POLICY REPORT

OTHER

Date: November 12, 1997

Dept:City Manager

CC File No. 8109

TO:Vancouver City Council

FROM:City Manager

SUBJECT:Port Legislation - Bill C-9 (Canada Marine Act)

RECOMMENDATION

A. THAT the Mayor be requested to write to the Minister of Transport and the Standing Committee on Transport to submit Council’s concerns about bill C-9 set out in 1) to 7) below and request the Bill be amended to meet these concerns:

1) Council urge the Federal Government to provide a legislative framework for national ports that is flexible and robust. Section 28(2)(b) should be amended to broaden the range of supplementary activities open to the Port; if there is a need to limit the activities at port authorities, then those limitations can be contained the Letters patent which are much more easily adjusted to local and changing circumstance.

2) Council advise the Federal Government that a direct financial return on federal land through a charge on gross revenues 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, and recommend that payment be in the form of a dividend based on net revenue.

3) Council request that the Minister include a representative from the City of Vancouver in any group advising on the development of letters patent and the implementation of the legislation in the Port of Vancouver.

4) Council urge the Federal Government to provide for a director appointed by the City of Vancouver and a director appointed by the other municipalities.

5) Council urge the Federal Government to relax the criteria for directors in Section 15 to provide for a broader range of expertise on the Board.

6) Council urge the Federal Government to ensure that the legislation sets high standards for the avoidance of a real or perceived conflict of interest by the amendment of Section 16 to exclude stakeholder groups from participation on the Board.

7) Council urge the Federal Government to amend the legislation to enable port authorities to enter into binding land use agreements with municipalities, subject to an override by the Governor-in-Council, and to permit broader land uses within the Port, so long as they comply with municipal zoning or joint port-municipal land use agreements.

B. The Mayor be requested to write to the responsible Ministers to urge the Federal Government that the Municipal Grants Act be amended to update the grants-ln-lieu process to provide for year by year finalization of grants and an appeal mechanism to ensure certainty for both municipalities and ports.

COUNCIL POLICY

There is no relevant Council policy. Council dealt with the proposed Canada Marine Act in 1996 and passed a number of resolutions requesting changes to the proposed legislation.

SUMMARY

Bill C-9 (The Canada Marine Act), currently before the House, eliminates the Canada Ports Corporation and replaces the Vancouver Port Corporation with a semi-autonomous port authority. Council commented extensively on this legislation when it was before the house in the last session as Bill C-44.

While the legislation provides port authorities greater autonomy in some areas, it introduces restrictions on activities the port authorities can carry on. The legislation may also place inappropriate restrictions on land use in the port, while remaining silent on the potential for port-municipal land use agreements.

The legislation is directed at making ports competitive and economically viable, but proposes an annual payment based on gross revenues be paid to the federal government. This could have a significant affect on the port’s ability to be competitive. At the same time the federal government is seeking annual payments, ports continue to utilize payments-in-lieu of taxes, which are significantly lower than normal taxation.

Recommendations are presented in this report to address these issues, to be forwarded to the Transport Committee and the Minister if Council approves.

PURPOSE

This report sets out issues related to Bill C-9, the Canada Marine Act, and recommends a Council position on this issues be forwarded to the Minister of Transport and the Standing Committee on Transport.

BACKGROUND

In December, 1995, the Minister of Transport released a proposal to alter the structure of the Port and harbour system in Canada extensively. Council responded in February of 1996 with 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 Board of Directors, and generally the makeup of the Board; and land use and development.

In June of 1996, Bill C-44, the Canada Marine Act, was tabled in the House of Commons and referred to the Standing Committee on Transport for review. On September 26, Council passed a series of resolutions and submitted these to the Standing Committee. The Mayor and Mayors from other municipalities made a joint submission in this regard to the Standing Committee on Transport during its hearings in Vancouver on the Bill. Since Council’s last submission, the issue of port policing has been resolved, and certain other aspects of the Bill have been amended which reduce the City’s concerns in these areas.

Bill C-44 died on the order paper when the Federal election was called. It has now been resubmitted as Bill C-9. While some of the issues which were of concern to Council have been dealt with, many remain outstanding. This report will deal with Bill C-9 from two perspectives: issues directly impacting the City, and issues relating to the effective operation of the Port in a highly competitive environment.

DISCUSSION

The Port of Vancouver is a major economic generator for the City and region, and is Canada’s gateway to the Asia-Pacific economies. Its economic health and viability are important. The Canada Marine Act, moves in the right direction, and Council has supported it’s adoption. Port decision making is streamlined with the elimination of the Canada Ports Corporation, and in most areas the local Port receives enhanced authorities.

However, the Port is also a major element of the City, occupying a large part of the City’s waterfront. It is important that the Port legislation recognize the need for the Port to be a good neighbour and permit the Port to act as such. The Bill is lacking in these areas.

In general, the legislation does not adequately address some issues which the City believes are important, and in other areas is overly restrictive. The legislation clearly intends to make Ports financially self sufficient, yet it still appears to restrict the Port in the activities it may carry on and imposes obligations which may effect the Ports’s economic capacities.

1.Powers and Capacities

The intent of the legislation is to make the system of Canadian ports more competitive, efficient, and commercially oriented. However, section 28 of the Bill states that the power of the port "is limited to the power to engage in

a)port activities related to shipping, navigation, transportation of passengers and goods, handling of goods and storage of goods, to the extent that those activities are specified in the letters patent; and

b)other activities that are deemed in the letters patent to be necessary to support port operations."

This wording unnecessarily raises the question of whether trade promotion, providing consulting services, selling software, and using property for non-port related uses on an interim basis are necessary to support port operations and are therefore permitted activities, though clearly they may be in the best economic interest of the Port.

Equally important from the City’s perspective, this wording could be used to argue that the Port is precluded from entering into partnerships with local governments to provide access to the waterfront, recreational activities, for tourism promotion, or even for coordination of emergency planning and response in the areas of the City adjacent to the Port.

Land Holdings

The Port is limited to leasing or licencing land ‘for the purpose of operating the port’. This does not recognize the long standing practice of the Port to lease land to adjacent municipalities for parks or other purposes, nor does it recognize the obvious need for the Port to lease for revenue purposes land not immediately required for Port purposes. Further, it does not acknowledge the unique character of some Port areas, like those in the Central waterfront adjacent to the downtown. These lands are clearly not suited for traditional Port uses, but a mix of Port related (cruise) and other complementary commercial uses is clearly appropriate.

From both a Port and a City perspective, there will be locations where a rationalization of land holdings will be desirable, requiring that the Port sell or exchange federal real property. The legislation appears to require that the Port obtain supplementary letters patent for any land transaction, however small. This is an unnecessary obstacle to efficient operations.

Financial Issues

The legislation requires that the letters patent include the formula for annual payments by the Port to the federal government. Ports will now be required to stand on their own financial feet, and function in a highly competitive environment. The benefits of a competitive port will extend across the country. A percentage of gross revenue does not enhance the Port’s competitive position and may adversely affect the Port’s ability to invest in port development. A more conventional ‘dividend’, based on net revenue, would be more appropriate.

Further, it is important to note that Ports do not pay full taxes on Port property - these would be significantly higher than the present grants in lieu. So long as this is the case, payment of a percentage of gross revenue would effectively be an inappropriate reallocation of funding to the federal government when the Ports are not paying their full share of local taxation.

Letters Patent

Letters patent will have a significant role in the operation of the Port of Vancouver, establishing the payment to the federal government and tailoring the powers and activities of the Port to the local situation. The City should be represented in discussions leading to the creation of letters patent, since as the Port’s largest neighbour the letters patent will have a major impact on the relationship between the City and Port.

It is recommended that:

Council urge the Federal Government to provide a legislative framework for national ports that is flexible and robust. Section 28(2)(b) should be amended to broaden the range of supplementary activities open to the Port; if there is a need to limit the activities at port authorities, then those limitations can be contained the Letters patent which are much more easily adjusted to local and changing circumstance.

Council advise the Federal Government that a direct financial return on federal land through a charge on gross revenues 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, and recommend that payment be in the form of a percentage of net revenue.

Council request that the Minister include a representative from the City of Vancouver in any group advising on the development of letters patent and the implementation of the legislation in the Port of Vancouver.

2.Governance

The Board of the Port of Vancouver is envisaged to contain between 9 and 11 members. One member is to be nominated by the municipalities bordering on the Port; one by the Minister; two by Provinces; and the remainder nominated by the Minister in consultation with users. The Chair will be elected by the directors, as previously recommended by Council.

Council has previously requested that the number of municipal representatives be increased to two, with one named by the City of Vancouver and one by the other municipalities acting jointly. It is appropriate to increase municipal representation, given the important and direct relationship between the municipalities and the Port, and it is particularly appropriate that Vancouver have a standing appointment.

The criteria for directors seem to require the appointment of directors whose expertise lies in the transportation field or business. Given the value of directors with economic, municipal, First Nations, union, environmental or other experience and expertise, all of which could be of great value to the Port, this limitation is excessive.

At the same time, the restriction on the appointment of users to the Board is not sufficiently clear. The legislation specifically excludes elected and appointed government officials and directors or officers or employees of port users. However, stakeholder associations andunions representing workers in the Port may not fall under the category of users, but their interest is too direct to avoid the potential for conflict. It is essential that conflict or the perception of conflict be avoided in the operations of the Board, and that the requirements be amended accordingly.

With regard to governance and accountability, 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.

Council urge the Federal Government to relax the criteria for directors in Section 15 to permit a broader range of expertise.

Council urge the Federal Government to ensure that the legislation sets high standards for the avoidance of a real or perceived conflict of interest by the amendment of Section 16 to exclude stakeholder groups from participation on the Board.

3. Payments-in-Lieu of Taxes

The initial policy proposals presented in 1995 suggested that payments in lieu of taxes would not be made, and that individual municipalities should negotiate fee for service arrangements with ports. City Council and FCM argued that this was an unacceptable way for ports to work in a municipal setting. This proposal also ran contrary to a consensus position on payments-in-lieu of taxes negotiated between FCM, Public Works Canada and the Federal Treasury Board.

Pressure by municipal governments and the FCM convinced the Transport Minister to withdraw these proposals. FCM has been assured that the provisions of the Municipal Grants Act will apply to the new port authorities.

While this is advantageous relative to the fee for service proposal, the Port pays significantly less under the payment-in-lieu scheme that if it were taxable. The Port has argued in the past that full taxation would affect its competitive position significantly. While maintaining a competitive Port is an obvious advantage to the municipalities, this should not be achieved at the expense of local taxpayers when the federal government is providing for a required payment to Canada based on gross revenue.

The payment-in-lieu scheme is significantly flawed. As previously reported to Council, the Port of Vancouver and federal Municipal Grants staff have recently reviewed the basis for past grants going back more than ten years. They have concluded that the City has been overpaid significantly, and is unilaterally recovering those funds by deductions from currentpayments in lieu. It is noteworthy that other federal agencies are conducting similar reviews, but are going back only four years - there is a lack of consistency and fairness in the process. There is no appeal mechanism. Given that the payment-in-lieu scheme rather than normal taxation is to be applied to ports, the program should be improved and updated. It is recommended:

Council urge the Federal Government that the Municipal Grants Act be amended to update the grants-ln-lieu process to provide for year by year finalization of grants and an appeal mechanism to ensure certainty for both municipalities and ports.

4. 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-9 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 letters patent will limit the activities of port authorities and the conditions under which port lands can be leased. This may preclude 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.

Given the significant roles many ports play in the municipalities in which they are located, port land use can be a major issue. The development of jointly agreed and binding land use plans between the Port and municipalities would be beneficial to both, by providing certaintyfor planning adjacent communities and for planning services to port lands. Authority for ports to enter into such agreements on a voluntary basis would be a significant enhancement to the legislation. Provision for development of national significance which was not anticipated when a land use agreement was prepared could be accommodated through an override provision.

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 legislation 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 amend the legislation to enable port authorities to enter into binding land use agreements with municipalities, subject to an override by the Governor-in-Council, and to permit broader land uses within the Port, so long as they comply with municipal zoning or joint port-municipal land use agreements.

CONCLUSION

Many of the changes proposed in Bill C-9 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 and preclude municipalities achieving objectives related to waterfront uses.

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 and the Minister.

* * * *

(c) 1997 City of Vancouver