With a new bus service linking Niagara District Airport to Toronto’s Pearson International Airport coming this June, Niagara-on-the-Lake has agreed to back it with up to $125,000 if the service falls short.
The cities of St. Catharines and Niagara Falls each contributed the same share for the Landline Company and Air Canada’s new motorcoach, creating what airport officials describe as a “revenue guarantee” of $375,000.
Each municipality, including NOTL, drew from its municipal accommodation tax to commit the funding, also known as a hotel room tax.
The airport’s chief executive officer, Dan Pilon, said the airport does not receive any money directly.
“There’s no scenario where the Town of Niagara-on-the-Lake, the City of Niagara Falls, or the City of St. Catharines is cutting a check for $125,000 to a private sector corporation, saying, ‘Hey, here you go, and feel free to do what you want with this,’” he said.
Pilon said the funding won’t be used if the seats fill up. It only comes into play if it dips below an average of about 10 passengers per bus.
“If there’s 600 people who need to have been on all those buses and there were only 580, they do the 20, times what the cost of the actual individual is, and pull from the revenue guarantee,” he said.
But if the service is meeting and exceeding that threshold, it will pay back into the revenue guarantee.
“When there’s 620, the revenue from those additional 20 gets paid back into the revenue guarantee to bring it back up,” Pilon said.
The fund is adjusted over time according to shortfalls and stronger months, but Pilon said the goal is to keep it at $375,000.
He described the model as a safety net and the arrangement as a shared-risk partnership, meant to help launch a new service in a market that hasn’t had it before.
“If there is a shortfall, we agreed to cover it,” Coun. Erwin Wiens said.
Wiens framed the move as a long-term investment aimed at reducing the airport’s reliance on taxpayers.
“We subsidize it,” he said, adding that since “the tax levy subsidizes the cost of the airport, we want to move that away so that it’s a financial asset to us.”
“So that the taxpayer no longer funds it.”
Wiens said council believes the plan will generate revenue over time.
“Sometimes you have to invest in something at the start so that later on it becomes profitable, but absent of an investment, how do you get a profit?” he said.
Still, not all councillors were convinced the town had enough information before approving the funding.
Coun. Sandra O’Connor said there were still unanswered questions around the motorcoach’s accessibility, and Coun. Andrew Niven questioned how the spending fits into the town’s broader tourism funding rules, asking whether there is a clear framework for how municipal accommodation tax dollars are used.
The municipal accommodation tax is a fee added to stays at a hotel, inn, bed & breakfast or short-term rental. It’s meant to support tourism-related projects. Staff said council had previously approved criteria for the tax, but that framework was put on hold during the budget process.
A future report is expected but in the meantime, staff said the town has “approved funds through (municipal accommodation tax) for tourism-related projects and issues.”
Pilon said the goal is to make it easier for travellers booking through Air Canada to reach Niagara.
“It’s a true partnership with Air Canada, in my mind, where they’re saying, ‘We just need to make sure the costs are covered when we’re taking a chance on a market that hasn’t had this level of service before,’” he said.
“The operating costs to do the service is essentially being eaten by Air Canada and Landline to be able to get a greater market share.”
The motorcoach will begin service on June 15 and will function like a connecting flight, booked at no added cost as part of an Air Canada itinerary. It can also be added separately when it cannot be attached, such as with some Air Canada Vacations packages or certain partner airline flights, for $49.
“In the first year of their contract, they just look to limit that risk even more by working with partnerships to ensure there could be revenue guarantee,” Pilon said.
He added that “what’s interesting” about this agreement is “the fact that they actually pay back into the revenue guarantee as well.”
