Item - 2023.EX3.9

The Executive Committee recommends that:

1. City Council authorize and direct the City Manager to negotiate with the Province of Ontario for the Province to commit to pay all amounts above the original SmartTrack Program Budget of $1.463 billion which are required to deliver the Program due to increased costs, as further detailed in Table 1 of Confidential Attachment 1 to the report (March 7, 2023) from the Deputy City Manager, Infrastructure and Development Services, and which as of the date of the report from the Deputy City Manager, Infrastructure and Development Services are estimated at $234 million.

2. Conditional upon reaching an agreement with the Province of Ontario as contemplated in Recommendation 1 above, City Council authorize the City Manager to enter into and execute an amendment to the Revised Ontario Toronto Agreement in Principle with the Province of Ontario, dated August 13, 2021 (the "Revised AIP") and all other necessary agreements, including all amendments, renewals and ancillary agreements, with the Province and/or Metrolinx to give effect thereto, upon such other terms and conditions satisfactory to the City Manager, and in a form satisfactory to the City Solicitor.

3. If it is not possible to reach the necessary agreement with the Province of Ontario as contemplated in Recommendation 1 above, City Council direct the City Manager to report back to the Executive Committee as soon as possible with a full analysis of available options for consideration.

4. City Council direct the City Manager to notify Metrolinx that the design-build contract for the Bloor-Lansdowne Station should only be awarded once the Province has committed to paying the costs as set out in Recommendation 1 above.

5. City Council authorize the public release of Confidential Attachment 1 to the report (March 7, 2023) from the Deputy City Manager, Infrastructure and Development Services following completion of the SmartTrack Stations Program as it contains commercial information, supplied in confidence to the City, which, if disclosed, could reasonably be expected to prejudice significantly the competitive position or interfere significantly with the contractual or other negotiations of a person, group of persons, or organization and involves the security of the property belonging to the City of Toronto.

In February 2021, through EX20.02 - Advancing the SmartTrack Stations Program, City Council approved the terms negotiated with the Province of Ontario to allow the SmartTrack Stations Program (the “Program”) to proceed to construction. These terms established that the Program would be delivered by the Province and/or its agencies (Metrolinx and Infrastructure Ontario) and that its scope would consist of five stations, namely, Finch-Kennedy, East Harbour, King-Liberty, St. Clair-Old Weston and Bloor-Lansdowne. The City’s capital contribution to the Program was reconfirmed to be a total of $1.463 billion (the “Program Budget”), inclusive of $585 million in funding from the Government of Canada.

The Program represents a significant investment to improve transportation choices within Toronto and leverages existing transit infrastructure to serve more people. Combined with Metrolinx's GO Expansion Program, SmartTrack will accelerate the transformation of heavy rail infrastructure in Toronto from a regional commuter service into an urban rapid transit network, thereby bringing transit faster to communities across the city.

Since the adoption of the aforementioned staff report, numerous unanticipated factors have caused the estimated costs of the Program to significantly increase. Metrolinx has advised the City that it has experienced cost pressures across its programs stemming from market economic challenges and market saturation for large and complex capital projects, amongst other factors. Metrolinx’s engagement with the market also identified several current conditions that led to higher costs in comparison to what was known in 2020 when the original Program Budget was established, including:

- Uncertainty in supply chain and market conditions including past effects on commodity prices and risk of availability;

- Significant concerns about the uncertainty of cost inflation, resulting in the project owner retaining the risk of future cost increases and needing to protect against future cost pressures beyond current projections;

- An increase of projects in the rail sector, as well as other construction sectors, leading to labour shortages and less market participation/competition, including opportunities with other clients in the market that have lower risk scenarios or require less time to deliver; and

- Maturation of schedules in contracts specific to work in a rail corridor with cost implications. These have been added to improve safety and to reduce/avoid impacts to service disruption.

The rationale provided by Metrolinx is consistent with current conditions experienced by the City through the planning and execution of its major capital projects.

As a result of the above factors, the estimated cost of the Program has now exceeded the existing Program Budget of $1.463 billion. To deliver the existing five station scope, roughly $234 million in additional funding is required at this time, with further details outlined in Table 1 of Confidential Attachment 1.

City staff are seeking City Council direction to request the Province of Ontario to pay for all amounts above the original Program Budget of $1.463 billion to deliver the Program due to increased costs, which as of the date of this report is estimated at $234 million. Since the Program will also benefit the Province through increased ridership on the GO system, and as the Province will own and maintain the SmartTrack Stations, there is a strong rationale for the Province to contribute towards the increase in Program’s costs.

A decision on the future of the Program is required urgently in order to award the design-build (DB) procurement for the Bloor-Lansdowne Station contract in early April. With a DB procurement, the City, through Metrolinx, would be committing to proceed to detailed design and construction and as such, there may be no opportunity for the City to reconsider or “off-ramp” its commitment to the station’s delivery once the contract is awarded. Metrolinx has secured an extension to the bid validity date with the proponent until April 5, 2023. Prior to making this commitment, City staff are seeking City Council’s direction to notify Metrolinx that the City will not proceed with the delivery of the Bloor-Lansdowne Station until the Province has committed the additional funding required to deliver the Program as set out above.

To date, the City has made significant financial investments to advance the delivery of the SmartTrack Program. Current incurred costs per station are identified in Table 2 of Confidential Attachment 1.