Item - 2016.ED13.5

The Economic Development Committee recommends that:

1.  City Council approve the application submitted by Ivanhoe Cambridge and Metrolinx for Imagination, Manufacturing, Innovation, Technology (IMIT) Development Grants and Brownfield Remediation Tax Assistance as a Transformative Project, subject to completion of all of the following:

-  Office building 1 at 45 Bay Street comprising of at least 120,774 m2. (1,300,000 sf) to be constructed and occupied within five years of final Site Plan Approval;

-  Office building 2 at 141 Bay Street comprising at least 92,903 m2. (1,000,000 sf) or the amount allowed through the planning approval process whichever is lower, to be substantially completed within fifteen years of Council approval of this report provided there is adequate sewer capacity to proceed;

-  The privately owned publicly accessible space (POPS) across the rail corridor of at least 0.4 ha (1 acre);

-  The "roughed-in" LRT platform in office building 1;

-  The Metrolinx bus terminal in office building 1 (not eligible for incentive);

-  The East Bay Teamway improvements;

-  The PATH connections to Union Station and the Air Canada Centre;

-  The PATH connections to the east side of Yonge Street;

-  Streetscape  improvements surrounding the site;

-  Approval of Zoning for Phase 2;

-  Meeting all other IMIT program requirements.

2.  Prior to the payment of any Imagination, Manufacturing, Innovation, Technology (IMIT) Development Grants Ivanhoe Cambridge shall be required to provide letters of credit equivalent to the total amount of the grant for office building 1, less the grant amount that the development may otherwise be eligible to receive if it qualifies under the Corporate Headquarters eligibility category in accordance with the terms and conditions as generally described in the report (June 15, 2016) from the General Manager, Economic Development and Culture, with respect to the financial security to ensure the Transformative Project status is maintained through the construction of the office building 2.

3.  City Council approve the provision of Imagination, Manufacturing, Innovation, Technology (IMIT) grants for the Corporate Headquarters Gross Floor Area (GFA) in office building 1 based on the existing IMIT Program definitions and criteria, in the event that either:

- Council does not approve this application as a Transformative Project; or

- the project is not completed in accordance with recommendations 1 and 2.

4.  City Council authorize the General Manager of Economic Development and Culture to negotiate and execute a Financial Incentive Agreement in a form satisfactory to the City Solicitor.

This report presents an application made to the Imagination, Manufacturing, Innovation and Technology (IMIT) Property Tax Incentive Program submitted by Ivanhoe Cambridge and Metrolinx (as current landowner) for their proposed development at 45 and 141 Bay Street. The application is being made under the Transformative Project eligibility criteria, for which Council approval is required.

This development, for two large office towers, if approved, will bring the largest amount of new Class A office space from a single development into the Toronto market since the completion of Brookfield Place (Bay Wellington Tower and TD Canada Trust Tower) 25 years ago. The office buildings will support approximately 12,500 new or retained jobs. This project brings a unique privately owned publicly accessible space (POPS) that will span the railway corridor connecting the Financial District to the Waterfront area. It will also incorporate the new Metrolinx Bus Terminal and other transit infrastructure as part of the larger Union Station intermodal transit hub. This development has an estimated construction value of $1 billion and meets the eligibility criteria for Transformative Project.

If City Council approves this project for the IMIT program, the City will be committed to make Tax Increment Equivalent Grant (TIEG) payments to Ivanhoe Cambridge estimated at $130 million at current rates. The applicant is also applying under the Brownfield Remediation Tax Assistance program, which would entitle it to a further $10 million in property tax cancellation.  Approved applications under IMIT are also entitled to an exemption from Development Charges, estimated at $1.2 million for this project, bringing the total value of the incentives for the Ivanhoe Cambridge to approximately $142 million.  The new municipal property tax the City will receive is $217 million over the term of the incentive netting $75 million to the City and $22 million per year thereafter. The two properties currently pay approximately $1.35 million in municipal taxes, which will continue to be paid throughout the grant period, since the grant is based on the 'increment' above the base municipal taxes.

Due to the complexity of the application and financial implications for the City, an independent third party review was requested to provide a detailed analysis of the transformative nature of this development and the need for financial incentives. The completed review by Hemson Consulting Ltd is attached as Appendix A of this report. Hemson concluded that the project meets the Transformative Project criteria, and that without the IMIT grant Ivanhoe Cambridge is unlikely to proceed with the development as currently proposed. Hemson also indicated that if the development does not proceed as currently proposed, it is improbable that nothing would be built on the portion of the site that is currently occupied by a parking lot. Ivanhoe Cambridge has advised that if the Transformative Project application is not approved it is prepared to switch to a more standard office development with a smaller building that lacks the high quality and substantial public amenities proposed in the current design.