Debate over $13M tax break for airport hotel ends in tie vote

Awide-ranging debateover whethera hotel project at the Ottawa International Airport should get a $13 million break on property taxes endedin an unusualtie voteTuesday at city hall.

City staff have determined Germain Hotels iseligible to pay $4.4 millionin taxes to the City of Ottawa over 25 years if it builds a new 180-room Alt Hotel attached to the terminal just25 per centof the$17.4 million in tax revenue it'sexpected to generate.

Germain Hotels was the first applicant under a new community improvement planfor the airport area approved by the former city council last July. It'sa tool also used in Bells Corners, on Montreal Road, and in much ofOrlans to spur development where it might not otherwise happen, but attracted negative public attention when a Porsche dealership applied successfully in 2021.

In a sign of how the program has lost favour with some members of council this term including with new mayor Mark Sutcliffe the finance and corporate services committee voted6 to 6 on the hotel's application, which means itfailed at the committee level.

Sutcliffesupports the airport, economic development, and city staff, but doesn't believe in grantingspecific private businesses such property tax breaks, he said. He called ita "flawed" funding model.

Councillors Catherine Kitts, Laura Dudas, Glen Gower,Matthew Luloff, Rawlson King and Cathy Curry voted in favour, whileSutcliffe and councillors Tim Tierney, Jeff Leiper, Riley Brockington, Shawn Menard, and George Darouze voted against. Darouze said he tends to support such grants, but opposed this one because he wants the Airport Parkway widened first.

The split votecreates some suspense, andwill undoubtedly lead to conversations betweencouncillors,ahead of the April 12 votewhen full city council decides to approveor reject the grant.

Airport wants to be a hub

The Ottawa International Airport pushed hard for the grant, arguing the on-site hotel was needed to entice airlines to usethe airport asa hub through which many flights pass andpassengers make connections.

Ottawa airport president and CEO Mark Larocheexplained there's a certain urgency to the process, because Porter Airlines is spending millions to buildtwo new hangarsand he wants to make Ottawa's airport as attractive as possible.

"Toronto, Montreal, Vancouver, Calgary, they all have a terminal hotel," Laroche told councillors. "If we want to play in the league of a hub airport, we haveto have those amenities."

Laroche explained the airporthas been trying to get a hotel attached to its terminal for the past seven years, but the site has some building constraints and the airport is being "picky" to ensure a quality hotel is built.In 2018, Germain Hotels signed a lease tobecome the airport's fourth hotel tenant, albeit the only one attached to the terminal by a pedestrian walkway.

Construction costs were pegged at $44 million pre-pandemic, but as those rose, Germain walked away. Construction is now estimated at$55 million, and Laroche said the incentive was required for Germain Hotels to agree to go ahead.

For his part, HugoGermain, vice-president of operations forGermain Hotels, explained to the committee that higher construction costs have created risks, and his lenders wereincluding the municipal grantin theirfinancing calculations.

Councillors in favour

Coun. Cathy Curry, who represents the high-tech park in Kanata North,was convinced theairport needs more direct flights and connections tomake Ottawa easier to accessforboth business and leisure travellers.

"This is how you build it. You build it and they will come," she said, adding that economic development is what leads to having extra funding for social needs such as housing.

It does cost us something. It's a grant from taxpayers and I don't think taxpayers want their money going towards this type of project, - Mayor Mark Sutcliffe

The hotel owner and airport had othersupporters on the committee, who agreed it was better to get jobs and an economic boostfrom anew hotel than to let the site sitempty.

Orlans West-InnesCoun. Laura Dudascould see why the airport and hotel would be frustrated that theyhad followed the city's steps under the new program, only toface achallenge from politicians at the committee level.

"This is not our residents' money, this is found money that would come into our city and support what you're trying to do," Dudastold the airport's CEO.

Those opposed

Others strongly disagreed with characterizingthe hotel's projected property taxes as "found money". They saw the grant as foregone tax revenue, or a municipal subsidy.

"It does cost us something. It's a grant from taxpayers and I don't think taxpayers want their money going towards this type of project," Sutcliffesaid.

Sutcliffe wasn't convinced the site wouldsit idle for 25 years, unable to generatetax dollars.

Others questioned the market need for the hotel,and raised the concerns fromsurrounding hotels that feltthe Alt Hotel's grant would affect their own room occupancy.

River ward Coun. Riley Brockington felt there were many other factors that would have a greater bearing on the airport's growth than a municipal incentive for a hotel, namely convincing the federal government to reduce fees on fares.

Much of Tuesday's debate came down to differing opinions about whether the community improvement plans themselves offer value to the city.

Sutcliffe ran in the 2022 municipal election on a promise to eliminate suchtax breaks in the futureand is waiting to see what comes of a review.

• City of Ottawa pauses grants to developers who de-contaminate sites

Council asked staff in December to review the community improvement plans and brownfield grants. Brownfield grants were paused while that takes place, while the city continues to accept applications to existing community improvement plans.