By Ted Nickerson
Building on my first “Philosophically Speaking” posting, I think the topic of the business case for the current and future use of the Federal Pickering lands deserves comment. I offer several perspectives on this. Is there a business case for farming, or for an airport? Where are they? What does the North Pickering Farms business case really say?
As further background, industrial land (serviced and un-serviced) in the Toronto region is scarce. Prices are soaring across the region due to rapid growth. Industrial land inside the Pearson Economic Zone, the second largest employment district in the GTA, has the lowest vacancy rate in North America (0.5% according to the Toronto Board of Trade).
The idea of creating a new Pickering Economic Zone around a new airport in North Pickering appears to be a timely solution. Juxtaposed against this are those few corporations and individuals claiming they have a better use for the land than building an airport.
“The is No Business Case” shout those opposed to a Pickering airport.
Several business cases for Pickering airport exist. Only one was released to the public, but the truth is that no one (Pro- or Anti-Airport) has actually “SEEN” it. Confused? Let me explain.
In 2020, Transport Canada released the Pickering Lands Aviation Sector Analysis (ASA) report. ASA Section: Revenue Generation and Economic Impact is a 130+ page business case. It starts by establishing the minimum criteria for financial success including return on investment (IRR), annual earnings (EBITDA), time to positive cash flow, capital costs and more. It evaluates the airport based on six different development scenarios.
Then, the ASA does a strange thing. It hides all the numbers! Pro- or Anti-, you have no idea how good or bad each scenario is in meeting the criteria for success is. A Reader’s opportunity to examine and critique the ASA analyses has been negated. There is literally nothing to “SEE”.
Even in the Section’s summary, none of the scenarios is either accepted or rejected. Since the objective of the ASA report was to comment on “WHEN” an airport would be needed, one is left with the conclusion that at least some of the scenarios met or exceeded the criteria for financial success. The ASA report looked at five airport development strategies. It determined that only two were both operationally and financially viable – an Industrial airport and a Specialty Passenger airport. The ASA business case analyzed both options on two scales and in combination. None of the ASA scenarios were rejected.
The business cases you will never see.
Here is another perspective on “There is No Business Case” statement. Development of the retained Federal Pickering lands will certainly be a P3 initiative led by a private sector consortium.
Private sector groups interested in developing the lands including an airport will make substantial investments in understanding the opportunity and building solid business cases for such a venture. The private sector is not going to make a multi-million/multi-billion-dollar decision without a viable business case.
Those business cases will be considered business confidential/proprietary documents. They will never be available to the public. Even after a formal Federal RFP-RFEI process, the public will at best see only high-level information on why the selected consortium was successful in being awarded the development. The details of their proposal will be withheld.
Then again, there is no business case for economic development of the Federal lands that the Anti-Airport folks will accept except their own – North Pickering Farms. So maybe, it was not so strange that the ASA hid the business case data!
However, if the Federal government wants to see a true business case for an airport at Pickering, they have to formally ask the business community for it. But they know that to ask means they are signaling that they ready to proceed with the economic development of the lands.
No potential investor is going to devote time or money in building a comprehensive business case unless the federal government makes it clear that they are committed to proceeding in a timely manner…give us an airport by this specific date. In the business world time is money. A government request for a business case without that level of commitment (full scope and timing) will garner no response.
The time for the federal government asking consultants for another airport study has passed. The most recent four (2004, 2010, 2016, 2020) all signaled a need for the airport.
What’s the status of the known business plans?
We know that the ASA business case, though grossly redacted, still supports that a Pickering airport will be required someday.
We are aware of two proposals made to the federal government to privately-fund and develop BA-GA commercial airports on the federal lands. These proposals were considered as too small in economic terms to attract the interest of the government. Both would have yielded greater returns than anything maintaining the land for farming produces.
The federal Pickering land are very valuable, potentially worth over $1 million per acre. At the current lease rate ($120 per acre per year), farming represents a long-term, low-return business case. Currently, tenant farmers on the federal lands produce crops worth $3.8 million a year.
The 2018 Land Over Landings– commission agriculture study provides a high-level summary of the business case for farming on the federal lands. One of its stated objectives is to create low skilled-low paying jobs. I find it unsettling that anyone would want to / need to do this in one of the most high-cost regions of the country, and in a country and region where the majority of adults, and recent immigrants, hold university degrees or college diplomas.
Yet, that’s exactly what their business plan creates – 1,459 local jobs (field, farm markets and associated stores) paying just $33,000 per year, placing these jobs in the 3rd lowest regional income level per Statistics Canada/Census Canada. In 2018, the Toronto region household income poverty level was $48,000 per year.
This contrasts sharply with the privately funded business case for the full economic development of the federal Pickering lands. This indicates 56,000+ direct high quality, skilled jobs would be created. These new jobs, per Statistics Canada/Census Canada, would earn about $59,000 per year, placing them in the 7th highest income decile for the region.
Anecdotally, the City of Pickering’s Aerotropolis study identified the opportunity as 48,000 jobs earning approximately $63,000 per year., values similar to the private business case.
In closing, I support the federal government starting the Pickering lands development process as requested by the new Durham Region Official Plan (page 18). The first critical steps would be:
- Issue a federal Request for Proposals or the Request for Expressions of Interest,
- Start the environmental assessment process, and
- Initiate the consultation with First Nations and the Metis Nation.
These actions are required before the first shovel goes into the ground. If our premise is correct, the first action, a request for expressions of interest, will trigger investors and businesses to publicly come forward to participate in the development process.
Those interested parties will generate multiple comprehensive business cases in their efforts to secure the development of the federal Pickering lands.
Further government delay is not warranted. Let’s start the development process. Ask the private sector for a business case now.
References:
Pickering Lands Aviation Sector Analysis: Revenue Generation and Economic Impact, KPMG, WSP, 2018, Released 2020.
A Future for the Lands: Economic Impact of Remaining Pickering Federal Lands if Returned to Permanent Agriculture”, Econometric Research Ltd., JRG Consulting Group, January 2018
Related Posts:
Land Over Landings Billion Dollar Ask of the Canadian Taxpayer. – Friends of Pickering Airport
You have got to be kidding……;-)
the Pickering airport project is not much different than what happened in Windsor in the runup to building the new Windsor-Detroit bridge, now named the Gordie Howe Bridge. Most people don’t know but the other and only bridge there, the Ambassador bridge has been owned and operated privately by Manuel Moroun and his family for almost 100 years. Having a monopoly is nice and as gatekeepers the Morouns did everything for decades to keep their gravy train going. They heavily lobbied numerous politicians and went as far as getting a state constitutional amendment on the Michigan general ballot in 2012 to oppose new international bridges, which was defeated. They held off the project from going forward for decades nonetheless. If it wasn’t for the last Federal gov’s resolve under Harper to build the new bridge, it would have never happened. And it was done by Michigan agreeing only after Canada committed to pay for the entire cost of the project to be then reimbursed by tolls. This is not much different than private entities picking up the tab for the new Pickering Airport to be then compensated for their investment in the years to come. The farming companies and their lobby groups are the gatekeepers like the Morouns in the case of the Pickering Airport. What’s needed is a serious gov to give private entities the confidence to commit to funding the airport with private funds.
Correction: Moroun owned the Ambassador bridge since 1979, and before that it was owned by other private entities. He always spent a large portion of his operating budget on lobbying to prevent the planning of a second Detroit-Windsor bridge.