Item - 2023.EX4.1

The Executive Committee recommends that:  

Port Lands Flood Protection

1. City Council approve, in principle, the updated funding strategy for Port Lands Flood Protection, and City Council authorize the Deputy City Manager, Infrastructure and Development Services or designate, in consultation with the Chief Financial Officer and Treasurer, to negotiate and execute an amended tri-government Contribution Agreement for the Port Lands Flood Protection project and a new Project Delivery Agreement for parks and public realm with Waterfront Toronto, in a form acceptable to the City Solicitor, based upon the principles set forth in the term sheets attached as Attachments 2 and 3 to the report (April 18, 2023) from the Deputy City Manager, Infrastructure and Development Services.

Port Lands Enabling Infrastructure Implementation

2. City Council authorize the Executive Director, Corporate Real Estate Management to approve real estate transactions in connection with the implementation of the Port Lands Flood Protection project, on terms satisfactory to the Executive Director, Corporate Real Estate Management, in consultation with the head of the City division to have operational management of the affected land or any affected Port Lands Flood Protection asset, with all associated agreements to be in a form satisfactory to the City Solicitor.

3. City Council authorize severally each of the Deputy City Manager, Corporate Services, the Executive Director, Corporate Real Estate Management and the Director, Transaction Services, to execute agreements and other documents relating to the transactions identified in Recommendation 4 below on behalf of the City.

4. City Council authorize the Deputy City Manager, Infrastructure and Development Services or designate to negotiate and execute Handover Protocol Agreements with Waterfront Toronto on terms and conditions satisfactory to the Deputy City Manager, Infrastructure and Development Services, in consultation with the relevant division heads, and in a form satisfactory to the City Solicitor for the effective and efficient acceptance and transfer of and the assumption by the City of responsibility for the operation and maintenance of municipal roads, bridges, public utilities, parks, open spaces and unique infrastructure assets that are being constructed as part of the Port Lands Flood Protection project, based upon the principles set forth in the term sheet attached as Attachment 4 to the report (April 18, 2023) from the Deputy City Manager, Infrastructure and Development Services.

5. City Council authorize the Deputy City Manager, Infrastructure and Development Services or designate, subject to funding being available in an approved Budget, and upon terms and conditions satisfactory to the City Solicitor, to enter into agreements with Waterfront Toronto as may be required for the operation and maintenance of assets constructed as part of the Port Lands Flood Protection project, for the asset warranty period following acceptance by the City.

Sediment and Debris Removal

6. City Council approve, in principle, phase one and phase two of the One-Time Backlog Keating Channel Dredging Program as outlined in Attachment 5 to the report (April 18, 2023) from the Deputy City Manager, Infrastructure and Development Services, subject to funding in the 2024 Budget.

7. City Council authorize the Deputy City Manager, Infrastructure and Development Services or designate, in consultation with the Chief Financial Officer and Treasurer, to negotiate and execute required agreements with Waterfront Toronto, the Toronto and Region Conservation Authority, PortsToronto or other parties for the One-Time Backlog Keating Channel Dredging Program as outlined in Attachment 5 to the report (April 18, 2023) from the Deputy City Manager, Infrastructure and Development Services, in a form acceptable to the City Solicitor.

This report provides a comprehensive update on the Port Lands Flood Protection project and the next steps for unlocking related future development.

Specifically, it outlines the next steps in completing flood protection, provides an update on new City assets being developed as a part of this work and their anticipated operating and maintenance costs, and provides directions on issues that will be considered as part of future reports and budget submissions. Anticipated milestones covered in this report are as follows:

-Substantial completion of Port Lands Flood Protection by the end of 2024 and expected opening of parks and public realm in 2025 (with possible opening in phases);

-Dredging the accumulated backlog of sediment from the Keating Channel from 2023 to 2026;

-Asset handover to the City (2023-2025) of Port Lands Flood Protection assets and refinement of long-term operating costs for assets and ongoing dredging of the Don River and Keating Channel to be updated as part of the 2024 and future budget processes; and

-By Q4 2024, updates to be reported to City Council on the foundational investments required as development proceeds (post-2025) to ensure continued flood protection and to unlock the value of public lands.

Completion of flood protection and associated projects, as described in this report, will provide enabling servicing for Villiers Island and are a prerequisite for future development and planning work that is underway.

Construction of Port Lands Flood Protection will generate $1.1 billion in value to the Canadian economy, over 10,000 person years of employment, and over $370 million in government tax revenues while setting the foundation for new housing, employment, and public land uses close to Downtown Toronto.

1. Port Lands Flood Protection

Port Lands Flood Protection is one of North America's most significant urban regeneration projects. Together with associated projects, it will flood protect over 240 hectares of land in the Port Lands and the South of Eastern neighbourhoods. It includes 23 separate sub-projects and, in addition to flood protection, is anticipated to remediate contaminated land, deliver new bridges, infrastructure and public parks, and create a new naturalized mouth of the Don River. Flood protection infrastructure is the cornerstone of the City of Toronto's plans to renew and revitalize the central waterfront.

The Government of Canada, Province of Ontario and City of Toronto approved $1.25 billion in flood protection funding in 2016 and 2017 to Waterfront Toronto as the tri-government corporation responsible for project delivery. Work is being done in close collaboration between Waterfront Toronto, the City, CreateTO, the Toronto and Region Conservation Authority, and other utilities and agencies, including coordinating capital projects in the lower Don River area. Port Lands Flood Protection construction began in 2016, and the project is well underway; it is anticipated to be substantially completed by the end of 2024.

The Port Lands Flood Protection project was guided by two Environmental Assessments and an extensive Due Diligence program which ultimately determined the government-approved scope and budget. The project has been undertaken with a continuous and ongoing program to reduce and mitigate risks (e.g., with soils and utility relocations) and reduce costs associated with the project scope. Risk mitigation includes oversight by the Waterfront Toronto Board of Directors and various government-led oversight and steering committees that govern the project's contribution agreements. Program oversight is supported by the senior staff Intergovernmental Steering Committee (IGSC).

In 2022 Waterfront Toronto began to identify and report significant risks to the project budget, given inflationary pressures and the remaining contingency available. As with many large ongoing infrastructure projects, Port Lands Flood Protection is facing significant challenges due to supply chain disruptions, cost inflation, labour issues in the construction industry, and global economic uncertainty brought on by continued COVID-19 impacts and geopolitical instability. The rationale provided by Waterfront Toronto is consistent with current conditions experienced by the City through the planning and execution of its major capital projects.

Over the last six months, government partners and Waterfront Toronto have collaboratively reviewed needs, alternatives, risks, and funding options for this significant project. The partnership has resulted in a recommended solution which preserves the original objectives of Port Lands Flood Protection while providing additional funding contributions over time. The recommended approach identifies incremental funding of up to $169 million from governments and Waterfront Toronto, restructures contribution agreements, and balances fiscal impacts to governments while meeting shared public policy objectives. The proposed incremental funding is approximately 13.5 percent of the total $1.25 billion government commitments and includes $63 million in contingency to the end of 2024. The City's recommended share is $55.2 million (approximately one-third, aligned with this project's original cost-sharing principle).

The recommended solution is currently going through formal approvals at all orders of government with appropriate approvals having already been received from the Waterfront Toronto Board of Directors. Subject to City Council approval, the recommended solution would advance the Port Lands towards its transformational opportunities, including disaster mitigation, economic development, and unlocking new flood-protected lands for housing supply.

2. Port Lands Enabling Infrastructure Implementation

Alongside the completion of flood protection, City staff and partners at Waterfront Toronto and the Toronto and Region Conservation Authority continue to advance implementation of a tranche of enabling infrastructure as part of the flood protection project. Implementation includes updating the anticipated operating costs for new assets being delivered to the City, and the roles and responsibilities related to ownership and ongoing management.

New City assets will include:

-Four new bridges, two at Cherry Street North over the Keating Channel, Cherry Street Bridge South, and Commissioners Street Bridge;

-A rebuilt Lake Shore Boulevard East bridge over the Don River;

 -Reconstructed Commissioners Street, which will be widened for future Light Rapid Transit;

-A rebuilt Don Roadway (with a new valley wall);

-A completely realigned Cherry Street;

-New water, sanitary and stormwater infrastructure, along with expanded cycling and pedestrian infrastructure along Cherry Street and Commissioners Street;

-Promontory Park South, and River Parks North and South;

-The Sediment and Debris Management Area, including sediment trap, space allocated for on-shore sediment and debris sorting and equipment and materials handling;

-A connection for the Lower Don Trail, a regional cycling route; and

 -New flood protection landforms and river valley.

The Port Lands Flood Protection and enabling infrastructure within New Cherry Street and Commissioners Street provide the servicing framework for the future development blocks on Villiers Island. This report provides an overview of estimated timelines for the anticipated handover of the road, bridge, park, and unique assets and the preliminary projected financial impacts to the annual operating budgets of City divisions over ten-years.

Asset Ownership and Handovers

Several City divisions, including Parks, Forestry and Recreation, Toronto Water, and Transportation Services, will be responsible for owning, operating, and maintaining the enabling infrastructure created through Port Lands Flood Protection. Operations and maintenance will be informed by Handover Protocols which will provide guidelines regarding the transfer of individual assets. Assets are to be transferred over three-years from 2023-2025. City staff recommend that City Council provide delegated authority to the Deputy City Manager, Infrastructure and Development Services or designate to enter into these handover protocol agreements.

Many assets, including roads, bridges, utilities, and parks, will follow standardized approaches to handover. In addition to this, the City may need to enter into operating agreements with Waterfront Toronto for a period of time before assumption. This is due to the dynamic nature of the Port Lands Flood Protection project, where assets will come online over time. City staff recommend that City Council provide delegated authority to the Deputy City Manager, Infrastructure and Development Services or designate to enter into agreements with Waterfront Toronto that may be required to operate City assets until formal City assumption.

Specific approaches are being developed for the unique assets the City will own, including the river valley, flood protection landforms, dockwalls, and sediment management, which will require non-standard acceptance and operational arrangements supported by the experience of the Toronto and Region Conservation Authority. City staff will report further on this matter by Q4 2024.

Asset Operating and Maintenance Costs

A number of manuals have been developed by Waterfront Toronto and consulting teams, in cooperation with City divisions to guide future operations and maintenance (O&M). These manuals will aid City staff in delivering operations and maintenance for standard and unique Port Lands Flood Protection assets and inform operating cost requirements.

In collaboration with Waterfront Toronto and Toronto and Region Conservation Authority and using the best available information, City staff have developed a preliminary forecast of incremental operating and maintenance costs. Over ten years and for all assets, the average operating and maintenance costs is estimated to be $7.7 million per year. The timing of expenditures will depend on when specific assets are handed over to the City. The figures provided are preliminary and, in some cases, need to be market tested.

Further analysis of the costs is necessary to protect this tri-government capital investment through operations and maintenance, programming, and state-of-good repair funding. Operating impacts will be reviewed annually to account for any revisions to operations and maintenance practices and market rates. City staff will update and include these operating costs as part of future budget processes.

Real Estate Matters

Given the complexity of the Port Lands Flood Protection project, Waterfront Toronto's role in negotiating property acquisition terms, the number of anticipated transactions, and the critical timelines associated with project completion and handover, City staff, in consultation with CreateTO staff, are recommending a limited delegated authority to approve real estate transactions in connection with the implementation of Port Lands Flood Protection to the Executive Director, Corporate Real Estate Management, in consultation with the head of the City division to have operational management of the affected land or any affected Port Lands Flood Protection asset.

3. Sediment and Debris Removal in the Don River and Keating Channel

Runoff, sediment, and debris collect in the Don River and are carried downstream and deposited into the lower Don River and Keating Channel. Dredged material is currently transported by boat to the Leslie Street Spit and disposed of in a Confined Disposal Facility in accordance with environmental approvals.

Removal of sediment and debris is outlined in two sections, one describing work required to clear an accumulated sediment backlog and the second describing the long-term dredging operation required to maintain flood protection.

Clearing the Accumulated Backlog

The City, Waterfront Toronto, the Toronto and Region Conservation Authority, and PortsToronto have developed a proposed program to remove the accumulated sediment from Keating Channel, subject to approvals. Accumulation has occurred over a number of decades due to fixed dredging budgets that did not adjust to fully address the removal of actual sediment volumes deposited in the channel annually. It is anticipated that the backlog (including annual accumulation over the next two years) in the Keating Channel is between 180,000 to 220,000 cubic metres of excess sediment which will need to be removed. Removal would ensure the Keating Channel achieves its specified design depth and can work together with other flood protection measures being put into place.

Waterfront Toronto would implement the first of two phases of accumulated sediment removal in the summer of 2023 to facilitate Port Lands Flood Protection construction which is anticipated to cost $10 million. Phase one would be funded upfront by Waterfront Toronto and/or other parties, with the City to provide reimbursement in the 2024 and 2025 budget years, subject to approvals. The City and the Toronto and Region Conservation Authority would lead a second phase in 2024 and continue dredging activities to maximize channel flows and flood protection benefits until full design depth is achieved.

An early estimate for the total cost to remove all accumulated material was $24 million which includes work under phase one and phase two. However, additional due diligence is required to update and confirm the total cost. The total cost and the final City share will require further analysis of volumes, environmental monitoring, and cost-sharing by other orders of governments and agencies and will be reported on as part of the 2024 budget process. In order to ensure flood protection is achieved, City staff recommend that City Council approve in principle both phases of the plan to clear the accumulated backlog, subject to the approval of future year budget submissions.

Long-Term Dredging Assets and Operations

Despite various efforts to manage stormwater and development upstream in the region, this issue will continue and require a permanent, ongoing annual program to remove sediment and debris. After Port Lands Flood Protection is completed, flood waters will be directed through the new mouth of the Don River, the Keating Channel, and the new Don River 'spillway.' Keating Channel, which PortsToronto owns, will convey the majority of overflow in a flood event. Sediment will need to be regularly dredged from the Don River and at least every two years from the Keating Channel to maintain sufficient flow.

Following the completion of Port Lands Flood Protection, annual sediment and debris removal operations will occur from a newly created Sediment and Debris Management Area north of the Lake Shore Boulevard East Bridge. City staff are finalizing a long-term plan for the mechanical dredging operations to start following the delivery of the interim Sediment and Debris Management Area.

Mechanical dredging is currently the most efficient method of dredging from both a cost and operational perspective. City staff in consultation with the Toronto and Region Conservation Authority and other partners will continue refining the long-term operations and maintenance plans and costing and report to City Council with recommendations by Q4 2024.

4. Next Steps for Implementation

Port Lands Flood Protection will unlock significant value in the port lands, with future development leading to an estimated $4 billion economic impact. Much of this value will be realized on City, CreateTO, and other public lands.

In addition to dredging, a number of associated projects will need to be completed as development proceeds, including the Sediment and Debris Management Area to its 'final' condition starting in 2030-31, PortsToronto land acquisitions for Promontory Park North, and the management of excess soils on development sites.

Unlocking the full development potential of the Port Lands depends on the completion of flood protection and parks and the public realm as outlined above. However, the Port Lands Flood Protection project and its enabling infrastructure is only a beginning, delivering the infrastructure required to enable flood protection and establish the major streets and servicing.

Separately, City staff are currently working with Waterfront Toronto and CreateTO to evaluate the impacts of an increased population density on the infrastructure and will assess options to support increased population densities if limiting constraints are identified. The infrastructure and community services, which was to be constructed independently after the flood protection and enabling works, will now be considered to realize the vision of a new, connected, climate-positive, and complete community on the Island that will be home to thousands of Torontonians.

The City, other governments and appropriate agencies are reviewing the steps required to unlock this potential. City staff will report on the next steps by Q4 2024, including within future reports on the update to the Villiers Island Precinct Plan and the Next Phase of Waterfront Revitalization.