Evaluation of the Ports Asset Transfer Program

Evaluation report outlining results of the assessment of the Evaluation of the Ports Asset Transfer Program at Transport Canada.

On this page

• Abbreviations
• Executive summary
• Introduction
• Program profile
• Evaluation of the Ports Asset Transfer Program
• Evaluation findings
• Conclusion
• Annex A: Key PATP terms

Abbreviations

GBCF

Gateways and Borders Crossing Fund

NMP

National Marine Policy

PATP

Ports Asset Transfer Program

PDP

Port Divestiture Program

TC

Transport Canada

CNWO

Crown No Worse Off

Executive summary

About the program

Transport Canada (TC) launched the Ports Asset Transfer Program (PATP) in 2015 as a successor to the Port Divestiture Program (PDP) with the objective of reducing TC’s inventory of port facilities. Through the PDP, 499 out of an inventory of 549 TC-owned local ports were transferred or had their public harbour status terminated. TC created the PATP, a more flexible program with incentives, to divest the remaining 50 ports that were inherently more challenging to transfer.

The PATP is implemented jointly by TC headquarters (HQ) and regional offices (Regions). TC’s Air, Marine and Environmental Programs at HQ has the functional authority for the program. Regions deliver the Program and are also responsible for on-going operations of the ports remaining in the inventory. The sharing of responsibilities between HQ and Regions has evolved, with HQ taking on a larger role in program delivery since 2017, including co-leading transfer negotiations.

The funding provided for the PATP supports the activities involved in the transfer, demolition or closure of ports, as well as the activities to maintain the ports remaining in inventory while divestiture activities are carried out. Of the total program budget of $248.3 million, $157 million was allocated for grants and contributions, which is made available to new owners to support their costs of undertaking some activities to the maximum amount estimated using the Crown-No-Worse-Off (CNWO) principle.

About the evaluation

The evaluation, which covered the period from 2015-2016 to 2019-2020, focused only on the PATP divestiture activities and demolitions; port operations and maintenance were excluded, as they were deemed peripheral to the main program objectives and are managed as a separate business line. A calibrated evaluation approach was adopted.  As such the evaluation methods were limited to document review and interviewing HQ staff and some regional staff.

What the evaluation found

The PATP is consistent with the National Marine Policy’s objective of commercializing federally owned and operated regional, local and remote ports by transferring them to local users.

Since its launch in 2015, the PATP has reduced TC’s outstanding inventory from 50 to 35 ports:

• Transferred nine ports by providing funding assistance to acquiring parties
• Demolished three ports
• Sold three ports

Given many of the ports that the PATP inherited faced decades-old issues that were not conducive to transfer, a reduction of the inventory by nearly one-third could be regarded as successful. The availability of financial support and the flexibility in the use of contribution funding proved important factors for drawing stakeholder interest and engaging in transfer discussions. Overall, the policy objectives of promoting local ownership while reducing the federal government’s liability have been furthered through the PATP.

Given the PATP has been renewed until 2022 with a narrow mandate to support the transfer of three ports only, no recommendations are included in this evaluation.

Introduction

This report presents the results of the evaluation of the Ports Asset Transfer Program (PATP), which is included in Transport Canada's (TC) five-year evaluation plan.

Program profile

The PATP was launched in 2015 as a successor to the Port Divestiture Program (PDP) with the objective of reducing TC’s inventory of port facilities. This has been a long-standing TC policy objective going back to the mid-1990s.

Prior to 1995, TC owned and operated a large number of public ports, without a coherent policy framework. In 1995, the government introduced the National Marine Policy (NMP) to improve the efficiency of the marine transportation system by rationalizing the ports system. The NMP aimed to rationalize ports in three categories:

• Canada Port Authorities: The NMP recognized 17 ports as strategically significant, and vital to domestic and international trade. These ports constitute Canada’s National Ports System. While TC retains ownership of the lands on which these ports are built, they are operated by financially self-sufficient non-profit corporations called Canada Port Authorities (CPAs).
• Remote Ports:  Existing TC ports that were not included in the National Port System were categorized as ‘Remote’ if they served as the sole mode of transportation for an isolated community for at least part of the year. In the NMP, TC made a commitment to maintain these facilities on an ongoing basis, or to transfer them to local communities where interest existed.
• Regional/Local Ports: Existing TC ports that were not included in the National Ports System and did not fit the definition of remote were categorized as ‘Regional/Local’ ports. These facilities ranged from ports with locally significant commercial activity to very small facilities with little or no commercial traffic. The NMP committed to divesting these ports through deproclamation or transfers to other federal departments, provincial governments, municipalities, First Nations or other local interests.

The PDP was created in 1996 to achieve NMP’s objectives and between 1996 and 2014, a total of 499 out of 549 TC-owned local ports (91%) were transferred or had their public harbour status terminated.

TC recognized the challenges associated with transferring the remaining 50 ports. Many of these installations had limited commercial viability due to limited potential for revenues, poor condition, isolated locations or environmental contamination. There were also issues related to lack of local capacity to operate the ports, concerns raised by Indigenous communities and complexities arising from provincial opposition to transfers.

To divest the remaining ports, a more flexible program with incentives was needed. The PATP was launched in 2015 with the objective of removing as many ports as possible from TC’s remaining inventory of 50 ports.

The PATP was to implement the divestiture process in three phases:

1. Sell ports at nominal value
2. Where the sale is unsuccessful, transfer the port by offering financial incentives (grants and contributions)
3. Where funded transfer is unsuccessful, either close and demolish ports that no longer meet operational criteria, or continue to operate the ports where they do

The PATP toolbox included the ability to use financial incentives to facilitate transfers, such as:

• pre-transfer funding support to acquiring parties to help with costs of conducting feasibility studies and other pre-transfer due diligence activities; and
• at-transfer funding to support ongoing port operations and maintenance requirements, including flexibility for new owners to make changes to the use and facilities of ports.

For ports that could not be divested but had to remain in operation, TC was to adopt measures to achieve operating efficiency and reduce costs, such as streamlining operations, considering alternate service delivery, implementing cost recovery measures and increasing user-fees. Furthermore, the PATP was to make the port sites ready for transfer by undertaking due diligence activities such as environmental assessments and remediation as well as consultations with Indigenous communities.

Under the PATP, there is no explicit differentiation between remote ports and regional/local ports; the program allows for closures and demolitions of any remaining facility where there was no acquisition interest and there was no strategic value to ongoing port operations.

Grants and contributions for funded transfers were negotiated on the basis of a Crown No Worse Off (CNWO) principle under a national framework. This principle stipulated that, for each site, the amount of grant of contribution should not exceed the cost to the Crown of owning that site for the next 25 years. In addition, the PATP followed the circulation process identified in the Treasury Board Directive on the Sale and Transfer of Federal Real Property, where ports are made available to other levels of government first and then, if there is no interest, to the general public. As we will discuss further in the Findings section, the general public category included Indigenous communities.

Program governance

The PATP is implemented jointly by TC headquarters (HQ) and regional offices (Regions). TC’s Air, Marine and Environmental Programs at HQ has the functional authority for the program. The key HQ responsibilities include program design, the development of program guidance and tools, ensuring national consistency in the application of program guidelines, leading the cost estimation for funded transfers and demolitions (i.e. CNWO calculations), co-leading negotiations, managing budget requirements.

The sharing of responsibilities between HQ and Regions has evolved over the last few years, with HQ taking on a larger role in program delivery since 2017. Regions deliver the Program, which involve responsibilities such as co-leading transfer negotiations with HQ, consultations with Indigenous communities, environmental assessments, and necessary due diligence to support transfers, such as survey and title work.

Following the last program renewal in 2020, program delivery in Regions with no funding/negotiations (Pacific and Atlantic) was also shifted to HQ with the Regions’ agreement.

In the related domain of port operations, the Regions are responsible for on-going operations of the ports remaining in the inventory. This includes activities such as facility inspections, identification of repair requirements, and managing contractors on sites. HQ is responsible for approving funding for capital and maintenance projects.

Program expenditures

The PATP funding was $234.1 million for the period from April 1, 2015, to March 31, 2020. This amount was supplemented with additional funds from the Gateways and Border Crossing Fund (GBCF), as well as proceeds of sale from surplus property, which brought the total to $248.3 million. The funding covered the costs of transfer payments, demolitions, operation and maintenance of inventory ports, and part of the capital costs associated with port operations.

Capital funding was provided for projects such as building breakwaters after the demolition of a port. Pre-transfer funding was made available to acquiring parties to support their due-diligence preparatory work in advance of submitting a proposal to acquire a port. At transfer, a grant or a contribution was made available to new owners to support their costs of undertaking the activities prescribed in the agreements. Financial support amounts were based on the CNWO principle.

Of the total budget of $248.3 million, $157 million (63%) was allocated for grants and contributions. Table 1 below shows the actual spending of the PATP for the evaluation period between 2015-2016 and 2019-2020.

Table 1: PATP actual spending 2015-2016 to 2019-2020

Item	Actual spending
Grants and contributions	$157,048,215
Operations and maintenance (including employee benefit plan and accommodation)	$66,492,084
Capital	$24,792,045
Total actual spending	$248,332,344

The PATP funding was renewed in 2020, with two different financial components and timelines:

• Grants and contributions funding totaling $70 million, until 2022 to support the transfer of three installations
• Operating funds totaling $35.2 million, until 2025

Evaluation of the Ports Asset Transfer Program

Evaluation approach

In accordance with the Policy on Results (2016), this evaluation addresses the key evaluation issues of relevance and performance.

Given that TC programming to divest ports has been previously evaluated and that the PATP was not being renewed when planning the evaluation, a calibrated evaluation approach was adopted. As such, the evaluation methods used in this evaluation were limited to document review and interviewing HQ and some regional staff. The evaluation did not reach out to external stakeholders (e.g. municipalities, provinces, communities served by the ports, Indigenous communities, and private entities).

Evaluation scope

The evaluation covers the period from 2015-2016 to 2019-2020 fiscal years.

The funding provided for the PATP supports two distinct streams of activities: 1) the activities involved in the transfer, demolition or closure of ports; and, 2) the activities to maintain the ports remaining in inventory while divestiture activities are carried out. Following discussions with program managers, a decision was taken to focus solely on the divestiture side of the PATP activities. Port operations and maintenance were excluded from the evaluation scope given that divestiture activities accounted for most of the initial program funding (approximately 85%) and activities to maintain the ports were deemed peripheral to the main PATP objectives.

Evaluation methods

Given the time-limited nature of the program, the evaluation methods used to address the key evaluation issues of relevance and performance were restricted to those described below.

Document review

The evaluators reviewed documents including Treasury Board submissions for program design and funding; a Memorandum to Cabinet seeking policy authority; and documents briefing senior management of the department on the status of program implementation.

Information from program staff

A questionnaire was administered to obtain written information from HQ program staff.

Interviews

A total of seven interviews were conducted with those involved in the program in the Quebec and Ontario Regions as well as with HQ staff.

Evaluation findings

Evaluation findings are discussed under the issues of program relevance and performance.

Relevance

Finding 1:

The PATP is consistent with the National Marine Policy and aligns with TC’s Core Responsibility of Efficient Transportation System.

As described in the program profile, the PDP was launched in 1996 to realize the NMP objective of commercializing federally owned and operated regional, local and remote ports^{Footnote 1} by transferring them to local users. The alignment of the PDP with the NMP has been extensively documented and validated since 1996. PATP, as an enhanced iteration of the PDP, is also consistent with the NMP.

PATP contributes to TC’s Core Responsibility 3: Efficient Transportation System, specifically Result 9: TC manages its assets effectively.

Performance

Finding 2:

Since its launch in 2015, the PATP has reduced TC’s outstanding inventory from 50 to 35 ports. Given these ports’ attributes made it challenging to attract interested stakeholders, a reduction of the inventory by roughly one-third could be regarded as successful. The availability of financial support and the flexibility in the use of contribution funding proved important factors for drawing stakeholder interest and engaging in transfer discussions.

The key expected outcome of the PATP program is to reduce the number of ports in TC’s inventory. The PATP removed 15 ports from the inventory:

• Transferred nine (9) ports by providing funding assistance to acquiring parties
• Demolished three (3) ports
• Sold three (3) ports

Transfers

The PATP was designed to be a more flexible program with incentives, given many ports were not commercially attractive, required ongoing maintenance and repairs, and often carried environmental liabilities. These facilities were high-risk properties to stakeholders and investors alike and have been unable to attract interest for decades. According to program managers, the offer of financial assistance was a key success factor in reaching agreements for the 9 ports that were transferred.

According to program managers, the availability of funds together with flexibility in the use of funds provided the sufficient conditions for reaching transfer agreements under the PATP. In addition, the criteria on the use and operation of ports and the use of contribution funds were relaxed to permit new owners to make a variety of changes. The PATP broadened eligible activities to include expansion activities on port property such as infrastructure improvements, acquisition of land adjacent to port property and any other legal activities on port property for alternate use. For example, new owners could expand capacity to large vessels, cruise ships, and build passenger terminals and small craft harbours. All of the proposals TC received included capital projects that would not have been eligible under the PDP, such as recreational tourism activities (kayak, small tour operations, or water taxi stand).

The PATP used a total of $157 million in grants and contribution funding for port transfers and pre-transfer due diligence works. Financial amounts in support of a transfer were determined through the CNWO costing model. The CNWO is a calculation based on the costs the department would incur at the site over a term of 25 years. The grant or contribution amount provided to a recipient was based on this calculation.

PATP also made pre-transfer funding available to acquiring parties to support their due-diligence preparatory work, such as feasibility studies, environmental assessment or legal fees, in advance of submitting a proposal to acquire a port. At transfer, a grant or a contribution was made available to new owners to support their costs of undertaking port operations and other activities prescribed in the agreements, up to the maximum amount set on the basis of the CNWO principle. Table 2 lists the 9 transfers completed with financial assistance during the PATP period.

Table 2: Transfers completed with financial support

Ports	Acquiring parties	Status
Gaspé, Rimouski, Matane and Gros-Cacouna, Québec	Province of Québec	Continued operations
Carleton, Québec	DFO	Converted to small craft harbour/marina
Cornwall, Ontario	Akwesasne Harbour Development Corporation and the Cornwall Harbour Development Corporation Private sector and Municipal Corporation	Continued operations
Hartley Bay, British Columbia	DFO / Canadian Coast Guard	Continued operations
Kingcome Inlet, British Columbia	DZAWADA’ENUXW First Nation	Continued operations
Quatsino, British Columbia	Municipality - Regional District of Mount Waddington	Continued operations

Demolitions

Under the PATP, TC was authorized to undertake demolitions of ports and provided with funding allocations for this purpose. Three full demolitions and one partial demolition have been completed under the program.

Demolition was considered at ports where a transfer was unsuccessful and where there was no justification for continued operation. Specifically, the following criteria were taken into consideration:

• Is the port the only reliable mode of transportation of goods or people?
• Does the port handle a significant level of commercial activity with no other ports in the vicinity?
• Is the port critical for the integrity of the regional transportation system?

At the outset of PATP, 11 ports were identified for demolition, some of which were already closed or partially closed for the intent to demolish. Between April 1, 2015, and March 31, 2020, PATP carried out demolitions of four of those ports, which were all in serious deterioration and posing significant safety risks. According to the Program managers, these ports were kept closed for several years, and their demolition was long overdue. Ministerial approval was required to proceed with port closures and demolitions under the program. The demolition costs of the four ports were approximately $2,8 million or 1.1% of the total PATP’s budget - a relatively small fraction of TC’s costs of owning the aging port facilities. By removing significant safety risks, demolitions helped reduce TC’s liabilities related to these sites.

Table 3: Port demolitions authorized 2015-2016 – 2019-2020

Port	Port condition before demolition	Demolition cost ($)
Sandspit,Queen Charlotte Islands, BC	Closed vehicular traffic in 2011 and pedestrian access in 2013 due to safety risks	1,039,670
Vieux-Fort, QC	Closed vehicular traffic in 1998 due to safety risks	858,280
Terrenceville, NL	Closed since 1999 due to safety risks – i.e. surpassed the port life of 40 years	558,624
Berens River, MB	Kept closed since 2006 due to safety risks – i.e. serious deterioration of wharf timbers	373,371
Total		2,829,945

Sales

Three ports were sold for a nominal value, without contribution funding or a requirement to operate the ports^{Footnote 2}. These ports were relatively small facilities, which the acquiring parties were willing to take over in an expedited manner and without impeding conditions. It was understood at the outset that for these ports the extent of the deterioration of the facility along with environmental liabilities would not justify the market value.

In summary, after the three sales, nine transfers and three completed demolitions, 35 ports remained in TC’s inventory^{Footnote 3}. At the writing of this report, TC completed an additional transfer and was in advanced stage of negotiations for two of the remaining 34 ports. In 2020, program G&C funding was renewed until 2022 to support the completion of these three transfer negotiations.

Expressions of interest

To get a better sense of whether PATP was successful, we considered the extent to which expressions of interest received by TC resulted in transfer agreements.

PATP received 39 Letters of Interest for 34 ports out of the 50 ports available for transfer. Transfer agreements were reached for nine of these ports.

The first step for parties interested in a transfer is to sign a Letter of Interest, which formalizes their intention to enter into transfer discussions. Concurrently, a Disclosure of Information Agreement is signed, through which TC provides the interested party with specific port information.

The Program carried out engagement activities to inform stakeholders of the availability of ports for transfer and solicit their interests. As outlined in the Directive on the Sale or Transfer of Federal Real Property, ports were made available for acquisition in two stages. In Stage 1, an opportunity to acquire a port was offered to federal departments, Crown corporations, provincial governments, and municipal governments. Where no interest was received in Stage 1, the opportunity was then offered to Stage 2 parties including Indigenous groups, industry, non-government organizations, CPAs, and the general public. The engagement went through a lengthy process involving both informal and formal activities. The regional offices played a key role in identifying local stakeholders and led outreach and information presentation and communications, utilizing their local expertise and connections.

Figure 1 illustrates the distribution of the expressions of interest in the ports by type of stakeholder. Of the 40 expressions of interest, 30% (12) came from municipalities; 28% (11) from the private sector; 20% (8) from the provinces; 20% (8) from First Nations groups; and 2% (1) from the Department of Fisheries and Oceans Canada.

Figure 1: Expressions of interest by stakeholder type

Text version

Stakeholder type	Expressions of interest
Municipality	12
Private	11
Province	8
First Nations Groups	8
DFO	1

Table 4 below provides further details on interests received by stakeholders. According to program managers, in addition to the stakeholder interest in the table below, DFO expressed interest in acquiring full or partial sites in Quebec where they are co-located with TC. Between 2015 and 2020 there were two partial transfers to DFO, and another port advanced to the stage of sharing formal transfer documentation.

Table 4: Interests in the PATP ports by stakeholders

Province	No. of PATP ports	Ports that received interest	Total expressions of interest	Stakeholder groups
				FNGFootnote *	Private sector	Municipality	Province		DFOFootnote **
BC	10	6	6	3	1	1		1
AB	1	1	1		1
MB	1	0	0
ON	8	7	7	2Footnote ***	1	3Footnote ***	2
QC	25	17	22	3	8	7	4
NS	2	2	2				2
NL	3	1	1			1
Total	50	34	39	8	11	12	8	1
DFO (interest in QC)	10	10 (partial)						10 (partial)

All in all, nearly 25% percent of expressions of interest resulted in transfer agreements (9 out of 39). It is virtually impossible to gauge whether that represents a successful conversion rate – there are too many variables at play and several facilities have unique circumstances.

In the interviews, it was suggested that future iterations of the program explore innovative ways to appeal to potential interested parties. In particular, advertising more creatively using digital tools/social media to showcase the ports. The counter argument to this view is that there is often only one party who can acquire a port site – usually local interests such as the municipality or the main user of the port and, as such, the use of social media is unlikely to broaden the number of interested parties.

Engagement with Indigenous communities

The program received eight formal expressions of interest from Indigenous groups and completed the divestiture negotiations for two ports. Table 5 below shows the transfer activities that involved Indigenous groups.

Table 5: Expression of interest and transfer agreement by Indigenous groups

Region	Ports	Transfer activities
British Columbia	3	3 Letters of Interest 1 divestiture agreement
Ontario	2	2 Letters of Interest 1 divestiture agreement with Municipal and First Nations Corporation
Quebec	3	3 Letters of Interest

All transfers required engagement with Indigenous communities to be completed prior to a transfer involving those communities and by all accounts PATP was delivered in accordance with Indigenous engagement and consultation requirements. The program managers stressed that they sought to address any emergent issues through outreach activities in all the stages of the port transfer process.

As mentioned earlier in the report, Indigenous communities were identified as a major stakeholder at the outset of the program, given several ports are located in or near these communities. Priority was given to federal departments, Crown corporations, provincial governments, and municipal governments in Stage 1 of the engagement stage. Indigenous communities were placed in Stage 2 group, the same category as the general public. This was because the Treasury Board Directive on the Sale or Transfer of Surplus Real Property prescribed the priorities for offers in the case of transfers. We have heard that some Indigenous communities were critical of the priority circulation sequencing.

The Directive has since been modified to give a priority to Indigenous groups at the same level as municipalities (although we understand the amended process will be officially implemented in May 2022). In addition, program managers maintain that indigenous communities’ priority ranking did not diminish their opportunities to address port issues of their communities.

There may be some opportunities with respect to ensuring better alignment of programs with specific parameters like PATP with TC’s overall goal of improving how it engages Indigenous communities. In the interviews, we heard suggestions that engagement with Indigenous communities may benefit from a more holistic outlook, rather than through the narrow confines of the divestiture mandate. This issue is broader in scope than the parameters of a single program but the recognition of the need to build relationships with Indigenous communities has grown significantly since the infancy of the PATP and future similar programs may benefit from an updated/improved department-wide approach to Indigenous engagement.

Conclusion

The PATP took over the divestiture efforts of an inventory of 50 ports from the previous PDP. Many of the ports that the PATP inherited faced decades-old issues that were not conducive to transfer. Taking advantage of a more flexible approach and the ability to use incentives, the program successfully removed 15 ports from TC’s inventory. Since the PATP renewal in 2020, one port has been transferred and two of the remaining 34 ports are in the process of transfer negotiations.

Overall, the policy objectives of promoting local ownership while reducing the federal government’s liability have been furthered through the PATP. Given the challenges associated with the remaining ports, there is also recognition that a number of them will continue to remain in TC’s inventory for the foreseeable future.

Annex A: Key PATP terms

Sale and divestiture

In the PATP, transfer of a port with funding assistance is discussed under “divestiture” whereas transfer of a port for a nominal value without funding assistance is discussed under “sale”. In general, divestiture involves selling off part or all of the existing business-investment/ interest, the key element of which is on reduction whereas the key element of sale is on exchange for a credit. In priorities, the Program pursues sales first; where sales are unsuccessful, the Program pursues divestiture (i.e. funded transfer).

Sale at a nominal value

The Treasury Board Directive on the Sale or Transfer of Surplus Real Property governs all real property transactions in the government. The Directive sets out the principal requirement that a real property of the Crown must be sold for market value. The Directive also prescribes exemptions (Section 6.1 of the Directive) that permit a sale for nominal value. TC sought and was approved the exemption for the disposal of 50 ports in the PATP.

TC’s grounds for seeking the exemption reflect the entire rationale of the program. They underline that: few of these ports have substantial market value owing to the condition of the buildings and infrastructure; the benefit to the Crown in disposing these assets at nominal value outweighs any benefit the Crown would have from continued ownership of these assets; the financial requirements of these assets would continue to increase given minimal investments have been made, resulting in deteriorating infrastructure that could eventually become a legal liability.