EdmontonRegionalAirport Authority – Agreement (T.Caterina)

EdmontonRegionalAirport Authority – Agreement

(T.Caterina)

Recommendation:
That the April 24, 2009, Deputy City Manager’s Office report 2009DCM026 be received for information.

Report Summary

This report provides a response to an Administrative Inquiry regarding the Edmonton Regional Airport Authority

Agreement .

Previous Council/Committee Action

At the March 11, 2009,City Council meeting, Councillor T.Caterina made
an Administrative Inquiry (seeAttachment 1).

Report

The following provides answers to the questions in the Administrative Inquiry.

  1. What was the understanding by the City of Edmonton in regards to the agreement with EdmontonRegionalAirport Authority at the time of the lease agreement as the result of the referendum?

Section 34.4 of the lease between The City of Edmonton (the “City”) and the Edmonton Regional Airports Authority (“ERAA”) for the CityCentreAirport (the “Lease”) confirms that the Lease is the entire agreement between the City and ERAA concerning the lease of the CityCentreAirport. The Lease therefore reflects the complete understanding between the City and ERAA and may be relied on for any particularinquiry in this regard.

  1. Was the total closure part of that understanding as a possibility? If so, was the public made aware of that possibility?

No, the Lease contains no terms with regard to total closure of the CityCentreAirport.

  1. Was the restriction of passenger capacity part of that understanding? If so, was the public made aware of that possibility?

No, the Lease contains no terms with regard to restricting passenger capacity. However, the Lease does contain terms with regard to restriction of “scheduled air passenger service” in section 6.3.

  1. Was the restriction of providing cargo service part of that understanding? If so, was the public made aware of that possibility?

No, the Lease contains no terms with regard to restricting cargo service; the Lease does require ERAA to operate the CityCentreAirport as a “public airport… …offering general aviation services” that does not expressly include cargo service, however.

  1. Was the closure of Customs Service part of that understanding? If so, was the public made aware of that possibility?

The Lease contains no provisions regarding Customs Service. The provision of Customs Service at the Edmonton City Centre Airport is the responsibility of the Canada Border Services Agency.

  1. Was the restriction to development and/or expansion of the current aviation related tenants part of that understanding? If so, was the public made aware of that possibility?

No, the Lease does not expressly speak todevelopment moratoriums arising after the commencement date, however, the Lease does provide ERAA with the discretion to operate an airport at the City Centre Airport subject to the terms and conditions of the Lease, including Article 6 (use and operation) and Article 17 (improvements and alterations to the City Centre Airport). The current development moratorium does not conflict with ERAA’s mandate to operate and manage the City Centre Airport, including development and subletting of the City Centre Airport.

  1. Was the closure of the terminal building part of that understanding? If so, was the public made aware of that possibility?

No, the Lease does not expressly speak to the closure of the air terminal building; however, as stated in the answer to question number 6, that step is consistent with ERAA’s mandate to operate and manage the CityCentreAirport, including the restriction of scheduled passenger traffic in section 6.3 of the Lease.

  1. Was the transfer of approximately $8 million to the head lease holder distributed and/or used as per the lease agreement? Please provide a detailed accounting of these monies.

Yes, the funds were distributed and/ or used as per the lease agreement, as outlined in Attachment 2.

After closing adjustments, the balance to be considered as at April 1, 1996, was $9.285 million.

Of that amount $4.213 million was applied by the City for purposes outlined in the agreement including dividends, revenue tax and parkade debenture payments.

$ 3.762 millionwas provided to the Edmonton Airports Authority (including interest of $0.065 million), which was used to purchase equipment from the City to operate the Airport, for airfield drainage rehabilitation and for other infrastructure work consistent with the lease provisions.

$1.375 million was held by the City and used to address contingencies for remedial work, legal matters, etc. Residual amounts of $0.613 million not applied to address the contingencies as set out in the agreement were paid to the Airports Authority at the end of 10 years, in 2006.

The detailed accounting for the Airport Reserve is shown on Attachment 2.

  1. Was maintenance of the land and infrastructure as per the lease agreement done on a yearly basis? If not, why not and does this part of the lease agreement make up part or all of the reported $40-million maintenance and repair amount reported that the City Centre Airport needs?

As per Section 28 of the Lease, ERAA annually provides the City with audited financial statements, a business plan, a review of the CityCentreAirport, and ERAA's annual report. Annual maintenance expenditures and capital expenditures are recorded in the financial statements and the business plan and the annual review outline proposed future expenditures.

In 2003, ERAA prepared a study of the CityCentreAirport's capital needs to the year 2020. Estimated capital needs total $33 million, consisting of pavement ($13 million), equipment ($9 million) buildings
($3 million) and storm system replacement ($8 million). ERAA has expended $6.7 million on capital requirements during the period 2003 to 2007. The 2008 to 2012capital planprovides for capital investment of $15 million, consisting primarily of pavement, equipment and utilities.

  1. Are all the chattels referenced in the lease agreement accounted for? If so, please verify with original list of chattels as per the lease agreement. When was that last inventory of chattels completed, if at all?

Section 13 of the Lease provided for the sale of all airport chattels to ERAA, as listed in Schedules D1 to D11. With the exception of those chattels as listed on Schedules D1, D2, D3, D5, D6 (the "excepted chattels"), which include computers, software, transceivers, etc., ERAA is free to use, repair, replace and dispose of the rest of the listed chattels (office equipment, tools, phones, etc.) as needed. Should ERAA move the excepted chattels from the airport, ERAA is obligated to pay the City the book value of those chattels. However, as the age of the chattels is a minimum of 14+ years, it is likely that most chattels are obsolete and have been either replaced or disposed of. The lease does not contemplate the City monitoring or managing the chattels sold to ERAA as part of the agreement.

Attachments

  1. Administrative Inquiry – March 11, 2009, Council
  2. EdmontonMunicipalAirport Reserve Fund Reserve

Others Reviewing this Report

  • A.B.Maurer, City Manager
  • D. H. Edey, General Manager, Corporate Services Department
  • L.Rosen, General Manager, Asset Management and Public Works Department
  • C.Warnock, Chief Financial Officer and Treasurer

Page 1 of 3

Attachment 1

Administrative Inquiry – March 11, 2009 Council

C.1.EdmontonRegionalAirport Authority – Agreement (T.Caterina)

  1. What was the understanding by the City of Edmonton in regards to the agreement with Edmonton Regional Airport Authority at the time of the lease agreement as the result of the referendum?
  2. Was the total closure part of that understanding as a possibility? If so, was the public made aware of that possibility?
  3. Was the restriction of passenger capacity part of that understanding? If so, was the public made aware of that possibility?
  4. Was the restriction of providing cargo service part of that understanding? If so, was the public made aware of that possibility?
  5. Was the closure of Customs Service part of that understanding? If so, was the public made aware of that possibility?
  6. Was the restriction to development and/or expansion of the current aviation related tenants part of that understanding? If so, was the public made aware of that possibility?
  7. Was the closure of the terminal building part of that understanding? If so, was the public made aware of that possibility?
  8. Was the transfer of approximately $8 million to the head lease holder distributed and/or used as per the lease agreement? Please provide a detailed accounting of these monies.
  9. Was maintenance of the land an infrastructure as per the lease agreement done on a yearly basis? If not, why not and does this part of the lease agreement make up part or all of the reported $40-million maintenance and repair amount reported that the City Centre Airport needs?
  10. Are all the chattels referenced in the lease agreement accounted for? If so, please verify with original list of chattels as per the lease agreement. When was that last inventory of chattels completed, if at all?
/ DeputyCity Manager
Due: May 13/09

Page 1 of 1Report: 2009DCM026 Attachment 1

Attachment 2

EdmontonMunicipalAirport Reserve Fund

Page 1 of 1Report: 2009DCM026 Attachment 2