Here’s a question for budget chair Mike Del Grande: How does the Ford administration spell renege?
Answer: P-O-R-T-L-A-N-D-S.
During last Tuesday’s shameful executive committee “debate” over Doug Ford’s scheme to redevelop the Port Lands, Del Grande noted, candidly, that if the city can extract itself from its arrangement with Waterfront Toronto, then proceeds from the sale of city-owned lands will flow into municipal coffers rather than those of the agency mandated to carry out the revitalization. A cash grab, in other words.
Ergo the first recommendation in the staff report, which calls on council to authorize city officials to renegotiate the 2006 memorandum of understanding [PDF] between the City of Toronto, TEDCO and Waterfront Toronto – the justification (pretext) being that the latter had its chance but achieved nothing.*
It’s worth pausing here to note some of the language in that MOU, which looks and reads to my layman’s eyes like a formal contractual relationship between three legally constituted corporations, one of which is partly owned by the Government of Canada and the Government of Ontario.
4.2. TWRC [i.e. Waterfront Toronto] shall invest its revenues from land transfers (freehold or leasehold) and other activities back into the Revitalization Initiative in accordance with Business and Implementation Plans, the rolling ten year financial forecast and the financial and accounting framework agreed to by the three orders of government.
5.2(d). TWRC shall use all proceeds from the sale of TEDCO [now Toronto Port Lands Company] Lands and all rents or other proceeds from the long-term leasing of TEDCO Lands (which, to be clear, does not include the TEDCO Projects) for purposes of the Revitalization Initiative in the manner described in Section 4.2.
7.6(a) TWRC shall continue with and work diligently to complete the assembly of the lands required for Commissioners Park and the Don Greenway [now the proposed Don mouth estuary]. A significant portion of the lands required for these parks is owned by TEDCO.
What’s more, as the 2006 staff report accompanying the MOU made clear [PDF], “The value of all lands contributed by each government is to be recognized and accounted for as part of the respective government’s overall contribution to waterfront renewal in accordance with a tri-government Accounting Protocol.”
So to recap: the Fords are proposing to pull out of a contract that not only creates a framework to allow Waterfront Toronto to leverage land sale revenues to further redevelopment effort, but also specifies the precise nature of the City of Toronto’s contribution to the $1.5 billion tri-partite revitalization agreement negotiated by Mel Lastman, Mike Harris and Jean Chretien in 2001. While Queen’s Park and the feds agreed to contribute cash, the City would provide its end of the deal both in cash and in kind (i.e., with real estate).
The feds and the province have certainly held up their ends of the deal. According to Waterfront Toronto, as of March 31, 2011, the Government of Canada had contributed $458.9 million to date while the Government of Ontario had invested $330 million (48% and 34% of the total spending to date). The City of Toronto, although the primary beneficiary, has kicked in just $176 million (18%).
So what’s happening, in effect, is that two of the three shareholders in Waterfront Toronto have already made substantial cash outlays, while the third is now looking to weasel out of its pledged commitment.
In any such arrangements, one party invests in the belief that the other party will keep its word. Indeed, let’s transpose this scenario to the business world, which, as the Fords never fail to remind us, is their source of inspiration. Say three partners negotiated a contract to invest both cash and land (or equipment or any other tangible asset) in some kind of business deal, and then one of them decides to pull out well into the venture but before delivering on its promised share.
We know exactly what would happen. The partner who tried to fleece the other two would be sued up the ying-yang for breach of contract. And they’d emerge from said legal dispute with a serious reputation problem.
I have no idea whether Queen’s Park or Ottawa, as Waterfront Toronto’s other shareholders, would at some point move to seek legal remedies against the City if council does endorse this enormously cynical scheme next week. But what is clear is that, above and beyond the massive damage and delay and cost associated with the Fords’ gambit, the City of Toronto will have proven itself to be an utterly untrustworthy partner.
As veteran businessmen, the brothers Ford surely know the type: the sort of company that places a great big order, takes delivery and then refuses to pay or skips town with the inventory.
Faced with such a situation at Deco Labels and Tags, they wouldn’t hesitate to call in the collection agencies and fire off legal letters.
At City Hall, however, they appear to have no qualms about breaking agreements, contractual or otherwise. Those earlier deals, it would seem, are no longer worth the paper they’re written on.
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* The staff report invokes section 17.3 of the MOU, which states:
“If at any time the City is of the view that there is insufficient commitment, financial or otherwise, on the part of TWRC, Ontario and Canada for TWRC to continue with the revitalization the East Bayfront lands or the Port Lands, the City may give notice to this effect (the “City Notice”) to TWRC, Canada and Ontario.
If the City’s concerns cannot be addressed to the City’s satisfaction, the parties will consider other options for revitalization of the TEDCO Lands. If, within six months after the date of the City Notice, the parties have not come to an agreement on other options, the City on 90 days notice may terminate this MOU as it relates to TEDCO Lands in East Bayfront and the Port Lands other than lands for which signed contribution agreements are in place.”
But it conveniently neglects to mention that the agreement also contains an elaborate dispute resolution provision (16.1):
In the event of any Dispute, such Dispute shall be resolved in accordance with the following procedure (the “Dispute Resolution Procedure”):
(a) the parties directly involved (the “Involved Parties”) first shall attempt to resolve the Dispute through good faith negotiation between such parties working through the Waterfront Liaison Committee;
(b) failing resolution of the Dispute through negotiation within 15 days after the Waterfront Liaison Committee becomes involved in efforts to resolve the Dispute, any Involved Party, by written notice to the other Involved Party or Parties (the “Step-Up Notice”), may request that the Involved Parties refer the Dispute to an independent third party (the “Expert”) who is an expert in the subject area of the Dispute, who is mutually acceptable to the Involved Parties, and who shall endeavour to achieve a mediated resolution of the Dispute; and
(c) if the Involved Parties fail to select a mutually acceptable Expert within ten (10) days after the Step-Up Notice has been given, or if the Expert fails to achieve a mediated resolution of the Dispute within 15 days after the Dispute is referred to the Expert, then any of the Involved Parties may, upon written notice to the other Involved Party or Parties, cause the Dispute to be submitted, by way of a report, to City Council, whose decision shall be final and binding upon the parties, it being acknowledged that the other orders of government are not bound by such decision [emphasis added].
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19 comments
Thanks for doing your homework, John. Wish that certain councillors would do the same!
The Feds have told BC to repay the $1.5bn for implementing HST. Surely Flaherty will want his money back from the Fords too… right?
Good article John. It’s unfortunate that the Fords continue to make unilateral decisions without consulting citizens or providing justification as to why a new direction may be warranted. I cannot see the federal or provincial government entering into any new funding agreements with Toronto in the near future given the Fords inability to meet the requirements of previous agreements.
What Water Front Toronto fails to mention in its report is that while all three levels off governmet would see a ROI only the city will face continual operating expenses.
Between perpetual operating loses and inital loses occcured by having developmentt fees that do not recoup inital costs the city does not stand to gain any net benefit. The only ones that do are the condo developers.
Great article. It’s too bad that deputations are arranged to be so short that one has a hard time laying out the whole story.
One other thing we don’t hear is that builders on land the city owns are obligated to borrow from the city – so for example we are earning 5% interest on the $120+ million we lent to the builder of the Corus project.
@Glen – Aren’t you forgetting revenue from property taxes?
No, WT is forgetting operating expenses for the city.
Operating expenses which are offset by property taxes.
Glen – What kind of operating expenses do you mean? I don’t see what significant operational expenses Waterfront TO’s plan has that are incremental to the Ford vision? No matter the plan, the city will have to manage stormwater somehow and provide drinking water (whether its to residential or commercial). Electrical distribution would have to be provided by Toronto Hydro regardless. Even if, for example, Waterfront TO’s plan has more condo’s and therefore, needs bigger pipes and perhaps more electricity is used to pump water – the cost of putting in a bigger pipe is incrementally not much more than a small pipe (still needs the same engineering, almost the same labour and a fraction increase in materials) and the electricity to pump water will be spent to house residents somewhere in the city – better it be near the waterfront where there is far less head losses and pumping required.
Ford should get out of office.
He is going to destroy this city.
We must work to stop this. Go to http://www.codeblueTO.com and take action. Julie B.
Joshua, the expenses are only partially offset.
Anna, the city must provide services such as Police, Fire, Ambuance, Librareis, Road maintaince, Public Transportation, Parks, etc… If you would like to see how much it spends look here ……. http://csconramp.mah.gov.on.ca/fir/View/Review_Toronto%20C.xls
Looking at just four expenses, ignoring any provincially mandated and cost shared programs, demonstrates this. To provide General Government , Protection to persons and property, Transportation and Recreation and Cultural Services cost the city an average of $4,844 per household. This does not include social services, libraries, etc.. Nor does it interest or the capital budget. On average the city generates approx $2,300 per year in residential property tax.. Even after adding in other revenue such as TTC fares, permits, etc. there is a tremendous shortfall.
The costs that you listed are for upfront costs thar are supposed to paid for by developmentt fees. Toronto’s development fees are far lower than the surrounding region, despite similar costs.
You might be interested in reading this ……. http://www.thecoast.ca/halifax/why-everyone-loses-under-the-citys-new-property-tax-plan/Content?oid=1436219
with a smaller imbalance between commercial and residential taxes than Toronto the findings were … “According to Mills’ poll results, people in HRM want property taxes “based on the cost of the services actually received by the property owner”—no one should be subsidized by someone else. But if we built such a system, the very first thing we’d have to do is to nearly triple property taxes.
As city budget documents show, if you add up all the residential taxes collected in HRM and compare it to the cost of all the services delivered to residential properties, you’d find that the costs are 2.7 times higher than the amount residents pay in taxes. The difference is made up by commercial property taxes.
So people on the Halifax peninsula who think they are subsidizing suburbanites are wrong—they aren’t. It’s Burnside and Bayers Lake industrial parks, and businesses in HRM generally, that are subsidizing suburbanites and peninsula residents alike.”
Toronto needs leadership and vision, the opposite of the bean-counting executive. The cure for Toronto is not cost-cutting or selling the farm. The cure for Toronto is to innovate its way out of its current predicament. (freely borrowed and adapted from Steve Job’s approach to the success of Apple computers)
Let us see if the people we have elected are up to the task. The Mayor only has one vote!
Thanks as ever for your smart and civic-minded reporting, John.
RE: Bruna’s comment, the closer we get to next week’s meeting and the more we hear from each other on these issues, the more I wonder: where are our elected leaders, anyway? Surely there are a silent majority of them at city hall, queen’s park and in ottawa who think this is ridiculous at best and, as John points out, illegal at worst. Why are they not standing up for the city, and calling out the bully brothers Ford? I realize the simple answer, of course: politics. There’s a provincial election going on, etc. But the fact that the only real leadership I’ve seen on this file has come from select people in the media (very select, unfortunately), members of the academy (the city centres at York and UofT), community organizations, and individual citizens enrages me. Ours is a multi-level democracy, and yet nobody cares to help us? Why are we not marching on city hall demanding that our leaders take action?
I totally agree with you Kim. Our other levels of government have been getting a bit of a free pass on this. For example, if McGuinty hadn’t folded immediately, Transit City would still be viable. In my opinion this should be an election issue.
Glen,
In both waterfront plans there is a mix of residential and commercial. So is your argument that there is enough extra commercial space in the Fords plan that it makes it viable while the Waterfront Toronto plan is not?
Is this based on any actual analysis of the proposals, or are you just assuming that ‘more commercial’=better?
To me, the Fords plan looks like something a 60s planner would come up with, hoping that ‘if you build it, they will come’. I’m sure that someone will want to build their plan, but I don’t know how well it would work out in the long run.
Steve,
My point is that the water front was inevitably going to turn into nothing more than a new subdivision, full off condos. As such, as I showed above, claims that it will have a positive financial impact for the city of Toronto are false.
Outside of direct and indirect subsidies and the creation of public space, the only value that WT can bring to the table is the ability to parcel land. The city would be better off financially to benefit form the proceeds than plow them back into a scheme that ill ensure a larger structural deficit.
I think Glen’s view that the Port Lands will “inevitably” turn into a forest of condo towers may be wrong, given the declared intent of Waterfront Toronto to ensure mixed use development by a tightly controlled development bidding process for the right to build each type of planned urban component.
While Glen makes some fine observations, he seems to be fixated with not liking anything from the Miller days even if it backs up his point. We’ve seen it so many other comments he has made.
Lorinc’s point of view is by far much more nuanced and informed. I’d rather we debate those ideas than some armchair columnist like Glen, no matter how well intentioned he is.
Plans are not reality. That is the problem. The city has been making and paying for plans that will not come to fruition. WT’s plans for commercial space are as unrealistic. They might as well plan to gro palm trees in the new parks while they are at it.
I do not reflexively argue against Miller. I took issue with the economic case being made by WT, and being reiterated by John. I am looking at this from a economic perspective. I will go on record as saying that Rob Ford’s 2011 tax freeze, foregoing of the PVT revenue and promise off a maximum 2.5% tax hike for 2012 was severely misguided. The difference between John and myself is that I see a tax freeze with a 0 or 1% increase in expenditures as being less contemptible than a 2% tax increase with a 5% increase in spending. Nuanced indeed.