Business

The Pearson 'mess'

Taxpayers paid heavily for Chrétien’s promise

PAUL KAIHLA May 26 1997
Business

The Pearson 'mess'

Taxpayers paid heavily for Chrétien’s promise

PAUL KAIHLA May 26 1997

The Pearson 'mess'

Taxpayers paid heavily for Chrétien’s promise

During the last federal election campaign, Jean Chrétien lambasted the deal as “indecent”—and promised to kill it. In Toronto, angry city councillors hoisted placards and demonstrated against it. The object of their scorn: a contract signed by the then-Conservative government awarding control of the two most profitable terminals at Toronto’s Pearson International Airport to a private consortium headed by Tory loyalists. Public outrage over the high-profile privatization helped the Liberals capture all but one of Ontario’s 99 seats, after which the new Chrétien government moved swiftly to cancel the contract. Now, in the final days of the 1997 campaign, opposition politicians are once again trying to make the airport an issue—but this time at the Liberals’ expense. “We’re here to protest the gross waste of money on politically motivated projects,” Reform party Leader Preston Manning declared last week after unveiling a Reform-sponsored billboard near the Toronto airport ‘We will make the government pay the price.”

The latest round of bickering in the Pearson saga comes at a time when the government thought it had put the issue to rest. In December, Ottawa

transferred control of the airport to a new, nonprofit local authority. According to a newly released consultant’s

report for Transport Canada, however, that move will cost taxpayers $300 million in lost revenue over the next 20 years—on top of $260 million in costs related to the settlement of a law-

suit brought by the ousted Tory consortium. Although federal officials insist that the arrangement will ultimately benefit taxpayers, Conservative candidates last week used the evidence of mounting costs to go on the attack. “Chrétien decided to make Pearson airport a political football without the slightest thought to the huge cost to the taxpayer,” said Beryl Ford, a school board chairwoman who is running for the Tories in the riding of Bramalea/Gore/Malton, which encompasses the airport. “Blatant political opportunism got the Liberal government into this mess.”

The irony is that the Tories are responsible for starting the “mess” in the first place. During the 1993 campaign, leaked cabinet documents showed that former Tory leader Kim Campbell’s short-lived government had signed the privatization deal over the

strenuous objection of Transport officials. Senior bureaucrats had recommended that the terminals go to a nonprofit entity, and were worried about the consortium’s financial health. After Chrétien took office, he commissioned former Ontario Liberal leader Robert Nixon to study the deal. Nixon’s report concluded that the contract had been concocted “under the shadow of political manipulation.” Chrétien’s subsequent decision to cancel the agreement provoked three years of legal and political wrangling,

with the Tory-dominated Senate supporting the consortium.

The standoff ended only when the Liberals settled out of court with the consortium and ceded the terminals to the nonprofit Greater Toronto Airport Authority. But Ford and other Toronto-area Tories maintain that the 1993 contract was the best deal for taxpayers, and that the Liberals wasted hundreds of millions of dollars by trashing it. Under the new arrangement, the government will receive $628 million less in rental payments over the next 20 years than it would have collected had the deal with the private consortium gone ahead.

But federal officials say that figure is an oversimplification. The GTAA’s lease requires it to spend at least $1.8 billion on renovations and expansion, saving Transport

Canada $400 million or more in improvements that would have been necessary over the next decade just to maintain basic standards and keep up with growing passenger volumes at the two terminals. Under the 1993 privatization deal, the consortium was supposed to spend $700 million on improvements, but only $96 million of that amount was binding. “The minimum capital investment required by the GTAA is significantly higher,” says John Cloutier, a senior financial adviser at Transport Canada.

Manning no doubt speaks for many voters when he says “The numbers are getting awfully confusing on the whole issue.” In his view, the government should have negotiated a joint venture with the private sector. “This has been a bad deal, badly handled all around with Tories and Liberals sharing equal blame,” he said at last week’s campaign stop, as jets roared overhead. “There’s a constant politicization of these types of deals. It’s like we’re in the Third World.”

Despite that, Liberal candidates report receiving little heat from voters on the Pearson issue. Eglinton/Lawrence MP Joe Volpe, whose riding is home to many air transport industry workers, says his campaign workers have so far telephoned 20,000 voters, only two of whom raised the issue. At a local all-candidates meeting last week, not one person asked about the airport controversy. “I think most people are just relieved that somebody’s done something about it,” says Volpe, who calls Pearson “a politician’s issue.” Even Ford acknowledges that the deal is not a major concern among voters, a fact that—in this election, at least—should help both the Tories and the Liberals.

PAUL KAIHLA