Item - 2016.EX18.3

The Executive Committee recommends that:

1.  City Council direct the Mayor, the City Manager and the Deputy City Manager, Cluster B to request Government of Canada and Province of Ontario funding commitments for the Port Lands Flood Protection project by the second quarter of 2017.

2.  City Council direct the Deputy City Manager, Cluster B and the Deputy City Manager and Chief Financial Officer to make any submissions required by Government of Canada and/or Province of Ontario funding programs; and to report on all details related to the tri-government funding of Port Lands Flood Protection, including conditions and obligations of any federal/provincial contribution agreements.

3.  City Council approve an Essroc Quay Lake Filling and Naturalization capital project with a project cost of $65.0 million to be created with the Waterfront Revitalization Initiative Capital Program with cash flow approvals of $35.0 million in 2017, $25.0 million in 2018 and $5.0 million in 2019, funded from the following:

a.  $32.5 million in federal funding;

b.  $16.250 million in provincial funding;

c.  $10.725 million funding from the Water Capital Reserve (XR6003); and

d.  $5.525 million funding from the Storm Water Management Development Charge Reserve Fund (XR2113).

4.  City Council direct the Deputy City Manager, Cluster B and the Deputy City Manager and Chief Financial Officer to identify funding for $401 million, the City's one-third share of the balance of the Port Lands Flood Protection project, through the 2017 - 2026 capital budgeting and planning process, with implementation subject to securing the remaining two-thirds share through provincial and federal contributions.

5.  City Council direct the Deputy City Manager and Chief Financial Officer to include updated Port Lands Flood Protection project components in the planned update to the City Development Charges By-Law, taking into consideration the funding request to other orders of government.

6.  City Council direct the Chief Planner and Executive Director, City Planning, to submit the necessary Zoning By-law Amendment(s) for the Essroc Quay Lake Filling and Naturalization project to the Planning and Growth Management Committee in the first quarter of 2017.

7.  City Council direct the Deputy City Manager and Chief Financial Officer to report to Executive Committee on the merits of directing the proceeds arising from the sale of City owned land in the Port Lands to be first applied to offset flood protection costs and then towards other necessary infrastructure improvements, and directing that any pledge of City owned land be contingent on further matching funds from the Provincial and Federal governments.

The purpose of this report is to recommend next steps for the Port Lands Flood Protection project, undertaken as a part of the City Council-mandated Port Lands Acceleration Initiative. This report provides findings from a due diligence review conducted by Waterfront Toronto for the project including a recommended project scope, budget, and schedule. This report also provides details concerning $65 million in proposed tri-governmental funding to immediately undertake the Essroc Quay Lake Filling and Naturalization project, which is one component of the overall Port Lands Flood Protection project.

The Port Lands Flood Protection project is vital to protecting life and minimizing property damage associated with a catastrophic flooding event of the Don River. Areas of Toronto currently at risk from a Regulatory Flood Event (e.g., a Hurricane Hazel-level storm event) include the Port Lands north of the Ship Channel, portions of the South Riverdale and Leslieville neighbourhoods, and the South of Eastern area, including the proposed Unilever Precinct. A review of flood protection projects in other jurisdictions indicates that the average benefit-to-cost ratio for flood protection is five to one; in other words, every $1 invested in flood protection will mitigate $5 in flood-related property damage.

The project will also enable new development of lands currently restricted under provincial regulation and local planning controls. The proposed flood protection plan will provide recreational and environmental benefits through the creation of new parks, naturalized areas and wildlife habitats.

A flood protection landform was created as a part of the recent development of the West Don Lands precinct and Corktown Commons which mitigates flood risk to the west of the Don River. 210 hectares (520 acres) of land in downtown Toronto, extending just beyond Yonge Street to the west, from the waterfront to Front Street, is now flood protected. The flood protection infrastructure described in this report will mitigate the flood risk for the vast majority of developed and developable lands within the approximately 290 hectares (715 acres) Regulatory Flood Spill Zone to the south and east of the Don River (Figure 1).

(See Figure 1 titled "Regulatory Flood Spill Zone

for the Lower Don River" in the Summary Section

of the report from the Deputy City Manager,  Cluster B

and the Deputy City Manager and the Chief Financial Officer)

Substantial work has been completed for the Port Lands Flood Protection project by Waterfront Toronto, City divisions, the Toronto and Region Conservation Authority (TRCA) and other partner agencies since 2014:

-  Two approved Environmental Assessments (EAs) including:

-  Don Mouth Naturalization and Port Lands Flood Protection Project EA;

-  Lower Don Lands Infrastructure Master Plan Class EA which identifies the location and design of streets, bridges, transit, utilities, storm water management facilities and other municipal services.

-  Public engagement and stakeholder agreement for the flood protection plan;

-  A due diligence review of scope, budget, and schedule related to flood protection and enabling infrastructure in the Port Lands.

-  Identification of a project (Essroc Quay Lake Filling and Naturalization) for immediate implementation with tri-governmental funding enabled through the federal Clean Water and Wastewater Fund.

The estimated project cost is $1.25 billion in year-of-expenditure dollars (YOE), comprising all hard (construction) and soft costs, applicable taxes and contingencies, including an allowance for expected escalation to the proposed year of expenditure. The scope of the project includes permanent flood protection through creation of a new, naturalized mouth of the Don River and other significant flood protection measures, as well as essential municipal services (e.g., water distribution, wastewater/stormwater collection and roadways), streets, bridges, parkland development and environmental remediation in the Port Lands that must be undertaken concurrently with the flood protection for technical and logistical reasons.

If project funding is confirmed by 2017 Q2, construction can commence by 2017 Q4 with scheduled completion in late 2023. Given the costs associated with delaying the project – currently estimated at approximately $30 million for each year of delay beyond the original project timeline – and the current alignment between government partners in prioritizing critical infrastructure investments, it is essential that funding commitments be established for the Port Lands Flood Protection project as soon as possible.

Due Diligence Review

The due diligence review process for the Port Lands Flood Protection project was initiated in 2015 at the request of the government partners. The review was undertaken by Waterfront Toronto in collaboration with the City of Toronto, TRCA and Toronto Port Lands Company (TPLC). A consultant team provided relevant expertise in design, engineering and construction, risk analysis, cost estimating, environmental engineering, procurement, project management and market analysis. Two qualified organizations peer reviewed the findings. The final due diligence report is provided as an attachment to this staff report.

The current budget estimate of $1.25 billion (YOE) represents a net increase of $275 million from the previous estimate of $975 million (YOE) provided in 2014. The current estimate incorporates more detailed and reliable data from the due diligence review concerning site conditions and technical requirements for the project area, including the nature, extent and distribution of soil and groundwater contamination, as well as additional excavation that will be required due to poor soil conditions. The revised estimate also accounts for minor scope changes, including both additions and reductions/deferrals for related infrastructure work. It also accounts for cost escalation (e.g., inflationary increases) of approximately $50 million since 2014 (Figure 2).

Figure 2 Variance between 2014 and 2016 Cost Estimates

Based on an equal three-way cost-sharing arrangement between the three orders of government, the City's share of the Flood Protection project costs would be approximately $417 million (YOE) over the 2017 to 2023 time period.

Next Steps

As per Council direction, the Mayor and City staff have been in discussions with representatives of the Government of Canada and the Province of Ontario concerning the project in relation to future infrastructure funding programs. The details of the next round of cost-sharing infrastructure programs are likely to be made public in early 2017. This report recommends that the Mayor and senior City staff request that the federal government and the Province confirm funding commitments by that time. Subject to Council approval, the Port Lands Flood Protection project will be a key priority for the City under Phase 2 of the federal government's green infrastructure plan which is anticipated to provide approximately $14.9 billion in new funding over the next ten years.

City staff will make all necessary submissions required by federal and/or provincial funding programs. The report recommends that staff be authorized to make these submissions and directed to report back on all details related to the tri-government project funding, including conditions and obligations of relevant contribution agreements.

This report recommends that funding for the City’s share of the project be secured through the 2017-2026 capital budgeting and planning process, subject to the securing of federal and provincial funding contributions. Given that development charge revenues are key to funding the project, it is recommended that flood protection components of the City development charges by-law be updated to reflect the revised scope of the Port Lands Flood Protection project and account for the cost-sharing funding request to other orders of government.

In September 2016, the Government of Canada and Province of Ontario committed to a 75 per cent share of $65 million in proposed joint funding through the federal Clean Water and Wastewater Fund (CWWF), to support the Essroc Quay Lake Filling and Naturalization project. Essroc Quay is a self-contained project that will improve storm water management at the mouth of the Don River. While integral to the overall flood protection plan, the Essroc Quay project can be implemented in advance of the larger scope of work. Infilling Essroc Quay will also lead to improvements in water quality and create new naturalized open spaces and aquatic habitat.

This report recommends that the Waterfront Revitalization Initiative Capital Budget and Plan be increased by $65.0 million to fund the Essroc Quay Lake Filling and Naturalization project. The City's 25 per cent share ($16.25 million) of the project costs will be funded through a combination of initial development charge funding ($5.525 million) and a contribution from the Water Capital Reserve ($10.725 million) that will be reimbursed through post-period development charge payments and future land sale proceeds. City staff will report to Council and request the authority to enter into a Transfer Payment Agreement with the Province for this funding in late 2016, once terms and conditions are available for consideration.

A comprehensive planning framework for the Port Lands is currently under development. Among other matters, the framework will provide enhanced land use direction for the Port Lands. Additionally, the City has been undertaking a Transportation and Servicing Master Plan Environmental Assessment for the balance of lands in the Port Lands and the South of Eastern area. Comprehensive preliminary cost estimates for the balance of all hard and soft infrastructure needs, including affordable housing, are being prepared. These two initiatives will be brought forward to Planning and Growth Management (PGM) Committee in early 2017. That report will also provide recommendations for necessary Zoning By-law amendments to enable the Essroc Quay project. Transit planning will be addressed in phase two of the Waterfront Transit Reset, to conclude with a staff report Q2 2017.

A Port Lands Business Plan will also be provided in 2017 concerning the costs associated with redeveloping the Port Lands and portions of the South of Eastern area, the development-related revenues that the City can raise to offset these costs and potential options for funding.