Remission Order in Respect of Non-residential Leases and Licences of Occupation Under the Administration of the Parks Canada Agency: SI/2020-41
Canada Gazette, Part II, Volume 154, Number 12
SI/2020-41 June 10, 2020
FINANCIAL ADMINISTRATION ACT
P.C. 2020-414 May 30, 2020
Her Excellency the Governor General in Council, considering that it is in the public interest to do so, on the recommendation of the Minister of the Environment and the Treasury Board, pursuant to subsection 23(2.1) footnote a of the Financial Administration Act footnote b, makes the annexed Remission Order in Respect of Non-residential Leases and Licences of Occupation Under the Administration of the Parks Canada Agency.
Remission Order in Respect of Non-residential Leases and Licences of Occupation Under the Administration of the Parks Canada Agency
1 (1) Remission is granted to the persons referred to in subsection (3) of 75% of the following amounts paid or payable by them in respect of the period beginning on April 1, 2020 and ending on June 30, 2020:
- (a) rent in respect of any lease referred to in subsection 11(1) of the National Parks of Canada Lease and Licence of Occupation Regulations;
- (b) rent in respect of any lease or lease amending agreement referred to in subsection 15.1(2) of the National Parks of Canada Lease and Licence of Occupation Regulations;
- (c) fees in respect of any licence of occupation of public lands
- (i) granted under section 18 of the National Parks of Canada Lease and Licence of Occupation Regulations, if the licence permits those lands to be used for commercial purposes, or
- (ii) referred to in subsection 18(23) of those Regulations;
- (d) rent under Article 9.1 of the Town of Banff Incorporation Agreement, dated December 12, 1989;
- (e) amounts in respect of any lease entered into under subsection 4(1) of the Federal Real Property Regulations or any licence given under paragraph 4(2)(a) of those Regulations, in relation to real property under the administration of the Parks Canada Agency, if the lease or licence permits the property to be used for commercial or municipal purposes; and
- (f) amounts in respect of any lease or licence of occupation in relation to public lands in the Rouge National Urban Park, if the lease or licence permits those lands to be used for commercial purposes and was entered into or issued
- (i) under subsection 13(1) of the Rouge National Urban Park Act, or
- (ii) by the province of Ontario or a municipality and subsequently assumed by the Minister of the Environment.
(2) If an amount referred to in any of paragraphs (1)(a) to (f) is calculated on an annual basis, the amount paid or payable in respect of the period referred to in subsection (1) is to be determined on a pro rata basis.
(3) The remission is granted to
- (a) any person that
- (i) would have been eligible for the Canada Emergency Commercial Rent Assistance program for small businesses, had the lessor or licensor not been the Government of Canada, and
- (ii) provides to the Parks Canada Agency, no later than August 31, 2020, a signed attestation supporting their eligibility;
- (b) the Corporation of the Town of Banff; and
- (c) the Municipality of Jasper.
(This note is not part of the Order.)
Pursuant to subsection 23(2.1) of the Financial Administration Act, the Remission Order in Respect of Non-residential Leases and Licences of Occupation Under the Administration of the Parks Canada Agency (the Order) remits 75% of the rent and licence fees for April, May and June 2020 payable on commercial and municipal properties in national parks, national historic sites, and other program lands administered by the Parks Canada Agency (PCA).
In line with the Government of Canada’s broader strategy to provide support to businesses during the COVID-19 outbreak period, the objective of this Order is to provide all PCA’s commercial tenants with the opportunity to apply for financial relief, on a portion of the annual rent and fees.
Parks Canada Agency tenants
PCA’s real property portfolio is one of the largest and most complex among federal custodians. There are 766 commercial agreements and two municipal agreements (Banff and Jasper town sites) affected by this Order. Less than 10 of these tenants are considered large corporations, such as major hotel chains and attraction providers (e.g. ski hills, mountain top attractions, skywalks, and other local attractions) who provide, disproportionately, employment and services to the largest numbers of people. The vast majority of PCA’s tenants are small to medium-sized businesses with a significant regional focus related to their location in the national park. The businesses range from small convenience and grocery stores and professional services, to golf courses, small to medium-sized hotels, restaurants and more.
PCA has a long-standing and important relationship with the businesses that operate on its sites, as they provide the critical accommodation, food and services that in many cases people require to complete their visitor experience. In addition, in many remote and isolated areas, Parks Canada places are the only source of visitor-generated revenue for these businesses.
Impact of COVID-19 pandemic on PCA tenants
The COVID-19 outbreak is having an adverse impact on tourism-related businesses across Canada. The COVID-19-related restrictions that have been imposed by multi-levels of government (e.g. social distancing requirements, closure of certain businesses) has meant that most visitor activities in national parks and historical sites were not permitted. Beginning on March 19, 2020, PCA suspended visitor access and visitor services as part of the national effort to flatten the curve and limit the spread of COVID-19. Therefore, most visitor activities in Canada’s national parks, national historic sites, historic waterways, national marine conservation areas, and national wildlife areas were temporarily suspended. Due to this suspension of services at PCA’s sites and the limited vehicle access to the public, many small and medium-sized tourism-dependent businesses located in national parks and historic places are facing significant operational challenges (i.e. they did not have customers during the first quarter of the year).
On May 14, 2020, the Government announced that PCA’s sites will begin to offer limited access and services starting on June 1, 2020, while maintaining physical distancing measures. PCA will begin gradually restoring limited visitor access and limited visitor services at a number of locations across the country, however, access and services will be focused on limited autonomous day use of trails, grounds, and other outdoor settings (e.g. recreational boating, some boat launches, locks, and mooring areas).
The summer tourism season is the high point of almost every park and site. For most of these businesses, this is when they generate a majority of their revenue (except for a few businesses that are able to generate more revenue in the winter, such as ski hills). However, even these businesses have considerable fixed cost structures that also require the summer season to generate revenue. Due to the temporary closure of sites in the first quarter of the year, and with the gradual reopening planned to start in June, their annual revenue is impacted as the summer season is now compromised. Therefore, their financial viability is at risk. In addition, international visitation is not expected to recover during 2020-21. The financial impact on PCA tenants associated with a decline in tourism is projected to persist throughout the year.
These businesses are particularly hard hit due to the following factors:
- Their revenue generation takes place primarily between May and September, so these businesses have very limited opportunities to recover as COVID-19 restrictions are lifted.
- The temporary closure of PCA’s national parks and historic sites, as well as the suspension of visitor services and vehicle access, has impacted revenue generation activities.
- The businesses themselves are located in areas of low population density, but scaled to provide services to their level of visitation. This tends to mean they carry higher structural and fixed costs, yet cannot count on the local population to provide economic levels of business.
- International visitation, which is also another revenue driver, is not likely to restart anytime soon.
Businesses and operators located within national parks and historic sites are of significant economic importance to a number of rural and remote communities across the country — from iconic places in the Rockies to remote areas on the coasts and in the North. Visitors rely on these businesses as they provide complementary services (e.g. lodging, restaurants, outfitters).
Businesses in the national parks are “scaled up” compared to their analogues in rural settings, in order to deal with the needs of thousands of Canadian and international visitors each year. The primary tourism season is already severely impacted, if not completely lost, while many of the fixed costs (buildings, equipment and other capital assets) remain idle and accruing liabilities. Unlike businesses that have a formal production function or have an output that can physically be measured, tourism and hospitality businesses experience an unrecoverable operating loss every day that goes by without significant revenue. For example, if national parks reopen in September, there is no recovering the lost days of hiking, picnics, canoe expeditions and overnight stays.
Government of Canada rent relief measures
On March 27, 2020, the Minister of the Environment and Climate Change announced that rent and fee payments owed by Parks Canada’s commercial tenants, and due on or after April 1, could be deferred without interest until September 1, 2020.
On April 16, 2020, the Government of Canada announced the Canada Emergency Commercial Rent Assistance (CECRA) for small businesses. The program seeks to provide loans, including forgivable loans, to commercial property owners, who in turn will lower or forgo the rent of small businesses for the months of April (retroactive), May, and June 2020.
PCA’s tenants are not eligible for the CECRA because the Government of Canada, and not a private commercial entity, is the landlord in their case. PCA’s commercial tenants fall within sectors of the economy that have been the most significantly impacted by the COVID-19 outbreak (e.g. hotels, restaurants and hospitality businesses). They also face the added burden of reduced visitation at PCA sites; the implementation of provincial and municipal measures to discourage regional travel; and, low “natural” residential occupancy from which to draw even minimal levels of business.
There are no existing legal authorities available to waive the rent owed by PCA’s tenants. Currently, the only option available is a remission order under subsection 23(2.1) of the Financial Administration Act. Following its approval, all tenants will be able to apply for rent relief under the Order. Eligible tenants will receive a reduction in their invoiced annual rent and fees amounts for 2020-21, without having to apply for it.
Given PCA’s unique real property environment, and the uniqueness of its operations within the national park system, a customized rent relief solution is considered both necessary and warranted.
The Order reduces a portion of the annual rents and fees due to PCA. It is estimated that up to $5.7M could be remitted as a result of this Order. The financial relief provided by this Order could benefit up to 766 businesses operating in more than 150 national parks and national historic sites and other Parks Canada places across the country, as well as two municipalities (Jasper and Banff). The land rents that would be remitted are only a small part of these tenant’s overall fixed or structural costs.
The rent relief will provide these businesses with dual support: 1) it will assist in reducing normally fixed expenses in a time of severely reduced revenues; and, 2) it will help these businesses reduce their outstanding liabilities, which will indirectly help them to maintain liquidity available through various forms of financing (e.g. equity lines of credit and operating capital loans).
The rents that would be waived through this Order are almost exclusively related to the use of land only, without the building structure and its components (HVAC, driveway, parking, exterior lights, etc.), or servicing (water, sewer, electrical service, etc.). Unlike many other commercial rent agreements, PCA tenants separately bear the costs associated with constructing and equipping the land for use, including the building cost itself and related fit-up required, which usually results in a separate mortgage or financing arrangement that is paid to another third party.
The Order would help small and medium-sized businesses mitigate some of the significant financial pressures associated with not being able to operate while PCA sites remain closed and while they are attempting to address or recover from the COVID-19 restrictions once they are lifted. This is considered in the public interest because it would help to support the longer-term maintenance of economic and tourism activities in PCA sites.
No formal consultations were undertaken on this Order. However, stakeholders (e.g. business owners, chambers of commerce and local tourism officials) did proactively engage the Government of Canada to express concern that their earning potential, which relies heavily on summer tourism, has already been significantly harmed, and their financial viability is at risk. This Order responds to these concerns and the rent relief it provides will be available to all PCA’s commercial tenants. The rent relief provided through this Order is aligned with the CECRA program. Accordingly, it is anticipated that stakeholders will be supportive of it.
Policy, Legislative and Cabinet Affairs
Parks Canada Agency