Ottawa city council votes against giving tax grant to proposed airport hotel

Ottawa city council has voted against giving a tax break to a proposed hotel project at the Ottawa International Airport.

A vote at the Finance and Corporate Services Committee last week on a $13 million tax grant for a proposed hotel at the Ottawa airport ended in a 6-6 tie, which technically defeated the staff recommendations but required the issue to rise to council for consideration.

Coun. Glen Gower put forward a motion, seconded by Coun. Cathy Curry, to reduce the length of the grant from 25 years to 10, and reduce the tax break to $3.7 million from $13 million.

After a lengthy debate, the motion failed on a vote of seven yeas to 18 nays. Voting in favour were councillors Catherine Kitts, Laura Dudas, Glen Gower, Cathy Curry, Matthew Luloff, Rawlson King, and David Hill. Against were Ariel Troster, Jeff Leiper, Steve Desroches, Jessica Bradley, Wilson Lo, David Brown, Sean Devine, Riley Brockington, Laine Johnson, Marty Carr, Allan Hubley, Stéphanie Plante, Shawn Menard, Tim Tierney, Theresa Kavanagh, Clarke Kelly, George Darouze and Mayor Mark Sutcliffe.

The debate centred on the surrender of potential tax revenues versus the economic gain of increasing amenities at the airport.

The Ottawa International Airport Authority, several councillors, and other business leaders in the city have argued the hotel project is vital to making the airport a hub in a geographically disadvantageous position between larger airports in Toronto and Montreal. Germain Hotels, the proponent, told the finance committee last week that their financial backers were hinging on the grant. Supporters also noted that Germain's application met all of the criteria required under the Ottawa International Airport Community Improvement Plan (YOW CIP).

Staff had estimated the hotel could generate more than $17 million in tax revenues over 25 years, which would put the city ahead by more than $4 million had the $13 million grant been approved. 

After the vote failed at committee, Germain Hotels suggested accepting a shorter grant of 10 years, instead of the 25 years in the initial proposal that was up for debate, which led to Gower's motion.

Mayor Mark Sutcliffe was vocal in his opposition to the grant prior to the vote at finance committee and city council. He argued that if there were a business case for a hotel, it would be built without the grant, giving the city 100 per cent of expected revenue.

The YOW CIP, approved by the previous term of council, is meant to help the airport rebound from its tremendous losses during the COVID-19 pandemic. Opponents of the grant argued that Germain's willingness to reduce its request meant that they were willing to move ahead with the project regardless of any tax breaks.

The hotel was first pitched before the pandemic, but it was shelved when international travel shut down. By the time the world had reopened, costs had ballooned.

"I do not support tax breaks for private businesses," Sutcliffe said ahead of the vote. "I am confident that we will find other ways that do not involve taxpayers' money to stimulate tourism and economic development and to support the airport's aspiration to become a travel hub, and I am committed to working on these solutions immediately."

Coun. Matthew Luloff said voting against the CIP grant sends the wrong message to businesses.

"You know, we set up a CIP seven months ago, and a hotel was one of the uses that was approved by council," he said. "I think this sends the message that we don't care about a tax uplift like this, and that Ottawa is not open for business. That's not a good message to be sending our business community."

In a statement, Germain Hotels said it was disappointed in the vote, but remains committed to doing business in Ottawa.

"Our roots have been established in Ottawa since 2016 when we opened the Alt Hotel, then two years later with Le Germain Hotel," the statement says.

"We are a Canada-based, family-owned business, and being a good corporate citizen is part of our core values. We will go back to the drawing board and hope we can find ways to make this project work. We remain committed to the National Capital Region and will be happy to continue welcoming guests in our two existing properties in downtown Ottawa."

The Ottawa International Airport also issued a statement to express it was very disappointed in the result, and said that while council was within its rights to reject the proposal, it could harm the airport's ability to attract new routes.

"In today’s world, acquiring new routes to new destinations often requires airline financial incentives. Other airports in Canada benefit from direct government support to attract new air service, while YOW has no comparable," it said. "The new Council decided against proceeding with the application, which is well within its rights as defined in the bylaw. This therefore leaves YOW with no financial tools provided by the City to support acquiring new routes to new destinations."

The airport noted that the lease agreement with Germain is still in place for "a few more weeks" and the airport authority would assist Germain if it decides to proceed with the hotel project, "provided it remains in our mutual best interest."

Coun. Riley Brockington had moved a motion seconded by Coun. Jessica Bradley calling on the mayor to write a letter to the CEO of the Ottawa International Airport Authority to hold meetings with councillors whose wards include or abut the airport to discuss the airport's long-term growth. That motion also failed, in part because Sutcliffe said it was unnecessary.

"As the councillor knows, I don't support motions that ask me to write letters," he said. "I support the intent of the motion and the content of the motion is all things we can do anyway."

The Ottawa airport says it remains committed to its goal of becoming a hub.

"We will not abandon this vision; however, the path will be limited to using the current toolbox without the financial assistance of the Airport CIP," the airport's statement said.