Item - 2016.EX16.14

The Executive Committee recommends that:

1. City Council:

a.  approve the provision of a construction loan guarantee (the "Construction Loan Guarantee") on behalf of the YMCA of Greater Toronto ("YMCA") to their lender, Ontario Infrastructure and Lands Corporation ("IO") (the "Lender"), to fund  the construction of a YMCA community centre at 505 Richmond Street West (the "Project"), in an amount not to exceed $30.0 million, inclusive of all interest costs payable by the YMCA, for a period ending upon substantial completion of the Project, for the purposes of allowing the YMCA to secure $30.0 million in construction financing from the Lender to complete the construction of the Project; and

b.  approve the provision of a capital loan guarantee (the "Capital Loan Guarantee") on behalf of the YMCA to the Lender, in an amount not to exceed $9.5 million, inclusive of all interest costs payable by the YMCA, for a period commencing upon substantial completion of the Project for a term not to exceed 30 years, for the purposes of allowing the YMCA to secure a fixed-term amortizing mortgage to be provided by the Lender for any remaining portion of the construction loan following completion of Project construction.

2.  City Council authorize the Deputy City Manager and Chief Financial Officer to negotiate and the City to enter into the Construction Loan Guarantee and the Capital Loan Guarantee (together the "Guarantees") and all related agreements including the agreements identified in the Term Sheet attached as Appendix A to the report (June 14, 2016) from the Deputy City Manager, Cluster A, the Deputy City Manager, Cluster B and the Deputy City Manager and Chief Financial Officer, which agreements shall be on terms and conditions as outlined in Appendix A to the report (June 14, 2016) from the City Manager and the Deputy City Manager and Chief Financial Officer, together with such other or amended terms and conditions, and ancillary agreements, as are acceptable to the Deputy City Manager and Chief Financial Officer and in a form satisfactory to the City Solicitor.

3.  City Council deem the Guarantees to be in the interest of the City.

4.  City Council authorize the City to enter into a Community Use Agreement with the YMCA for the Project, having a term ending 30 years after commencement of operation, substantially on the terms set out in Appendix B to the report (June 14, 2016) from the Deputy City Manager, Cluster A, the Deputy City Manager, Cluster B and the Deputy City Manager and Chief Financial Officer, and on such other terms and conditions deemed necessary and appropriate by the City Solicitor and the General Manager, Parks, Forestry and Recreation.

5.  City Council direct the Chief Planner and Executive Director, City Planning, to allocate those funds secured for community services and facilities from the developments identified in Appendix C to the report (June 14, 2016) from the Deputy City Manager, Cluster A, the Deputy City Manager, Cluster B and the Deputy City Manager and Chief Financial Officer towards this Project, including any increases as a result of indexing at the time of payment.

6.  City Council direct the Chief Planner and Executive Director, City Planning, to prioritize this Project as a community benefit for future development applications within, or within close proximity of the King Spadina Secondary Plan area until such time that the City's contribution of $19.0 million plus its share of accrued interest is fully recovered.

7.  City Council authorize payment by the City of up to $19.0 million, plus interest accrued on the City's share of Project cost (2/3 of the capitalized interest from the construction period) to the YMCA or its Lender to repay a portion of the construction loan upon substantial completion of the Project, on terms and conditions satisfactory to the Deputy City Manager and Chief Financial Officer and the General Manager, Parks, Forestry and Recreation, and in a form satisfactory to the City Solicitor.

8.  City Council direct the Deputy City Manager and Chief Financial Officer, should there be insufficient Section 37 and Section 45 funds available from Ward 20 at the time the payment referred to in Recommendation 7 above is required to be made, to report to Council on a source of  funds to fulfill the City's funding contribution to the Project which funds are to be recovered from future Section 37 and Section 45 funds in Ward 20, with interest charged on the account at 3 percent per annum, until such time that all the funds advanced are recovered.

9.  City Council authorize and direct appropriate City Officials to take such action as may be necessary to implement the foregoing.

In September 2015, City Council adopted a report from the General Manager, Parks, Forestry and Recreation, and Chief Planner entitled '505 Richmond Street West – Proposed YMCA Centre', and in doing so, indicated City Council's support of a YMCA centre as an appropriate use in the redevelopment of this formerly City owned-property, now owned by Build Toronto (the "Project").  Council also agreed, in principle, that existing and future Section 37 and 45 funds from Ward 20 be used to fund the City's two-thirds share of construction cost with the YMCA contributing the other one-third share.

The obligations and business terms between the numerous parties involved have now been detailed, and are described in the body of this report and summarized in the attached term sheet for City Council consideration.  The YMCA construction and fit-out cost estimate for the proposed recreation centre is approximately $30 million.  Build Toronto, on behalf of the City, will contribute the land value to the YMCA at nominal cost.  The YMCA will enter into a 'Guaranteed Maximum Price' construction contract with the developer for the 'shell' of the facility with an option for fit-out by the same developer.  

The YMCA will enter into a construction financing agreement with Infrastructure Ontario (IO) for the full construction cost, which will be converted to a long-term mortgage (up to thirty years) at substantial completion.  The City will advance its two-thirds share ($19 million plus accrued interest) at substantial completion (expected by the end of 2019), and the YMCA will be obligated to fund the balance of the construction cost.  The City will be required to provide a loan guarantee to IO on behalf of the YMCA for $30 million through the construction phase, which guarantee will be reduced to $9.5 million at substantial completion to support the YMCA's construction take-out mortgage.  The actual amount of the mortgage to be guaranteed is expected to be less depending on the outcome of the YMCA's fundraising for this project.

Funds for community services and facilities pursuant Section 37 and 45(9) of the Planning Act  from Ward 20 in the amount of approximately $5.3 million, as listed in Appendix C, have been secured through agreements with the City and are able to be allocated by the Chief Planner toward this Project when those developments proceed.  In some cases the funds have already been received.  In one case, a companion report will be brought forward by City Planning through Toronto East York Community Council to authorize a redirection of funds for this purpose.  City Planning advises that there are numerous other development projects pending and others that are contemplated within and around the King Spadina Secondary Plan Area which could result in by-laws that include Section 37 contributions.  A recommendation has also been included providing that the Chief Planner be directed to prioritize this Project as a community benefit in the context of pending and future development applications until such time as related Section 37 and 45 funds raised in this area are sufficient to pay the City's contribution to this project.  If there is a shortfall in raising the City contribution to the project of $19 million (plus 2/3 share of accrued interest) at substantial completion, the City will advance its funding obligation from a source to be determined at that time, to be recovered from future Section 37 and 45(9) funds in Ward 20.  

City Corporate Finance staff have reviewed the YMCA's business model and pro-forma for this project, and are satisfied that the business model can support the proposed mortgage of up to $9.5 million over the thirty year (or less) term of the IO loan.  The City will require that various agreements be entered into to protect the City's financial interest during both the construction phase and the community-use operating term.  

The YMCA will enter into a 30-year community-use agreement with the City.  The YMCA will also be responsible for all operating and life-cycle costs of the facility.  If the YMCA does not meet its obligations, the City can assume control of the facility.  At the end of the 30-year operating period, there will be no further obligation on the YMCA, and the YMCA is free to continue operations on site or sell to a third party (with the City having a first option to purchase), and in which case the City shall be reimbursed for the fair market value of the land at that time.