September 30, 1998

To:Community and Neighbourhood Services Committee

From:Chairman of the Board of the City of Toronto Non-Profit Housing Corporation and the Metropolitan Toronto Housing Company

Subject:Cityhome and MTHCL Amalgamation

Purpose:

This report is written to inform the Community and Neighbourhood Services Committee of two studies which have been commissioned to review costs and practices related to maintenance and property management services.

Background:

Cityhome and MTHCL will legally amalgamate to form a new housing company January 1, 1999. As of April of this year, Cityhome and MTHCL began sharing a cross-appointed nine-member Board of Directors. In May the Board of Directors adopted a report which outlined a vision and structure for the new housing company. The proposed "decentralized service" vision for the new company suggests an organizational model with several local management units managing residential portfolios and a central administrative body. This model suits the requirements of a large scale social housing provider - it allows for meeting local customer needs while effectively delivering high quality services at affordable cost. Key to implementation of the model, is the need to determine the current cost of services delivered by the housing companies, and the cost and impact of alternative delivery options for property management services.

In early August, Derek Ballantyne was named Chief Operating Officer of the new housing company. He assumed his position on September 15, 1998.

Comments:

As part of the process to develop the structure of the new housing company, the Board of Directors and the City Administration have commissioned three major studies to be completed with the assistance of consultants.

These are:

1. Amalgamation Organization Design and Restructuring of Services

An amalgamation structure study to decide the organization structure of the new company.

2. Review of Property Management Services

A bench marking study to evaluate more broadly the cost and effectiveness property management at Cityhome and MTHCL and to compare costs, effectiveness and delivery models with the private sector.

3. Review of Technical Services and Maintenance Operations

A study to evaluate technical services and maintenance operations at Cityhome and MTHCL, compare them to private sector maintenance costs and delivery models and recommend a maintenance structure and service delivery model for the new housing company.

The Organizational Design and the Property Management studies are fully funded by the Amalgamation Office, the review of Maintenance and Technical Services Operations has been fully funded by the Housing Company.

A brief summary of the three studies follows:

1. Amalgamation Organization Design and Restructuring of Services

The purpose of this study is achieve a detailed organizational design of the new housing company consistent with the vision adopted by the Board of Directors earlier this year. In addition, the consultants will investigate alternative delivery models as required by the City of Toronto's CAO and City Council.

Phase 1 Cdevelopment of organizational design (by 26.10.98)

• service delivery design options for the organization and assistance in its implementation.

Phase 2Cdetermination of accountability and relationship between the City and the New Housing Company - Memorandum of Understanding with Shelter and Housing Support Services Division(by 23.11.98)

2. Review of Property Management Services

The purpose of the study is to review the property management operations of MTHCL and Cityhome and to make recommendations as required for the organizational and operational aspects of the property management function in the new company.

• undertake a detailed evaluation of the property management function as currently performed and to make recommendations with regard to the most cost effective manner of providing these services in a combined operation.

• undertake a detailed comparison between Cityhome and MTHCL in relation to each other and also in relation to private sector property management benchmarks. The study will provide a set of comprehensive recommendations outlining the areas where improvement is needed and will also provide detailed and specific recommendations for improvement, with regard to the most cost effective manner of providing these services, while considering effectiveness and value criteria.

• the study will also provide a survey/assessment tool for periodic monitoring after the completion of this assignment to track user satisfaction (building staff, tenants, and other staff).

The evaluation of property management services will include:

• Identification of Property Management Services
• Assessment of the Cost of Property Management Services
• Examination of the current ways market units are rented to prospective tenants
• Commentary on the property management support services currently performed at the District level.
• A study of management and administration of building staff
• Identification of labour issues
• Analysis of the management of the commercial portfolios
• Analysis of the private sector per-unit costs derived above into the "manageable cost study" format for overall expenditures excluding mortgage payments and utility costs, according to the methodology used in the 1995 Price Waterhouse "Large Provider Manageable Cost Study"

3. Review of Technical Services and Maintenance Operations

The purpose of the review is to make a detailed inventory and evaluation of the maintenance and technical services functions currently performed in each organization, including a comparison between Cityhome and MTHCL in relation to each other and also in relation to private sector maintenance management benchmarks. The review will also develop cost-effective service delivery design options for maintenance and technical services.

The review will include:

• Assessment of general operational approach
• Assessment of the Recurring Maintenance System
• Assessment of the Preventative Maintenance System
• Review of grounds maintenance function
• Assessment of the provision of technical services and capital work project management
• Assessment of the goods and services procurement process
• Assessment of after hours emergency calls system
• Assessment of the current maintenance information systems
• Establishment of private sector property management benchmarks for maintenance and technical services

Conclusion:

It is important to note the context in which these studies are being undertaken. Cityhome and MTHCL face significant cost pressures. There is a pressing need to determine the most effective approach to delivering property management and maintenance services, including options to contract services to third parties. The studies underway will assist in developing a proper understanding of the current cost structures, and the comparative value of services within the private sector.

It is important that the studies provide the housing company with an identification of the main cost drivers for these services and a better knowledge of comparable "apples to apples" private sector costs. Cost comparisons with the private sector are complex, as there is a need to factor in the nature of the social housing business, which differs significantly with private sector property management. The information generated by these studies will help us to design the most appropriate organizational structure that we can to respond to this new economic and local environment and it will assist us in bringing our operating costs down and provide a accountability framework for property management functions.

Chairman of the Board of Directors

City of Toronto Non-Profit Housing Corporation and

The Metropolitan Toronto Housing Company Limited

Chief Operating Officer