Item - 2008.EX17.13

It is recommended that:

1.         Council authorize the City to provide the following consents, subject to the Provincial and Federal governments providing the same or substantially the same consents:

a.         consent to Toronto Waterfront Revitalization Corporation (TWRC) to borrow money (which includes consent to provide letters or credit (LCs)), mortgage or otherwise encumber its assets in connection with that borrowing, and raise revenues, on and subject to terms and conditions that include:

i.          borrowing and encumbering TWRC assets being for activities consistent with TWRC’s objects, business and Long-Term Funding plans, and annual budget;

ii.         borrowing being without recourse to the three orders of government (the Governments) unless, in case of City or Province, that Government agrees otherwise;

iii.        no TWRC borrowing being secured by a pledge of City assets;

iv.        each of the Governments having the right to audit TWRC;

v.         TWRC using any revenues it raises for purposes consistent with its objects; and

vi.        TWRC ensuring that the lender is required to give the Governments written notice of any default under the loan agreement.

b.         consent to TWRC to establish one or more subsidiary corporations to operate a real estate business (RE Subs) in the Designated Waterfront Area, to earn revenue from that business, and to guarantee the indebtedness of the RE Subs, with the consent being subject to certain conditions that include:

i.          the articles and by-laws of each RE Sub being in a form satisfactory to the Deputy City Manager whose responsibilities include Waterfront Revitalization (DCM – Waterfront) and the City Solicitor;

ii.         TWRC using its revenues from the real estate businesses to further the objects of TWRC;

iii.        the board of directors (the Board) of each RE Sub consisting of members nominated in consultation with TWRC management and members nominated from TWRC’s Board, with the total number of directors and the split between those nominated in consultation with management and those nominated from the TWRC Board being proposed by TWRC and subject to approval of the DCM - Waterfront;

iv.        the chairs of RE Subs being appointed by the Board of the RE Sub and each director serving a term that does not exceed three years;

v.         board meetings being conducted in public, except when discussing matters that City Council could discuss in camera;

vi.        each RE Sub not acting as an agent of the Federal Government, or (unless it consents) the Province or City; and

vii.       each RE Sub not borrowing money or encumbering its assets without the consent of the Governments;

c.         consent to each of the RE Sub(s) to raise revenue, borrow, and encumber its assets as security for that borrowing, subject to conditions that include the following:

i.          borrowing being for purposes consistent with the RE Sub’s articles, and TWRC business plans, and annual budgets as they relate to the RE Sub;

ii.         borrowing being without recourse to the Governments unless, in the case of City or Province, that Government agrees otherwise;

iii.        borrowing not being secured by a pledge of City assets;

iv.        the Governments having rights to audit each RE Sub;

v.         revenues being used for purposes consistent with the RE Sub’s articles;

vi.        the lender being required to give the Governments written notice of any default under the loan agreement; and

vii.       each RE Sub maintaining separate books, records and accounting processes for its operations, expenses and revenues, and reporting thereon to TWRC, which will include the results of each subsidiary’s financial activities in its consolidated financial statements;

d.         consent to TWRC to establish a subsidiary corporation (DE Sub) to develop and operate, with a third party, a district energy business serving all or part of West Don Lands, East Bayfront, the Port Lands, and 480 Lakeshore Blvd. East, and any other areas in the City consented to by the City;

e.         consent to TWRC for the DE Sub to earn revenues from the district energy business and to guarantee the indebtedness of the DE Sub, with the consent being subject to the same conditions as those set out in Recommendation 1b for RE Sub(s), excluding those related to the Board of Directors;

f.          the Board of Directors of the DE Sub consist of three members nominated in consultation with TWRC management and six members nominated from TWRC’s Board (two TWRC directors nominated by each of the City, Province, and Federal Government), with the chair being appointed by the DE Sub’s Board and each director serving a term that does not exceed three years;

g.         the DE Sub not borrowing money, encumbering its assets, or acquiring any equity or similar ownership interest in any corporation, partnership or trust without the consent of the Governments; and

h.         consent to the DE Sub to raise revenue, borrow, and encumber its assets as security for that borrowing being subject to the same conditions as are set out in Recommendation 1c (but applying to the DE Sub rather than to the RE Sub(s)).

2.         Council authorize the City to amend future Contribution Agreements by:

a.         either deleting the prohibition against TWRC acquiring or disposing of more than $10,000 worth of assets in any given year, or increase the maximum to an amount that is satisfactory to the DCM - Waterfront; and

b.         allowing TWRC to determine, subject to the satisfaction of the DCM - Waterfront, the indemnities that are required in the particular circumstances and projects.

3.         Council authorize the DCM - Waterfront or any person acting in that capacity to execute and deliver the documents and take the actions referred to above as well as to take any other actions that may be required to give effect to the foregoing.

4.         The appropriate City officials be authorized and directed to take the necessary action to give effect thereto.

The Provincial legislation that governs the Toronto Waterfront Revitalization Corporation (TWRC), the Toronto Waterfront Revitalization Corporation Act, 2002, came into effect on April 1, 2003. It provides TWRC with no authority to borrow money, mortgage or otherwise encumber its assets, establish subsidiary corporations, or raise revenue unless it has the consent of the City, Province and Federal Government (the Governments) or is authorized to do so by Provincial regulation.

Now that TWRC has moved beyond the planning stages of the Initiative, obtaining individual consents for these activities is time-consuming and has resulted in project delays. To expedite implementation, TWRC has requested that the Governments provide it with more comprehensive consents to:

1.         Borrow money (which includes consent to provide letters of credit (LCs)), mortgage or 

otherwise encumber its assets, and raise revenues.

2.         Create one or more subsidiaries to hold and revitalize parcels of real estate acquired for

strategic and public purposes.

3.         Create a subsidiary to establish and operate, with a third-party, a District Energy (DE)

System servicing all or part of the West Don Lands, East Bayfront, the Port Lands, and

480 Lakeshore Blvd. East.

Representatives of the Governments have worked together with TWRC to determine the conditions that should be imposed in connection with the granting of these consents.

TWRC also has requested that the Governments amend the standard Contribution Agreements that they enter into with TWRC to delete the requirements that TWRC obtain specific indemnities (the Required Indemnities) from its eligible recipients (entities that carry out Waterfront Revitalization projects on behalf of TWRC) and contractors. The Required Indemnities, which are in favour of TWRC and the Governments, are very broad. TWRC has advised that requiring these indemnities is (i) discouraging potential participants from entering into contracts with TWRC or its eligible recipients, and (ii) causing participants who are willing to enter into contracts to substantially increase their contract prices, thereby driving up the costs of Waterfront Revitalization significantly. If the obligation to obtain the Required Indemnities is deleted, it will be up to TWRC to determine what indemnities are required in each situation, subject to the concurrence of the Deputy City Manager whose responsibilities include Waterfront Revitalization (DCM – Waterfront).

Similarly, the clauses in the standard Contribution Agreement requiring that TWRC not acquire or dispose of more than $10,000 of assets in any year are also no longer practical. Flexibility is needed to adjust this amount to reflect what TWRC determines is appropriate in each situation, again subject to the concurrence of the DCM – Waterfront.

This report seeks conditional Council authority to grant various consents requested by TWRC, and to amend the Contribution Agreements entered into in the future to address the above two issues. Provincial and Federal staff are seeking the same authority from their respective Treasury Boards.