Rent is due for Gander International Airport
Airport authority will have to pay $80,000 to federal government this year
The Gander International Airport Authority now has to pay rent to the federal government for the use of the land the facility sits on, after a 15-year lease deferral clause expired this year.
The operation, management and maintenance of the airport was transferred to the airport authority back in 2001, under the terms of a 60-year lease arrangement with the federal government.
That means the authority will have to come up with $80,000 to pay the rent bill this year.
"This is very much $80,000 that would have been better invested in our infrastructure — the beauty of our kind of setup is that any profit we make is kept in the community and channeled back. In this case, that $80,000 just sort of goes out the window," said Reg Wright, the president and CEO of the Gander International Airport Authority.
According to Wright, the formula for calculating the rent is complex, and is based on the money the airport generates.
As revenue creeps over certain thresholds, the percentage paid to the federal government also increases.
Better you do the more you pay
"So, we pay a percentage of our revenue — one per cent between $5-10 million, and anything made over $10 million at five per cent — so it is a sizeable sum," Wright told CBC Radio's Central Morning.
The airport authority has to absorb the new expense, and Wright said he's hoping they'll be able to do that without passing along the cost to users.
"There's certainly in this climate a real impetus for the airport authority to keep its passenger facility charge where it is, keep landing fees, which we haven't really changed since 2006, where they are, and it does create some small hardship."
The additional bill for the airport authority could also have an impact on opportunities for local businesses.
"Gander, as an example, made a revenue last year of $10.7 million, so once you eclipse that $10 million mark it's really a disincentive to get involved in low-margin type businesses that would produce less that a five per cent return," said Wright.
"If we were to get involved in a partnership say with a cranberry farm on our land, and it produced less than a five per cent return, well there's no point in pursuing it because that money is essentially going to the government."
Wright said a reprieve is unlikely, as the lease was signed 15 years ago with a full understanding of what was coming.
A bigger sticking point for Wright is the designation the airport gets because it sits on federal land, and as a result can't compete for funding that other small airports can access.