Item - 2024.EX17.17

The Board of Directors of TO Live recommends that:

1. City Council request the Board of Directors of TO Live to direct the President and Chief Executive Officer, TO Live, in consultation with the Executive Director, Corporate Real Estate Management and the Executive Director, Financial Planning:

a. to proceed with the detailed design phase, in accordance with the established stage gate process as outlined in this report page 9 and page 10 entitled Stage Gate Process, and

b. to amend the 2024-2033 Capital Budget and Plan for TO Live to reallocate $8.779 million in funding commitment from the remaining cash flow funding originally intended for state of good repair to advance the Detailed Design phase.

2. City Council direct that Confidential Attachment 1 to the report (September 6, 2024) from the President and Chief Executive Officer remain confidential in its entirety because it contains financial information supplied in confidence to the Board of Directors of TO Live which, if disclosed, could reasonably be expected to significantly prejudice the competitive position, or interfere significantly with the contractual or other negotiations of a person, group of persons, or organization..

At its meeting on September 12, 2024, Board of Directors of TO Live considered Item CT11.2 and made recommendations to City Council.

Summary from the report (August 28, 2024) from the President and Chief Executive Officer, TO Live:

The purpose of this report is to provide an update on the redevelopment of the St. Lawrence Centre for the Arts ("STLC") project, as directed by the Board of Directors of TO Live (Item CT9.9) and City Council (Item CC15.1), on the refined project cost estimates upon completion of a schematic design with appropriate Class Estimates and status on the financing strategies.  Included in this report is information regarding the completion of the schematic design phase and associated Class D estimate, with project management and oversight from Corporate Real Estate Management (CREM), as well as TO Live's fundraising strategy and the established project stage gate process. This report seeks approval from the TO Live Board and City Council to progress from the schematic design phase into the detailed design phase.

Included in the detailed report will be:

1. Recommendations for approval

2. Financial Impact outlining costs for the associated Stage Gate

3. Decision History

4. Background:

a) About TO Live

b) About the STLC

c) Process Outline (How we got here)

d) Stage Gate Process Outline

e) Schematic Design Phase Process; cost estimates, valuation and cost management

f) Design Development Phase Progress Outline

g) Major Design Milestones

h) Funding Model

i) Next Steps

Confidential Attachment: Funding Update.

The Chief Financial Officer and Treasurer recommends that City Council:  

1. Delete Recommendation 1 from the Board of Directors of TO Live as part of report CT11.2 and give direction that the St. Lawrence Centre for the Arts Redevelopment Project will not proceed to the detailed design phase.

2. Subject to Council approval of Recommendation 1 from this supplementary report, direct the Chief Financial Officer and Treasurer to include funding in the 2025 Budget for the Mayor’s consideration, that will enable TO Live to fully address SOGR and accessibility requirements at the St. Lawrence Centre for the Arts, to be informed by the Building Condition Assessment once completed.

This supplementary report from the Chief Financial Officer and Treasurer has been submitted for Council's consideration in companion with the report from the President and Chief Executive Officer of TO Live entitled Update on the St. Lawrence Centre for the Arts Redevelopment Project (CT11.2).

During the 2024 Budget process, City Council approved preliminary project funding to complete the schematic design phase of the St. Lawrence Centre for the Arts (STLC) Redevelopment Project through the reallocation of $8.560 million in funding originally planned for State of Good Repair (SOGR) requirements within TO Live's 10-Year Capital Budget and Plan.

City Council also requested the President and Chief Executive Officer, TO Live, in consultation with the Executive Director, Corporate Real Estate Management (CREM), to report back to Executive Committee on refined project cost estimates upon completion of a schematic design.  Council also requested that reporting include the status of project financing strategies.

In response to this request, at its meeting on September 12, 2024, the Board of Directors of TO Live received an update from the President and Chief Executive Officer, TO Live on the STLC Redevelopment Project (Item CT11.2), which included:

- An updated project cost estimate of $421.467 million at the conceptual design stage, upon completion of the schematic design based on a Class D estimate (+/- 20%-30% accuracy).

- Preliminary results of a building condition assessment that is nearly complete that estimates a total cost of between $70 to $80 million over the next 10 years to alternatively complete only SOGR and accessibility improvements to the venue.

- A proposed updated financing strategy that includes:

- $8.560 million in City funding already allocated to the project as part of the 2024 Budget process to complete the schematic design;

- $41.903 million in further City funding originally planned for SOGR requirements within TO Live's 10-Year Capital Budget and Plan, with its use contingent on federal and provincial funding commitments towards the project; and

- $371.0 million in project costs that are currently unfunded and would need to be secured from federal, provincial, third-party sponsorship, and further City contributions.

- The report also seeks Council authority to advance with the detailed design phase of the project at an estimated cost of $8.779 million, to be to be funded by unspent funds from the $8.560 million noted for the schematic design and an additional draw of $7.0 million from originally planned SOGR funding within TO Live's 10-Year Capital Budget and Plan.

- If approved, completion of this next proposed phase would bring the total spent to advance the project to $15.560 million.

TO Live staff have worked collaboratively with the City on this initiative and engaged staff from within Financial Planning, Economic Development and Culture and Corporate Real Estate Management in preparation of the report (CT11.2). However, City staff advised that they were not supportive of advancing the project further to detailed design or beyond given the project’s outstanding financial risks.

- The financing strategy outlined in CT11.2 relies significantly on financial support from the federal and provincial governments, as well as a third-party fundraising, none of which TOLive and the City have yet to secure.

- In the absence of full funding commitments from other orders of government and third-parties, there is a financial risk that the redevelopment project will not be funded and completed as planned.

- Should funding not be secured from the other orders of government and third-parties, the project could not proceed without further City funding contributions. If the project does not proceed, any amount reallocated from the originally planned SOGR funding within TO Live's 10-Year Capital Budget and Plan will not be available to meet the immediate needs identified in for TO Live’s SOGR plan.

- Furthermore, the City’s Financial Planning Division considered this project through the newly developed Capital Prioritization Framework, and the project scored poorly based on established evaluation criteria that aligns with Council priorities.

Given the continued financial risk of the project coupled with its poor rating within the Capital Prioritization Framework, the City’s Chief Financial Officer and Treasurer is recommending that the redevelopment project not proceed to the detailed design phase and instead consideration be given to accelerating and fully addressing SOGR needs at the venue.

TO Live has been provided with spending authority up to $8.560 million to complete the schematic design phase for the St. Lawrence Centre for the Arts Redevelopment Project. To date, TO Live has spent $6.781 million for this work and has a remaining balance of $1.779 million that is expected to be unspent by the end of 2024.

- Note that the funds set aside for the schematic design are part of the $50.463 million in funding that had previously been budgeted for planned SOGR works at the venue over the 10-year planning period within the TO Live Capital Plan.

The schematic design estimates the total cost for the STLC Redevelopment project at $421.467 million (in 2027 dollars) which includes all design, construction costs, and contingency costs (+/- 20%-30% accuracy).

As noted in report CT11.2, beyond $50.463 million in City funding ($8.560 million Council approved reallocation of SOGR, and a remaining $41.903 million of potential reallocation of SOGR contingent on federal and provincial funding commitments), the remaining balance of $371.0 million in project cost is currently unfunded.  The financing strategy developed by TO Live staff and included as a confidential attachment to CT11.2 expects remaining funds to be secured from federal, provincial, third-party sponsorship, and further City contributions, but does not identify any commitments secured to date.

Through the update report, TO Live is requesting Council authority to advance the project to the Detailed Design phase and to reallocate additional cash flow commitments in the amount of $8.779 million from the remaining $43.683 million in SOGR funding for this purpose. In the absence of full funding commitments from other levels of government, this amount, and all amounts reallocated to the project from SOGR are at risk, which could mean the project does not advance without added City funding contributions.

Furthermore, if the project does not proceed, the City would need to replenish SOGR funds that had been allocated to the redevelopment project that are now needed to address the venues SOGR and accessibility requirements.

- An updated building condition assessment of the STLC is underway with preliminary SOGR and accessibility cost estimates for the venue now totaling $70-$80 million over the next 10 years.