Item - 2009.EX33.19

This report is provided to finalize matters related to the West Don lands Phase 1 Plan of Subdivision.  Within this context, it addresses how financial securities and indemnity requirements are being addressed, recognizing that this land is provincially-owned and undergoing renewal as part of the tri-government waterfront revitalization initiative.

Waterfront Toronto (WT) and the other orders of government have asked the City to modify its usual security requirements (120% of the estimated costs of municipal infrastructure work to be completed) because of the special circumstances relating to waterfront renewal.  This report recommends that the City accept financial security provisions from WT in an amount that is not less than 20% of the estimated annual costs for constructing and installing all municipal infrastructure, including parks and public spaces. Security requirements will be confirmed annually and on a rolling basis as part of the five-year Financial planning process for waterfront renewal and will remain on file for the duration of the construction and warranty period to address emergency and repair requirements should they arise.

The City and the Province have jointly addressed indemnity requirements to protect the City from future environmental, flood protection land form, and subdivision agreement liabilities related to West Don Lands land transfers to the City for roads, services and parks.  It is recommended that the City enter into an Indemnification Agreement with the Province of Ontario, containing all indemnity requirements imposed by the City as outlined in the conditions of draft plan of subdivision approval for Phase 1 West Don Lands.

There are no immediate financial implications resulting from approval of recommendations contained in this report.  The City’s share of costs associated with revitalizing the West Don Lands is included in the Council approved Five Year Financial Plan/Ten Year Forecast (2008-2017) for waterfront revitalization, approved by Council in October 2008 and is subject to the annual capital budget process. Included in the current plan is a provision for City and Provincial contributions to West Don Lands and East Bayfront securities of $28 million until the end of 2011.  Of this amount, $8.6 million is to be funded by the City, and has been included in the “Financial Securities” sub-project of the 2009 Capital Budget for waterfront revitalization approved by Council in December 2008.

Financial impact must be considered both from the perspective of the City as the holder of cash or letters of credit as security for proper completion and performance of municipal works constructed in the waterfront, and as one of the three government partners in waterfront renewal.

The risk of defaults on waterfront projects is reduced significantly given the project oversight provided through financial contribution agreements between WT and the three governments, the public mandate of WT, the fact that several projects will be underway at any given time each contributing 20% of their total value to the Security Fund thus ensuring a substantial “pool” of resources to address any problems, and the confirmed public sector funding for construction of these projects through existing  agreements. 

The amount of security that WT will be required to provide if the City applies its standard requirement for 120% of project costs is prohibitively high, given WT’s primary source of funding for these projects is the government investment in waterfront renewal.  The cost to the governments of supporting securities at this level outweigh the benefit of these securities.

The Deputy City Manager and Chief Financial Officer has reviewed this report and agrees with the financial impact information.