concerns regarding Alberta Health Services’ (AHS) Request for Proposal (RFP) process for the provision of air ambulance services. Primarily, we were concerned that the RFP process could have negative implications for the financial sustainability of the Peace River Regional Airport.  One of our major tenants was very much involved in providing air ambulance services to our region, and the loss of this tenant would likely have far-reaching impacts on the future of the Airport.

Over the summer of 2017, we worked with our regional partners, airport stakeholders and AHS to make sure our concerns were heard.  We were not engaged as an advocate for any particular proponent – we were and we remain focused on the long term economic impact to the airport and the region.

As you know, the entire RFP process has been brought into question before the Courts. The Town is not a party to this litigation but we will continue to monitor the proceedings as they might relate to the operation of our airport.

What is happening now with the Airport leases?

Our Leases are based on the old sub-leases that were in place when the Federal Government owned the airport.  They are out of date, and they need some re-writing. One of our concerns was over the renewal language that appears in some of the Leases. One tenant expressed the view that, on renewal, our ability to set the rents was severely limited. With the assistance of the Court, it has now been determined that our renewal clauses are effective and that our ability to set renewal rents is not restricted as our tenant had suggested. We are pleased with how the Court has dealt with the matter. With the Court’s advice, we are now able to finalize lease arrangements with Nor-Alta/CanWest and other tenants whose leases are coming due in a financially responsible manner.

Airport Funding – Will the airport be closed?

We have no intention of closing the airport.

After years of hard work and the signing of a five-party funding agreement with municipal neighbours, the annual operating cost to Peace River taxpayers for airport operations is now approximately $200,000.  This is about 20% of the net operating cost. Prior to 2016, the Town of Peace River taxpayer bore the full burden of operating the airport which was approximately $700,000 annually. It is the goal of this Council and the previous Council to minimize, if not eliminate, taxes subsidizing the operation of the airport.

It should be noted that capital expenses – including the purchase and repair of major equipment items and infrastructure – is not included in the funding arrangement with the municipalities. To keep capital expenses down, we rely on the Airport Capital Assistance Program (ACAP) administered by Transport Canada.  One of the prerequisites to receive ACAP funding is that the airport requesting the funding must have scheduled passenger air service.

We remain concerned that one unintended consequence of the AHS RFP process would be the loss of scheduled service at the Peace River Regional Airport, and that may result in the loss of continued ACAP funding. That funding has brought in, more than, $13.2 million dollars since 2010. When we raised this issue with Alberta Health Services, they told us that, “They were not in the airport viability business.”

Why has the Town been silent?

Our practice is to be proactive in our communications with our ratepayers, since September of 2017, there have been ongoing legal matters related to the airport that have impeded our ability to publicly discuss details.  We appreciate the frustration this has caused, but our lawyers have assured us that matters that are before the Courts should be argued there and not in the media.

As the various Court related matters wind down, we will be in a better position to respond to requests for information.

Has the Town been sued over Airport leases?

The Town has been taken to Court by tenants in two lease-related matters, but has not been sued, as such, for damages.  In one case, our tenant was challenging its ability to assign its Lease.  In another, there were questions over the interpretation of a renewal clause in the Lease. One of those matters is completed and the other is subject to an appeal.

Did the Town arrange leases with some parties to block CanWest?

CanWest has not been blocked at the Airport. They have taken over the Highland Helicopters space at the Airport and the Highland Lease has been renewed.

Did the Town allow hangars to be used for improper purposes to block CanWest?

The Town retains the right, as Landlord, to establish uses of land for its tenants at the airport.

In the case of the facility being used as a bus barn, this relates to an agreement dating back to 2012. The remaining hangar is used for aircraft storage.

Has the Town of Peace River intentionally tried to block CanWest from obtaining land or a hangar at the airport?

No. However, we have remained cautious about their entry into the Airport as a tenant in light of the Judicial Review of AHS’ RFP process now pending before the Courts. The ultimate outcome of the Judicial Review could have broad ranging implications for CanWest’s desire to stay at the Airport.

CanWest has taken over the Highland Helicopters space at the Airport and the Highland Lease has been renewed. However, that Lease does contain early termination provisions that can be exercised by either party.

CanWest and their neighbour at the Airport, Advanced Paramedic Ltd., have indicated their desire to construct improvements at the Airport but we do not have completed applications in this regard. Those applications would have to receive both MD and Federal approval in any event, and we are not certain where these processes are at.

Highland Helicopter Lease

CanWest and its parent company, Nor-Alta, have taken over the Highland Helicopters Lease at the Airport and the Highland Lease has been renewed. We are in the process of determining an appropriate rental rate for the space. We anticipate the new tenant will want to undertake some improvements, and we also know that the Highland Lease contains early termination provisions that can be exercised by either party. There is an appeal outstanding relative to the Lease takeover but until that appeal is heard, the takeover remains in effect.

How are we facilitating lease arrangements?

Under most of our Leases at the Airport, the Town has the right to set the basic rent at a rate the Town feels is appropriate. This might be based on several factors, including a tenant’s ability to pay and including the impact of any particular tenant on airport operations. Those are just two possible examples. Right now, we are retaining professional assistance to direct our thinking in this regard.

In the meantime, for Leases that are renewing, we will follow our past practise of leaving rents where they sit at the end of the term, and adjusting once a new rental rate has been set.

Is the Town appealing any of the rulings?

There is one ruling under appeal, and that deals with CanWest’s takeover of the Highland Lease. Until that appeal is heard, the takeover remains in effect, and we are working with that in mind.

Moving forward

Things are changing at the Peace River Airport, and the Town is prepared to accept that fact. We will work with our tenants, both old and new, in a combined effort to keep the airport as a fundamental component of a vibrant and active region. In this new era, we will be looking to increase the cost-effectiveness of airport operations, and this is a burden that will have to be shared by all.

Environmental Issues

In 2016 an active landslide located near 99 Street resulted in a sanitary sewer line separating and a sanitary sewage manhole failing.

That break resulted in sanitary sewer contents being released onto the Town-owned property. Crews were immediately dispatched to clean up the spill and plug the failed line.  A temporary sewage lift pump was installed to direct the system to the manhole located on the stairs located by the RCMP station.  The Town also reported this sanitary system contravention with a letter to Alberta Environment in accordance with our system Approvals, and Alberta Environment regulations and requirements.  The Town has also maintained daily checks on this system and weekly lift station pump servicing.

Following that initial spill, we have had additional contraventions, all on Town-owned property. These resulted in spills of less than 2.0 cubic meters and were due to pump failures or to extreme cold weather events freezing the sanitary sewage line. Each time the event was caught within 12 hours, cleaned up, and reported to Alberta Environment as outlined in requirements. Sample testing was also conducted at each of these subsequent events and submitted for analysis.

While this was happening, work was underway to address the root cause, the landslide, and to permanently repair this portion of our sanitary sewer system.

We worked with a Geotechnical Engineer and a Civil Engineer, to provide a solution for both the landslide and the underground infrastructure. Final designs for both the landslide mitigation and the underground infrastructure were completed in the Fall of 2017, and tenders issued for the construction work.

In order to fund this major emergency infrastructure repair, we worked with both the Federal and Provincial governments to obtain grant funding. Part of that process required that we not award any construction work until grant funding was approved. At the end of 2017, we were advised that we had been successful, and had been awarded a Federal grant of $1.918 million, and a matching Provincial grant of $1.918 million, for a total of $3.836 million.

With this funding in place, we have been able to award the construction contracts and address the root cause of the sewer breaks, which was the sliding hillside. This project is expected to be completed by the fall of 2018.

Follow Up Questions

We will be collecting any follow-up questions and will endeavour to answer as many as possible in a subsequent update.