LATE DISTRIBUTION FOR CS&B SEPT. 26, 1996 SUPPORTS ITEM NO. 4 CS&B COMMITTEE AGENDA SEPTEMBER 26, 1996 POLICY REPORT OTHER Dated: September 24, 1996 Dept. File No. TO: Standing Committee on City Services and Budgets FROM: City Manager SUBJECT: Bill C-44, The Canada Marine Act RECOMMENDATIONS A. Council urge the Federal Government to provide a legislative framework for national ports that is flexible and robust so that ports can respond to the realities of the world in which they operate. If there is a need to limit the activities of port authorities, then those limitations should be part of the Letters Patent which are much more easily adjusted to local and changing circumstance. B. Council advise the Federal Government that a direct financial return on federal land through a charge on gross revenues or other formula is inappropriate, given the financial constraints under which the ports will operate, the competitive environment, and the absence of an obligation to pay full taxes to municipalities. C. Council request that the Minister include a representative from the City of Vancouver and the Port of Vancouver in any group advising on the development of letters patent and the implementation of the legislation in the Port of Vancouver. D. Council advise the Federal Government that provision of crown agency status through the legislation is appropriate, subject to the maintenance of the required financial separation and appropriate arrangements to manage issues of land use and municipal regulation. E. Council urge the Federal Government to provide for a director appointed by the City of Vancouver and a director appointed by the other municipalities in the Port of Vancouver. F. Council urge the Federal Government to amend the legislation to provide that the Chair of the Board of a port authority be elected by the directors. Alternatively, the letters patent for Vancouver should state this requirement. G. Council urge the Federal Government to relax the criteria for directors to permit a broader range of expertise. H. Council urge the Federal Government to ensure that the legislation sets high standards for the avoidance of a real or perceived conflict of interest. I. Council urge the Minister of Transport, the Solicitor-General, and the Attorney-General to convene discussions with representatives of the municipalities to examine how policing responsibilities in British Columbia ports can best be met, with the clear understanding that municipalities will not be required to fund additional police services without full compensation. J. Council urge the Federal Government to provide a mechanism and sufficient time for a smooth transition between the present Ports Canada Police jurisdiction and the establishment of replacement policing K. Council reiterate its position that the new port authorities be subject to the same payment-in-lieu of taxes rules that apply to other federal property, or that they become taxable, and urge the Federal Government to ensure that the new legislation does not result in a net increase in costs to municipalities through any combination of additional responsibilities for municipalities and changes in the payment of grants-in-lieu. L. Council urge the Federal Government that if grants-in-lieu are to be retained rather than implementing full taxation, the process be revised to provide for year by year finalization of grants and an appeal mechanism to ensure certainty for both municipalities and ports. M. Council urge the Federal Government to permit broader land uses within the Port, so long as they comply with municipal zoning or joint port-municipal land use agreements, and to enable port authorities to enter into binding land use agreements with municipalities, subject to an override by the Governor-in-Council. COUNCIL POLICY There is no Council policy related directly to this matter. Council has previously considered the issues discussed in this report and passed resolutions which are described in the Background section below. SUMMARY This report sets out issues arising from Bill C-44 and its impact on the City and the Port of Vancouver. The legislation would eliminate the Canada Ports Corporation and replace the Vancouver Port Corporation with a semi-autonomous port authority. As the legislation is written, port authorities would not be agents of the Crown. The legislation provides port authorities with greater autonomy in some areas, but introduces restrictions on the activities the port authorities can carry on, which may limit their effectiveness. The structure provides some representation for municipalities, but this is considered inadequate. Recommendations for presentation to the Transport Committee are advanced to address these concerns. Elimination of the Canada Ports Corporation means elimination of the Ports Canada Police. Their policing role must be absorbed by other agencies. This report supports a joint review by the Minister of Transport, Solicitor-General and Attorney-General to examine policing needs and develop a solution that will not increase policing costs to municipalities. In response to municipal concerns, the legislation does not provide for a negotiated fee for municipal services, but neither does not it provide for grants-in-lieu of taxes. Port Authorities should pay grants-in-lieu of taxes or normal taxes, and recommendations for submission to the Transport Committee are presented in that regard. The legislation places inappropriate restrictions on land use in the Port. There is no provision in the legislation for development of joint, binding land use plans with municipalities. Recommendations for submission to the Transport Committee which would address these issues are presented. PURPOSE The purpose of this report is to bring Council up to date on developments arising from Bill C-44, the Canada Marine Act, which will provide a fundamental change in the way the Port of Vancouver is managed, and to seek Council direction for the City to address several issues of importance before the House of Commons Committee reviewing the draft legislation. BACKGROUND In December 1995, the Minister of Transport (Douglas Young) released a proposal to alter the structure of the port and harbour system in Canada extensively. For the City of Vancouver, the most significant component of the proposal is the replacement of the Canada Ports Corporation and the Vancouver Port Corporation with a local port authority. While the Crown is to retain ownership of all lands at port sites in Canada, they will be placed in the care and management of a semi-autonomous, not-for-profit corporation. On February 27, 1996, Council considered a report from the City Manager dealing with the new national marine policy and the Port of Vancouver. Council approved recommendations which reflected the City's position on four significant areas of concern: policing of port lands; payments-in-lieu of taxes; local representation on the port authority board of directors and the accountability of that board; and land use and development. In June 1996, the Federal Government introduced Bill C-44 (the Canada Marine Act) into the House of Commons and referred it for review by the Commons Transport Committee. DISCUSSION Bill C-44 provides the legislative framework within which the port and harbour system in Canada will be transformed to conform to the new marine policy. Statements by federal ministers have helped to clarify the intent of some aspects of the legislation. The basic thrust of the policy proposed in 1995 is largely unchanged, and the issues raised by Council earlier this year are still relevant. The City's interest in this legislation is mainly related to the new operating environment for major ports. Staff have reviewed the draft legislation and have identified several significant areas which may be of continuing concern. We are commenting from two perspectives: issues which will directly affect the City, and issues which will affect the operation of the Port as a commercial entity. As a general comment, the legislation does not address some issues which are important to the City. In addition, we believe the legislation is overly rigid in its definition of the activities in which a port authority can engage and inconclusive with regard to several issues important to the operation of an effective port system. The legislation is very clear that the financial obligations of a port are not financial obligations of the Federal Government, and that the port is to stand on its own feet. Having said that, the legislation then restricts the Port significantly in the activities it may carry on and ties the Port back to Ottawa for approvals for some basic aspects of its business. 1. Powers and Capacities The intention of the new National Marine Policy was to make it easier for national ports to operate. The preamble to the legislation speaks of "... making the system of Canadian ports competitive, efficient and commercially oriented..." yet many provisions of the legislation will work against that objective. General Authorities Bill C-44 defines the activities of the new port authorities in a very narrow and restrictive way, limiting their ability to undertake many of the activities now available to the national ports, including the Port of Vancouver. Section 24 of the legislation limits the powers of the organization to "engage in activities within the port related directly to shipping, navigation, the transportation of passengers and goods and the handling and storage of goods." (emphasis added) Rather than being enabled, port authorities are being severely limited to the extent that many current activities of national ports may not be permitted. These might include: - Operating trade promotion offices in foreign countries; - Operating "duty-free" zones for the processing (rather than handling) of goods; - Entering into partnerships with local governments or other agencies for enhancing access to Ports, for creating parks and recreational areas, for tourism promotion, or for coordination of emergency planning and response; - Using real property not currently needed for port development for purposes other than the handling and storage of goods. For example, parking, restaurant, and other short term uses will not be allowed, even though they are in the commercial or other interests of the port; - Holding a port conference outside the specific boundaries of the port; and - Providing consulting or development services to developing ports or selling information or software. Land Holdings Section 6 of the legislation provides that the Minister may issue letters patent which will identify the federal and other property managed and owned by the port, set out the makeup of the Board, and other matters consistent with the Act. Section 36(5) states that a port may "manage, occupy, or hold only the real property set out in its letters patent". In Section 38(2), the port is authorized to dispose of real property that it owns, subject to the issuance of supplementary letters patent. It appears that in order to enter into a property transaction, however trivial, within the port, the port will be required to obtain supplementary letters patent. An arrangement between the City of Vancouver and the Port to consolidate and exchange certain holdings for the convenience and mutual advantage of both, not involving federal lands, would require approval in Ottawa. A property arrangement with the City which requires that the Port purchase land outside the Port may not be possible. Financial Issues Section 27(3) provides that a port authority may not "mortgage, hypothecate, or pledge or otherwise create a security interest in the property it manages or holds". While the Port can dispose of property it owns, albeit with the issuance of supplementary letters patent, it is legislatively precluded from mortgaging the same property for financial purposes Section 6(h) requires that the letters patent include the formula for annual payments by the Port to the Federal Government. The major ports will now be required to stand on their own financial feet; they do not pay full taxes to municipalities; they must function in a competitive environment; and the benefit from their effective operation extends across the country. The Federal Government should be content to see the benefit from effective port operation as sufficient return on the federal lands that ports manage, and not require a financial contribution. So long as the Federal Government is not authorizing payment of full taxes to municipalities, a requirement that the ports pay the federal government is effectively downloading directly to municipal governments. Development of Letters Patent The Minister has indicated that users will be asked to advise on the development of the letters patent for a port. It may be noteworthy that the Minister has not said that the Port of Vancouver will be represented in the group giving advice on letters patent. Given the significance of the letters patent in the operation of the Port, Council should ask the Minister to include a municipal and a Port of Vancouver representative on the advisory group. It is recommended that: Council urge the Federal Government to provide a legislative framework for national ports that is flexible and robust so that ports can respond to the realities of the world in which they operate. If there is a need to limit the activities of port authorities, then those limitations should be part of the Letters Patent which are much more easily adjusted to local and changing circumstances. Council advise the Federal Government that the a direct financial return on federal land through a charge on gross revenues or other formula is inappropriate, given the financial constraints under which the ports will operate, the competitive environment, and the absence of an obligation to pay full taxes to municipalities. Council request that the Minister include a representative from the City of Vancouver and the Port of Vancouver in any group advising on the development of letters patent and the implementation of the legislation in the Port of Vancouver. 2. Relationship to the Federal Government Staff have been advised by the Port that the legislation appears to remove the Port's status as an agent of the Crown. This change could make it subject to the provincial corporation capital tax and municipal regulations for the lands it owns directly. To some degree, it may also impact on the Port's status and marketing efforts in other countries where these activities are typically conducted by governments. From a federal perspective, granting crown agency status presumably might reduce the financial "firewall" between ports and the government it is creating through this legislation. There may also be a concern about federal agency status for a corporation which is not directly controlled by the government. From a municipal policy perspective, the ability to apply zoning controls to a subset of the lands controlled by the Port has some limited value. From an administrative perspective, it is undesirable to have a mix of regulated and unregulated lands. It is certainly undesirable to have the Port subject to taxation by any other level of government when the Port is not paying full municipal taxes to compensate for the expenditures municipalities make in the delivery of services. The Federal Government is imposing significant restrictions on the Port, and retaining substantial control through the letters patent. On balance, staff believe it would be desirable for the Port to retain its status as an agent of the crown if issues of the makeup of the Port Board and the management of land use are appropriately dealt with. Council advise the Federal Government that provision of crown agency status through the legislation is appropriate, subject to the maintenance of the required financial separation and appropriate arrangements to manage issues of land use and municipal regulation. 3. Governance and Accountability Section 6(f) and Section 12 deal with the appointment of a board for the Port of Vancouver of between nine and eleven members: one nominated by the Minister, one appointed by British Columbia, one appointed jointly by Alberta, Manitoba, and Saskatchewan, one appointed by the municipalities named in the letters patent, the CEO, and the remainder nominated by the Minister in consultation with users. The Chair may, but apparently not necessarily, be elected by the directors. This formula would provide four community representatives, the CEO, and four to six user representatives. It would be desirable to have an additional municipal representative, for a total of five community representatives, five user representatives, and the CEO. This would provide an appropriate balance and enhance municipal representation. Council previously approved this position. It is recommended: Council urge the Federal Government to provide for a director appointed by the City of Vancouver and a director appointed by the other municipalities in the Port of Vancouver. It is appropriate in Vancouver that the Chair be elected by the directors so there is local input to the selection. Either the legislation should be adjusted to state that the directors shall elect the Chair, or if for some reason this is not appropriate nationally, the letters patent for the Vancouver Port Authority should reflect that requirement. It is recommended: Council urge the Federal Government to amend the legislation to provide that the Chair of the Board of a port authority be elected by the directors. Alternatively, the letters patent for Vancouver should state this requirement. Section 13 requires that "Directors of a port authority shall have generally acknowledged and accepted stature within the transportation industry or the business community and relevant knowledge and extensive experience related to the management of a business, to the operation of a port or to maritime trade". This requirement is much more restrictive than that in the present legislation, and inappropriate. It would preclude directors with specialized expertise valuable to be Board. Specifically, from the perspective of municipalities it would eliminate potential directors whose expertise is in local or regional government or community affairs. It is recommended: Council urge the Federal Government to relax the criteria for directors to permit a broader range of expertise. Section 14 excludes certain individuals from being directors, including elected officials, employees of a government, and anyone who in the opinion of the Minister is an officer or employee of a user. However, this would still permit directors who have an interest in businesses which are users of Port services, or could stand to benefit from Port activities. It is recommended: Council urge the Federal Government to ensure that the legislation sets high standards for the avoidance of a real or perceived conflict of interest. 4. Port Policing With the restructuring of the port system, the Canada Port Corporation, the umbrella organization in the Canadian port system, will be disbanded and along with it the Ports Canada Police. Under the current system, the Ports Canada Police provide policing and security services to the Vancouver Port Corporation, for which the corporation pays about $3.0 million annually. These are in addition to the services provided individually or collectively by the RCMP, Canada Customs and the municipal police departments. With the dismantling of the Ports Canada Police, responsibility for port policing remains uncertain and the issues identified by Council in February 1996 remain valid. Responsibility for policing will have to be transferred to other jurisdictions and/or agencies following an assessment and arrangements for compensation. There are a variety of levels on which security and policing is necessary in the port: - the owner's responsibility for the security of the property and buildings In February, 1996, Council took the position that the new port authority should take responsibility for this level of security should the Ports Canada Police be disbanded. Bill C-44 does not address this issue directly, however, the Minister of Transport has indicated that the responsibility for these services will fall to the new port authority. As the City does not supply services at this level to its taxpayers, it should be clear to the government that this is not a role the City will play on port lands. Equally, however, it should be clear that police agencies will require full access to port facilities, and security services must be developed on this basis. - the "normal standard" of policing that is provided by the local police department to all taxpayers The City already provides policing services to the port related to certain types of criminal investigations. As long as the port authority continues to make payments-in-lieu of taxes for the property it occupies, the City should continue to do so whether or not the Ports Canada Police are disbanded. It should be noted, however, that this level of service is far from adequate for a port environment. - police services falling under the realm of federal responsibility which arise because of the unique nature of the port operation but which do not require involvement of federal enforcement There may be enforcement areas where the City may be required to provide services beyond the normal level to the port authority. However, in these cases, the federal government should provide full funding, or the port should be required to pay user fees in addition to payments-in-lieu of taxes. - police services falling under the realm of federal responsibility because of the need for federal enforcement These services arise from need to deal with drugs, organized crime, illicit alcohol or arms trade, immigration, national security or emergency planning. It is beyond the mandate and role of the Vancouver Police Department or other municipal police forces to provide for enforcement at this level and Council took that position in February. Transport Minister David Anderson has acknowledged in a letter to the B.C. Attorney General that the lead role in these areas has always been played by federal enforcement agencies, including Canada Customs and the RCMP, and these agencies will continue to carry that responsibility under the new port regime. It is essential that these agencies have adequate resources for these tasks. Elimination of the Ports Canada Police will require the assumption of additional policing duties by local municipalities and the RCMP. Bill C-44 leaves in question the issue of how these responsibilities for policing will be divided among the agencies and how any transition necessary as a result of the disbanding of the Ports Canada Police would be handled. However, the Transport Minister indicates he has initiated discussions at the federal level concerning the establishment of a broad, multi-jurisdictional review of policing issues in Canadian ports. Council should support this initiative, so long as municipalities and the Attorney-General are fully involved and the discussions are predicated on the Federal Government assuming its full responsibilities for the unique policing problems associated with ports, including drug enforcement, organized crime, immigration, alcohol and arms trade, customs, maritime terrorism, and peacetime emergency planning. In many cases, these responsibilities will best be carried out by cross agency task forces, or handled through the existing Coordinated Law Enforcement Unit, but funding must be provided from the Federal Government. The Chief Constable believes that the Port is not adequately policed under current circumstances due to resource limitations, and that the City would have to expand its police department if port policing responsibilities were to be transferred. Municipalities should not be required to accept additional costs as a result of the elimination of the Ports Canada Police. Where municipal forces have to be enlarged to meet policing responsibilities on port lands, these costs must be met either through direct payments from the ports, or enlarged grants-in-lieu of taxes through the elimination of some or all of the present exemptions. It is recommended: Council urge the Minister of Transport, the Solicitor-General, and the Attorney-General to convene discussions with representatives of the municipalities to examine how policing responsibilities in British Columbia ports can best be met, with the clear understanding that municipalities will not be required to fund additional police services without full compensation. Council urge the Federal Government to provide a mechanism and sufficient time for a smooth transition between the present Ports Canada Police jurisdiction and the establishment of replacement policing functions. 5. Payments-in-lieu of taxes When the proposed National Marine Policy was made public in 1995, it included a provision by which federal ports remaining part of the national port system would be offered a unilateral federal exemption from payments-in-lieu of taxes. In their place, each local port authority would have been expected to negotiate user fees for municipal services with neighboring municipal governments. Payment-in-lieu of taxes is only an issue in cases where federal property is held by the government or its agencies. Port land and facilities leased to private operators (such as Vanterm in Vancouver) are fully taxable. City Council and the FCM took the position that this was an unacceptable way for the port authorities to exist in a municipal setting. The proposal also ran contrary to a consensus position on payments-in-lieu of taxes that had been negotiated among FCM, Public Works Canada and the Federal Treasury Board that requires the federal government and its agencies to respect the local assessment and taxation regimes as part of fulfilling their responsibilities as property owners. Pressures brought by municipal governments and the FCM convinced the Transport Minister to withdraw these proposals. While Bill C-44 is silent on the exact tax status of the restructured national ports, both the Transport Minister and the President of the Treasury Board have indicated that the current provisions of the Municipal Grants Act will apply to the new port authorities and that municipalities should not expect to be worse off financially than under the current system. It is important to note that the Port does not pay the equivalent of full property taxes through grants-in-lieu. There are significant exemptions from grants-in-lieu of taxes. Elimination of these exemptions or applying normal taxation would increase revenue to municipalities. Further, the present grants-in-lieu process is flawed. As Council has been advised, the Port of Vancouver and federal Municipal Grants staff have recently reviewed the basis for past grants estimates over a period of more than ten years, and concluded that the City has been overpaid by in excess of $3 million. The Port is unilaterally recovering that overpayment over time; the 1996 payment to the City has been reduced by $.5 million. The recovery of alleged overpayments dating back ten years is questionable in the context of normal commercial practice. The grants-in-lieu system should be revised to eliminate this possibility and to provide an appeal mechanism. This problem would of course not arise if the Port were taxed normally on an annual basis. The Port has argued that full taxation would impact heavily on its competitive position. It is vitally important to the region, the province and the country that the Port of Vancouver remain competitive, however, this should not be achieved at the expense of property owners and taxpayers in Vancouver and other neighboring municipalities. This is particularly true, as previously noted, when the Federal Government is requiring Ports to contribute a share of revenue. It is recommended: Council reiterate its position that the new port authorities be subject to the same payment-in-lieu of taxes rules that apply to other federal property, or that they become taxable, and urge the federal government to ensure that the new legislation does not result in a net increase in costs to municipalities through any combination of additional responsibilities for municipalities and changes in the payment of grants-in-lieu. Council urge the Federal Government that if grants-in-lieu are to be retained rather than implementing full taxation, the process be revised to provide for year by year finalization of grants and an appeal mechanism to ensure certainty for both municipalities and ports. 6. Land Use and Development At present, the Federal Government relies on its constitutional prerogative to avoid compliance with local planning authority. While this prerogative extends to the Vancouver Port Corporation, the VPC and the City have established a good working relationship with respect to the development of port lands. Council is aware of the joint planning initiatives undertaken with respect to port lands west of Main Street and of the agreement that development east of Main Street will be follow a review process not dissimilar to the development application process that applies to development on private lands. The working relationship, however, is a function of the personnel and Board presently in place at the Port. There is no certainty that it would survive a change in staff or the Board. Bill C-44 does not require port authorities to adhere to municipal zoning and development processes. However, the legislation does limit the type of development that can occur on port land in two ways. First, the legislation limits the activities of port authorities to those directly related to marine transport and commerce and the conditions under which port lands can be leased. This limitation will provide some protection against inappropriate land use. However, it also precludes the Port providing non-port facilities sought by municipalities. In particular, facilities and parks for the public to access the waterfront might be precluded. Since the Port controls the majority of the Burrard waterfront in Vancouver, this is unacceptable. Second, the legislation requires port authorities to develop and publish a land use plan, and to hold a public meeting to solicit input from the public, within six months of its incorporation. This presumably provides some opportunity for municipal input. However, it puts the municipality in the same category as public individuals. There is no explicit provision for the Port and adjacent municipalities to reach agreement on a land use plan for the Port. While federal land is exempt from municipal zoning control, this exemption is not extended to land purchased directly by a port authority. This could lead to a situation in which a patchwork of properties having to meet different standards could develop. In addition, developments might end up being structured based on who controls development, as opposed to the most sensible land use plan. The City has a strong interest in seeing port lands developed for port purposes and subjecting all properties, whether owned by the port authority or the Crown, to land use control is the best way to ensure that development occurs in a way that is sensitive to the surrounding area. The FCM position seeks mandatory compliance with municipal planning authority and specific political authorization from the Minister for any action by port authorities which is at variance with official municipal plans and bylaws. Council has endorsed this position, and it remains appropriate. Finally, the Bill C-44 provides significant restrictions on the ability of port authorities to utilize federal land. For example, leases may be only for purposes of operating the port, thereby eliminating the possibility that property may be developed for non port uses. In areas where industrial port uses are inappropriate (such as Vancouver's central waterfront) there would be no possibility of a waterfront park, convention centre, or hotel. These provisions place unnecessary limitations on the utilization of port lands, while at the same time avoiding legitimate municipal involvement in land use decisions. It is recommended: Council urge the Federal Government to permit broader land uses within the Port, so long as they comply with municipal zoning or joint port municipal land use agreements, and to enable port authorities to enter into binding land use agreements with municipalities, subject to an override by the Governor in Council. CONCLUSION Many of the changes proposed in Bill C-44 will benefit the Port on an operational basis. However, there are significant limitations on the authority of the Port which will directly effect the Port's ability to function; preclude municipalities achieving objectives related to waterfront uses; and potentially increase municipal costs for policing. Payments of grants-in-lieu of taxes is not addressed in the legislation as it currently stands. Changes in the legislation to address these issues and provide for improved municipal representation on the Board of Directors could resolve these concerns. Recommendations for such changes are provided in this report for Council to communicate to the Transport Committee. * * *