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

A wide-ranging debate over whether a hotel project at the Ottawa International Airport should get a $13 million break on property taxes ended in an unusual tie vote Tuesday at city hall.

City staff have determined Germain Hotels is eligible to pay $4.4 million in taxes to the City of Ottawa over 25 years if it builds a new 180-room Alt Hotel attached to the terminal — just 25 per cent of the $17.4 million in tax revenue it’s expected to generate.

Germain Hotels was the first applicant under a new community improvement plan for the airport area approved by the former city council last July. It’s a tool also used in Bells Corners, on Montreal Road, and in much of Orléans 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 favor with some members of the council this term — including with new mayor Mark Sutcliffe — the finance and corporate services committee voted 6 to 6 on the hotel’s application, which means it failed at the committee level.

Sutcliffe supports the airport, economic development, and city staff, but doesn’t believe in granting specific private businesses such as property tax breaks, he said. He called it a “flawed” funding model.

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

The split vote creates some suspense, and will undoubtedly lead to conversations between councilors, ahead of the April 12 vote when the full city council decides to approve or reject the grant.

Airport wants to be a hub

The Ottawa International Airport pushed hard for the grant, arguing that an on-site hotel was needed to allow airlines to use the airport as a hub through which many flights pass and passengers make connections.

Ottawa airport president and CEO Mark Laroche explained there’s a certain urgency to the process, because Porter Airlines is spending millions to build two new hangars and 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 have to have those amenities.”

Laroche explained the airport has 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 to become the airport’s fourth hotel tenant, although 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, Hugo Germain, vice-president of operations for Germain Hotels, explained to the committee that higher construction costs have created risks, and his lenders were including the municipal grant in their financing calculations.

Councilors in favor

Count. Cathy Curry, who represents the high-tech park in Kanata North, was convinced the airport needed more direct flights and connections to make Ottawa easier to access for both business and leisure travelers.

“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 and airport owners had other supporters on the committee, who agreed it was better to get jobs and an economic boost from a new hotel than to let the site sit empty.

Orléans West-Innes Coun. Laura Dudas could see why the airport and hotel would be frustrated that they had followed the city’s steps under the new program, only to face a challenge 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,” Dudas told the airport’s CEO.

Those opposed

Others strongly disagree with characterizing the hotel’s projected property taxes as “found money”. They saw the grant as foreign 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,” Sutcliffe said.

Sutcliffe wasn’t convinced the site would sit idle for 25 years, unable to generate tax dollars.

Others questioned the market need for the hotel, and raised concerns from surrounding hotels that felt the 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 such tax breaks in the future and is waiting to see what comes from a review.

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