TABLE OF CONTENTS

REPORTS OF THE STANDING COMMITTEES

AND OTHER COMMITTEES

As Considered by

The Council of the City of Toronto

on October 1 and 2, 1998

STRATEGIC POLICIES AND PRIORITIES COMMITTEE

REPORT No. 18

1Compliance Audit of Election Campaign Finances of a Candidate

2Developing Council's Strategic Plan

3The 2008 Toronto Olympic Bid - October, 1998 Update Report

4Development of the Municipal Grants Policy

5Audit Division Restructuring and Staff Redeployment - Update

61997 Over-Expenditure - Information Technology Services Division- Former City of Toronto

7Use of Long Term Consultants

8Progress Report on Amalgamation

9Response to Bill 56, the "Greater Toronto Services Board Act"

10Invoices from Province for Social Housing

11Children's Oncology Care of Ontario Inc.(Ronald McDonald House)- 356 Dundas Street West - Ward 24

12Toronto Atmospheric Fund (TAF) - Capital Reserves

13June 30, 1998 Operating Budget Variance Report

14Business Case Review of the "Works Best Practices Program"

15Basement Flooding Problems in the York Community

16Implementation of a 100 Percent Biosolids Beneficial Use Program at the Main Treatment Plant

17Toronto District Heating Corporation

18Service Level Harmonization

19Installation of a Temporary Pedestrian Crossover-

Walmer Road, North of Bloor Street West (Ward 23 - Midtown)

20Ontario Lottery Corporation - Advance Funding Program

21Transfer Plan for Child Care Services and Adjustments to Child Care Support for Ontario Works

22Alterations and Additions to Ted Reeve Arena

23Contract No. T-47-98: F.G. Gardiner Expressway -

Saulter Street to Leslie Street, Substructure Repairs

24Toronto Transit Commission Confirmation of Additional Project Approval- Garage Subsurface Investigation and Remediation Program

25Toronto Transit Commission Confirmation of Additional Project Approval- Roofing Rehabilitation Program

26Toronto Transit Commission - Procurement Authorization- Excavation and Paving 1998 Surface Track Program

27Millennium Task Force

28Governance of Toronto Hydro-Electric Commission

29Other Items Considered by the Committee

City of Toronto

REPORT No. 18

OF THE STRATEGIC POLICIES AND PRIORITIES COMMITTEE

(from its meeting on September 24, 1998,

submitted by Mayor Mel Lastman , Chair)

As Considered by

The Council of the City of Toronto

on October 1 and 2, 1998

1

Compliance Audit of Election Campaign Finances

of a Candidate

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends that the City Solicitor be requested to commence legal proceedings as set out in the confidential report (September15,1998) from the City Solicitor, which was forwarded to Members of Council under confidential cover, and that the City Auditor be directed to lay the information to begin the legal proceedings.

(City Council on October 1 and 2, 1998, had before it, during consideration of the foregoing Clause, a copy of a confidential report (September 15, 1998) from the City Solicitor, addressed to the Strategic Policies and Priorities Committee, entitled "Compliance Audit of Election Campaign Finances under the Municipal Elections Act, 1996," such report to remain confidential in accordance with the provisions of the Municipal Act.)

(City Council also had before it, a copy of a confidential report (September 14, 1998) from the City Clerk, addressed to the Audit Committee, embodying a report dated August 28, 1998, from the City Auditor entitled "Compliance Audit of Election Campaign Finances of a Candidate", such report to remain confidential in accordance with the provisions of the Municipal Act.)

2

Developing Council's Strategic Plan

(City Council on October 1 and 2, 1998, amended this Clause by adding thereto the following:

"It is further recommended that the Striking Committee be advised of Councillor Johnston's interest in being appointed to the Council Reference Group.")

The Strategic Policies and Priorities Committee recommends the adoption of the report (September 18, 1998) from the Chief Administrative Officer:

The Strategic Policies and Priorities Committee reports having requested the City Clerk to canvass members of Council for their interest in being appointed to the Council Reference Group, and present a list of such members to the Striking Committee for consideration.

The Strategic Policies and Priorities Committee submits the following report (September18,1998) from the Chief Administrative Officer:

Purpose:

A Strategic Plan is Council's collective vision for the new City. It describes Council's leadership role in the community and global priorities for the corporation. Strategic planning is a natural next-step in moving the City out of transition and into a period of city-building. This report seeks approval for the process to develop Council's Strategic Plan for the City of Toronto.

Financial Implications:

There are no financial implications arising from the recommendations in this report.

Recommendations:

It is recommended that City Council:

(1)adopt the strategic planning process outlined in this report;

(2)establish a Council Reference Group to assist in guiding the strategic planning process, reporting to the Strategic Policies and Priorities Committee as required; and

(3)authorize the appropriate City Officials to take the necessary action to give effect thereto.

Reference:

At its meeting of May 13 and 14, 1998, Council adopted the report on the corporate management framework which described a hierarchy of planning within the corporation (strategic plan, multi-year program plans, annual operating plans and budgets, and employee performance development and appraisal). This report included recommendations directing the CAO to report on terms of reference for a strategic planning process, including Council member involvement and coordination with other planning initiatives.

Why is Strategic Planning Important?

All successful enterprises have some form of strategic plan. Strategic planning allows Council to assess what the City is like now and explore what we want the City to be like in the future, how we get there, and how we measure progress in achieving our goals. The Strategic Plan helps Council make decisions on wide-ranging and complex issues. It establishes directions, which can be adjusted over time, that address key questions about the future state of the City, for example:

(a)What are Council's values? Do they reflect those of the community?

(b)How do we maintain these values during times of fiscal restraint?

(c)What makes this a healthy City? Are there areas where quality of life should be enhanced?

(d)What makes this City prosper?

(e)How do we ensure that people who need help receive it?

(f)How do we ensure that diversity is recognized and respected?

(g)How do we ensure meaningful citizen participation in government?

(h)How do we make tradeoffs among competing demands while supporting the City's goals?

In answering such questions it helps to define the role of the corporation, and the requirements of our other partners, in achieving the goals and strategic directions established for the City. A Strategic Plan tells staff what is important to Council. An overall Strategic Plan provides context and direction for the preparation of multi-year program plans and annual operating plans and budgets.

It is timely for Council to develop a Strategic Plan now. As we move through the stages of implementing amalgamation, Council must begin to establish priority directions to guide its decision making. This is a first attempt, not exhaustive and not the final word. Strategic planning is an iterative process, and the plan will be reviewed and renewed during subsequent terms of Council.

How Do We Proceed?

(1)Coordination with Other Planning Initiatives

Major sectoral planning initiatives are also underway which directly relate to Council's Strategic Plan. These include a new official plan, an environmental plan, a social development strategy, and an economic development strategy. The work of these sectoral planning initiatives will be coordinated with Council's Strategic Plan. (Refer to Appendix A for an illustration of key linkages.)

While different members of Council are involved in different initiatives, all Councillors will be involved in the Strategic Plan and will bring to the strategic planning work groups the perspectives of the sectoral initiatives. The expertise and resources built into the sectoral planning initiatives will also be available to the Strategic Plan exercise. For example, the ideas and advice from the sectoral plans will be presented directly to the relevant strategic planning work groups. Staff involved in the sectoral plan initiatives will be included in the staff team to support the development of Council's Strategic Plan.

A common environmental scan exercise is planned to meet the needs of the Strategic Plan as well as the official plan and some of the sectoral plans. Public consultations are being conducted through the task forces and sectoral plan initiatives, and the input they receive will directly inform the strategic planning process.

(2)Council Member Participation

The strategic plan reflects Council's collective vision for the City, and must be led by Council. All members of Council should participate in the strategic planning sessions ranging from plenary sessions for a visioning exercise to smaller workshops to develop strategic directions.

The strategic planning timetable is ambitious and will involve all Councillors directly. The scope of the exercise and number of participants require a mechanism for political guidance. The mandate of the Strategic Policies and Priorities Committee (SPPC) includes developing a mission statement and strategic plan for the City. Therefore, it is recommended that 3 or 4 members of Council be designated to serve as a Council Reference Group for the strategic planning process, and that the Council Reference Group report to SPPC as required.

The Council Reference Group will assist in guiding the overall exercise including the design and format for the various strategic planning sessions, assist in integrating goals and strategic directions, and review the preliminary drafts of the Strategic Plan. The Council Reference Group will meet informally to advise staff throughout the process.

(3)Other Inputs

At the staff level, the Chief Administrative Officer will lead a senior management Coordinating Committee for the Strategic Plan. The Coordinating Committee will coordinate the work program, liaise with the Council Reference Group, and provide direction to the Staff Working Group.

A small Staff Working Group will be led by the Corporate Policy and Healthy City Office, and will include representation from various departments to achieve cross-representation with the sectoral planning initiatives, particularly the social, environmental, economic and official plans. The Staff Working Group will conduct research and analysis, provide information and develop options, coordinate the strategic planning sessions, and prepare a consolidated draft plan.

Key senior managers from across the corporation will participate throughout the strategic planning process. Other employees in the various program areas can participate through related program specific exercises. Senior managers will be requested to conduct these exercises in advance of their own participation in the formal strategic planning process. External resources may be employed during the process, if required, to complement internal resources and expertise.

(4)Overview of the Process

The strategic planning process is intended to facilitate visioning and development of strategic directions. This process will explore policy questions affecting the City, identify key result areas where change or improvement is desirable, develop indicators to monitor progress, and ensure that the various planning initiatives for the City are integrated.

The strategic planning process will involve several steps, based on common models for strategic planning. A series of specific activities to implement this process will be designed by staff and discussed with the Council Reference Group, and may include facilitated workshops, presentations, speakers, study tours, circulation of the draft plan, and communication of Council's vision and directions for the City. The steps in the general process are summarized below (refer to AppendixB for a conceptual illustration of the process):

(a)situation analysis

(i)environmental scan and selective research and consultation

(ii)SWOT analysis (strengths, weaknesses, opportunities, threats)

(b)visioning

(i)vision statement

(ii)values

(c)key result areas

(i)defining goals (outcomes)

(ii)defining strategic directions (ways of getting there)

(d)analysis and refinement

(i)integrating goals and strategic directions

(ii)reviewing implementation issues (priorities, measurability, monitoring process)

(e)preparation of draft strategic plan

(f)circulation of draft plan

(g)Council adoption of final strategic plan

(h)communication of Council's Strategic Plan

Once the Strategic Plan is approved, the implementation and monitoring processes outlined in the plan will be designed. This will include implementation strategies, a process for monitoring and reporting on progress, and a process for periodic review and renewal of the plan.

(5)Outputs and Timeframes

The strategic planning timetable covers a 9 month period following Council approval to proceed. Phase one of the process (steps (a) and (b)) would be conducted before the end of 1998. The second phase (steps (c) and (d)) would be conducted during the first quarter of 1999. The target for compiling a draft plan (step (e)) is the end of May 1999.

The Strategic Plan will be presented for Council's approval in June of 1999 (step (g)), subject to the timetable for circulation (step (f)). Communication of Council's vision and strategic directions will occur after final approval of the Strategic Plan by Council. Completing this important process will launch Council's year 2000 financial and program planning activities.

Conclusion:

Council's Strategic Plan is the keystone for all city-building initiatives. The first Council of the new City of Toronto has a unique and historic opportunity to create a collective vision to guide the City as it enters the new millennium.

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The Strategic Policies and Priorities Committee also submits the following communication (September23,1998) from Councillor Jack Layton:

Recommendation 2 of the Report to Committee is for the establishment of a Council Reference Group to assist in guiding the Strategic Plan process, reporting to the Strategic Policies and Priorities Committee as required. I would like to volunteer for this group.

The Report highlights the importance of coordinating with other Planning initiatives, specifically the environmental plan being developed by the Environmental Task Force. As Chair of the Task Force, my membership on the Council Reference Group would help facilitate this coordination.

As well, as Chair of the Council Strategy Committee for People Without Homes and Co-Chair of the Advisory Committee on Homeless and Socially Isolated Persons. I can facilitate coordination with these initiatives and the City's Strategic Plan.

(Copies of Appendix A titled, "Strategic Planning at 2 Levels " and Appendix B, titled "The Strategic Planning Process", referred to in the report, were circulated to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting of September 24, 1998, and a copies thereof are on file in the office of the City Clerk)

3

The 2008 Toronto Olympic Bid - October, 1998 Update Report

(City Council on October 1 and 2, 1998, adopted the following recommendation:

"It is recommended that the report dated October 1, 1998, from the Commissioner of Economic Development, Culture and Tourism, entitled '2008 Toronto Olympic Bid - Supplementary Report', embodying the following recommendations, be adopted:

'It is recommended that City Council endorse the additional appointments to the Board of Directors of the 2008 Olympic Bid Corporation (TO-Bid), those persons named in Appendix1 to this report'.")

The Strategic Policies and Priorities Committee submits, for the information of Council, the following report (September 2, 1998) from the Commissioner of Economic Development, Culture and Tourism and reports having received same:

Purpose:

(1)To update Council on Toronto's bid to host the 2008 Olympics.

(2)To begin to respond to the various Council motions of March and July, 1998 when the Olympic bid was previously considered by Council.

Financial Implications:

None arising from this report.

Recommendation:

It is recommended that this report be received for information.

Comments:

This report is the first in a series of regular update reports to Council on Toronto's bid to host the 2008 Olympics. Appendix 1 provides an overview of the first phase of the public consultation process now underway. Appendix 2 outlines the responses to date to Council motions of March and July, 1998. Finally, Appendix 3 describes the results of the inaugural September 1, 1998 meeting of the TO-Bid Board. A report on additional names proposed to be added to the TO-Bid Board and the Committee structure and membership is expected to be available at the October 1, 1998 Council meeting for Council's endorsement.

Contact Name:

Joe Halstead, Commissioner, Economic Development, Culture & Tourism,

Telephone:(416) 392-6188;Fax:(416) 395-0388

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Appendix 1

Public Consultation Overview

Staff were asked to initiate a public consultation process as a result of motions passed at the March4, 5 and 6, 1998 City Council, in its approval in principle of the City of Toronto bid to host the 2008 Olympic Games. The first phase of the consultation is now underway.

Following the adoption of the July 7, 1998 report to the July 22, 1998 Community Councils, during the week of August 17^th, over 3000 brochures were sent out to a variety of community groups and organizations, inviting them to participate in the consultation process. The list of organizations is extensive and includes:

285 - Media

283 - Local Sports/Recreation Groups

368 - Cultural Groups

279 - Community Centres, Recreation Centres and Libraries

668 - Community Associations and Ratepayer groups

56 - BIA's

742 - Housing and Poverty Advocates

36 - Labour organizations

Councillors were canvassed for their assistance in providing names of organizations and several Councillors gave names to staff for brochure distribution.

Posters, inviting participation, were provided to all community centres, recreation centres and libraries throughout the City.

Information kits were prepared for members of Council, Commissioners, and Level 3 Directors which included copies of the information brochure, posters, and other background information. This same information was also sent to the new TO-Bid Board members.

Special Community Council meetings have been set up for September and October, 1998 and planning is underway for the focus groups in November and open houses in December, all as set out in the July 7, 1998 report to the Community Councils.

Advertisements were placed in over 20 newspapers, including 2 Toronto dailies, as well as a broad selection of ethnic and local newspapers. This was augmented by a press release and public service announcements sent out to over 200 media contacts.

Staff from the City Olympic Office have begun to respond to the telephone calls coming into the office. A special voice messaging system has been set up to respond to calls from the public.

Finally, the City's Website now includes information related to Toronto's bid.

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Appendix 2

Response to Council motions of March and July, 1998

For ease of reference, the Council motions of March and July, 1998 have been categorized into broad issue-related categories as set out in the following sections. These categories are also being used as the basis for the focus groups and the development of the guiding Olympic principles.

2.1Social Equity:

Housing and Construction Consultation on Olympics Accommodation:

Council directed TO-Bid to work with all stakeholders in the housing and construction industry to develop options to ensure that the opportunities for long term affordable housing are maximized from the accommodation to be built for the Games and that particular attention be paid to ensure that all accommodation is constructed to the highest environmental standards possible.

Since April, 1998, TO-Bid staff have continued to meet and consult with many groups and individuals interested in the accommodation that would need to be built for the Olympic Games.

Initial discussions have focused on four specific approaches: building the housing in time for the Olympics; building the housing in advance of the Games; building the housing even if the Olympic bid is not successful; and working to support and develop housing pilot projects prior to the Olympics.

Detailed work will continue on the feasibility of all of these options throughout the remainder of 1998 and beyond. The initial focus of this work is to identify and consider the issues to be addressed in constructing the housing prior to the Olympics.

Consultations have also begun with environmental groups. There is a high degree of interest in developing the Olympic housing using the most up-to-date and environmentally friendly technologies and approaches.

Many of the groups consulted see the construction of new housing and opportunities for affordable housing as being a significant legacy of both the bid and the Olympic Games.

The work on the Olympic Village and housing options is being undertaken by the Olympic Village and Waterfront Committee of the TO-Bid Board, and supported by a group of experts in the field of housing planning and construction.

Affordable Housing Strategy:

Staff were asked to report, in consultation with the Advisory Committee on Homeless and Socially Isolated Persons, on issues and mechanisms to ensure the Games do not negatively impact on the homeless, isolated persons and tenants. Council also asked for a report, to be submitted to the Economic Development Committee this fall, on a by-law and proposed strategy to ensure full protection for tenants and homeless persons during the hosting of the Olympic Games, particularly in the areas adjacent to potential facilities such as South Parkdale.

To facilitate discussion, the TO-Bid staff prepared a paper identifying the primary accommodation and housing challenges of the Olympic Bid. The paper identifies four areas of concern, and potential strategies to deal with them, as follows:

(i)Dealing with Toronto's shortage of affordable housing - The development of Olympic accommodation is seen to be an opportunity to create a legacy of permanent affordable housing in the city. Strategies to achieve this include involving federal and provincial governments in housing initiatives, exploring innovative financing schemes such as cross-subsidization. Options include trying to create the necessary housing prior to the Games.

(ii)Tenants could be displaced from their homes through upgrading and economic eviction, conversions of buildings, and demolitions. Some strategies identified include "early warning" monitoring of the rental housing market, strengthening of tenant protections prior to, during and after the games, and special support for vulnerable tenants to avoid evictions.

(iii)Homelessness could increase as a result of displacement from vulnerable housing such as rooming houses, boarding houses, hotels and motels; the rights of street people need to be protected - Shelter and services available to homeless persons should be enhanced, and measures should be put in place to reduce the risk of displacement from hotels, motels, rooming and boarding homes. Specific security guidelines should be put in place to avoid harassment of homeless persons or "street sweeps".

(iv)Avoiding negative impacts on residential neighbourhoods adjacent to Olympic venues - Strategies could include Neighbourhood Olympic Plans, developed in consultation with affected communities, housing and commercial rehabilitation programs and the establishment of strict controls on development in affected neighbourhoods. Each Olympic facility will need a plan to minimize its local impact.

The paper was presented to the Advisory Committee on Homeless and Socially Isolated Persons and they requested that a meeting of interested individuals and groups be convened to discuss in more detail the previous Olympic experience in dealing with these issues. A meeting is now being arranged for late 1998 or early 1999. At Council's request, a preliminary report on a proposed strategy to protect tenants and homeless persons during the Olympics will be presented to the Economic Development Committee in the Fall. The City Solicitor will be providing input in terms of legislation (e.g. by-laws) to support the strategy.

Reinstating Rent Control:

The CAO was asked to report on the motion that the 1992 Rent Control Act, Landlord and Tenant Act, and the Rental Housing Protection Act, be re-instated for the City of Toronto and preferably for the whole Province until at least the year 2010.

A 1994 Olympics and Housing report from Sydney, Australia, reviewed the impact of hosting "hallmark events" (such as Olympics) for six international cities. In summarizing the housing impacts, the report found that there was significant pressure on the private market to increase rents and convert rental units to other uses (notably shorter term tourist type accommodations). It will be critical that Toronto learns from these experiences and legislative measures be put in place to reduce these impacts.

There are limited tools available under the current provincial legislative regime. The Tenant Protection Act, 1997 (TPA), which came into force June 1998, replaced both the Landlord and Tenant Act (LTA), and the Rent Control Act (RCA). In addition, the Rental Housing Protection Act (RHPA) was repealed.

a)Rent Control:

The Tenant Protection Act, 1997, (TPA) permits landlords to set a new rent when a new tenant moves into the unit (called vacancy decontrol), regardless of the prior rent history of that unit. Previous rent control legislation set a limit on the maximum rent that could be charged for a unit; and this limit applied whether or not there was a new tenant, and regardless of when the unit was first occupied as a rental property. In addition to vacancy decontrol, the new Act exempts new rental units (first rented after June 1998) from rent setting rules, such as having rent increases limited to the annual rent control guideline. The TPA also includes mechanisms for making the eviction process faster than was previously possible under the replaced LTA such as making the notice periods shorter.

Because the TPA has only been in effect since June 1998, we do not yet know its impact on the rental market. We do know that based on experience in other cities, that the Olympics will create pressure for increased evictions and increased rents. Unless other controls are put in place by 2008, under the TPA landlords would have the means to substantially increase rents for sitting tenants occupying units which came onto the market during the prior ten years, and incentive to evict sitting tenants of older units so that rents could be increased.

However, reinstating the Rent Control Act or the Landlord and Tenant Act in 2008, in their entirety, may not be practical or appropriate. Now that the TPA is in force, substantial changes have been made. For example, landlord and tenant issues are now addressed through the Ontario Rental Housing Tribunal, not the courts, and the Rent Registry system, which maintained maximum rent levels for all units in Ontario, is no longer operating.

In addition, even if these Acts were reinstated, they still may not provide a high enough level of protection. The Olympics and Housing study made note of stronger mitigation measures such as requiring a six month notice of eviction or rent increase, staying the eviction for 90 to 150 days after the order is granted, and putting some limit on the size of allowable rent increases; although none of these measures were actually introduced.

It is clear that some type of regulatory intervention will be required to protect tenants, if and when Toronto wins the Olympic bid. It is proposed that the overall strategy on housing and homelessness for the 2008 Olympic bid include recommendations for regulatory intervention.

b) Rental Housing Protection:

The Rental Housing Protection Act (RHPA) provided municipalities with significant authority to restrict the loss of rental housing. The RHPA had permitted municipalities to make decisions about applications to convert rental properties to condominium, equity co-operative, commercial or other uses, demolition of rental housing, renovation/repair of rental housing which would require vacant possession, and severance of rental properties. With proclamation of the TPA, applications by the landlord to convert, demolish, renovate or sever rental property are no longer required.

Municipalities do have some powers available to them under the Planning Act, or related legislation; notably the ability to implement official plan policies relating to conversion to condominium and demolition control powers. However, there does not appear to be any clear authority (outside of zoning or property standards by-laws), for the City to restrict renovations/repairs, severances or conversion of rental properties to other uses, such as commercial. At this time, the Commissioner of Urban Planning and Development is preparing a report on Official Plan policies related to the conversion and demolition of rental housing, for consideration by City Council this fall.

Since the RHPA was primarily administered by the municipality, there should be no impediment to introducing similar legislation for the Toronto area for 2008, should we win the bid and the Province agree to the measure. However, Council may want to recommend even stronger measures. For example, the RHPA did not apply to complexes with less than five units, and since boarding homes and rooming houses are especially at risk of conversion to tourist hotels according to the Olympics and Housing study, it may be appropriate to remove this exemption.

It is clear that some type of regulatory intervention will be required to protect rental stock, particularly lower cost units, should Toronto win the 2008 Olympic bid. Such intervention would require enabling legislation from the Province. It is proposed that the overall strategy on housing and homelessness for the 2008 Olympics include recommendations for regulatory intervention.

Privatization of Social Housing:

The CAO was asked to report on the motion that the Federal and Provincial governments suspend all privatization of co-operative apartments and units and other forms of social housing within the GTA until at least the year 2010.

Toronto has a significant supply of affordable social housing, which includes non-profits as well as co-operatives. Should Toronto win the bid, pressure on existing affordable housing will increase, and this stock should be protected. Under current policies, with the possible exception of a few scattered units, ownership of social housing is not being privatized. With the devolution of social housing, municipalities could be managing these programs and in a position to formulate their own policies on privatization within the next 1-2 years.

Currently the Province is working on reforms to the way the social housing programs are administered, and eventually administration will be passed on to the City. The Provincial Social Housing Committee is expected to release its draft recommendations for reform shortly, for consultation with all interested parties prior to implementation by the Minster in the Fall. The discussions to date suggest that with the transfer of administration, the City will be able to formulate its own policies about privatization.

Until that time, the sale of scattered units by the Metro Toronto Housing Authority (MTHA) will be rare under a new policy adopted by the Ontario Housing Corporation. This policy prohibits sale of units (except in extreme situations supported by a business case) until the turn-over rate is equal to or less than the waiting-list number for that type of unit. For example, if there were 1,000 three-bedroom units and the turn-over rate were 10 percent, sale of three bedroom units would be restricted unless the number of families on the waiting list for those units was 100 or less. There is no provincial or federal policy in place for sale of social housing units. Where a housing provider has failed to comply with the operating agreement, there is an option to sell the property privately as a last resort; however the likelihood of sale is rare and, when it has occurred, the assets have instead been transferred to another social housing provider.

It appears that further loss of social housing units will be limited in the near future as a result of OHC's recent policy change, and existing social housing policies. Eventually, and hopefully by the time the bid results are known, the City will have control over whether social housing stock can be privatized. It is proposed that the overall strategy on housing and homelessness for the 2008 Olympics include recommendations about municipal policies to protect social housing stock, in conjunction with the GTA regional municipalities

Unit Market Assessment:

The CAO was asked to report on Councillor Walker's motion regarding Unit Assessment (U.A.) given the potential for extreme instability in assessment because of redevelopment related to the Olympic Games.

At its meeting on July 23, 1998, City Council adopted a current value assessment implementation plan, which locks in commercial and industrial assessments for three years. During those three years, commercial and industrial tax increases will be capped at 2.5 percent per year and no tax increases will occur because of speculative increases in land values. Council also adopted a staff recommendation that comprehensive tax policies be developed before the return of 1999 current values of taxation in 2001.

In the future, Council could direct staff to review nonmarket value alternatives to current value assessment such as unit assessment. This review could be incorporated in the three year work plan leading up to the next reassessment cycle in 2001. However, it should be noted that substantial resources would be required to undertake such a review and it is not anticipated that Provincial assistance would be forthcoming.

Social Impact Assessment Process and Consideration of a Social Investment Fund:

TO-Bid staff were directed by Council to work with social planning agencies and City staff to determine the best method of developing a full social impact assessment process for the Games and that it be prepared within the next six months. In addition, TO-Bid staff were directed to work with social planning agencies to consider the opportunity and viability of establishing a social investment fund from the Games -- to be provided within the context of a financially responsible Games.

TO-Bid staff have undertaken a number of steps to respond to Council's directions on these two issues.

To facilitate the discussions, TO-Bid staff have conducted a preliminary literature review on social impact assessments and developed a list of issues to be considered. Discussions have also been held with the author of the 1990 "Stage One Social Impact Assessment" conducted during Toronto's previous bid for the 1996 Olympics.

An initial meeting between TO-Bid, the City of Toronto Social Development and Administration Division, and the Community and Social Planning Council of Toronto was held on August 31, 1998, to discuss the social impact assessment process and the social development fund. At this meeting participants discussed the need for the social impact process to engage the community in identifying both positive and negative social impacts of the Olympics as well as the opportunity to develop concrete strategies to mitigate negative impacts and find ways to distribute the social and economic benefits to all members of the community.

Further details concerning the work to be undertaken on the social impact assessment and the social investment fund will be provided in the next update report.

2.2Financial Impacts:

At its meetings in March and July, 1998, City Council directed staff to respond to a number of motions relating to, among other things, financial matters. Specifically, Council directed staff and TO-Bid to develop financial strategies that ensure the City is shielded from financial liability in both the Bid process itself and in staging the Games in the event that the City's bid is successful.

The purpose of this section is to inform Council of the work undertaken to date and workplan presently underway to meet the foregoing objectives.

Bid Stage:

The City has entered into a tri-party agreement ("Bid City Agreement") with the Canadian Olympic Association (COA) and the Bid corporation (TO-Bid). That agreement sets out the relationship of the three parties, their respective roles and responsibilities relating to the bid and addresses transitional matters that will follow if the City is awarded the Games.

The agreement also contains a number of provisions that control and in some instances restrict the financial operations of TO-Bid. These provisions effectively reduce to the greatest extent possible the City's financial exposure in the pursuit of the bid.

Salient provisions of the agreement include:

(i)The express prohibition on TO-Bid from borrowing money or spending more money than it has raised.

(ii)The adoption by TO-Bid of a budget and strategic plan.

(iii)The requirement on TO-Bid to indemnify the City from any and all commitments, losses or expenses arising as a result of the agreement and to obtain insurance upon the City's request.

(iv)The right of the City Auditor to inspect the books and records of TO-Bid.

City staff have held a number of meetings with TO-Bid staff since the execution of the Bid City Agreement. The purpose of these meetings was to develop an interim budget for the Bid. The interim budget (July to October) is intended to place controls on expenditures and financial commitments until such time that the newly created TO-Bid is operational and that its board of directors have had an opportunity to develop a budget and strategic plans.

The interim budget was developed to ensure that financial controls and an orderly transition of financial matters are in place until the TO-Bid corporation is operational.

Financial Plan for the 2008 Games:

The draft Bid Book contains financial estimates for the staging of the 2008 Games. The estimates were developed by City and BidCo staff in consultation with KPMG.

Revenue estimates were primarily based upon firm contractual commitments for broadcast rights, third party expert analysis for ticketing revenue, and projections based upon Atlanta actuals for sponsorship and license revenue.

Cost estimates are primarily divided into two categories: operating and capital. Operating cost estimates are based upon detailed analysis of the actual operating expenditures incurred for the hosting of the Atlanta games.

Capital costs are costs estimated for the construction of new and expansions to existing facilities. The cost estimates were prepared by PCL Contractors Inc. and are based on analysis of proposed venues.

Adjustments were made to account for exchange rates, inflation and discount rates so that the financial projections reflect 1998 Canadian dollars.

Work is currently underway to refine the financial projections and strategies in the following areas:

(i)More detailed analysis of timing of cash flow projections.

(ii)Exchange rate differentials and sensitivity analysis.

(iii)Further detailed analysis of operating costs based upon Sydney 2000 budget estimates and costs incurred to date.

(iv)Rigorous analysis of capital cost estimates prepared by PCL.

(v)Mechanisms for financing the costs of the Olympic and media villages.

(vi)Assessing the nature and extent of Federal and Provincial financial support and guaranties.

Preliminary meetings have also been held with staff from the offices of the Honourable David Collenette, Sheila Copps, Lloyd Axworthy and the Prime Minister. These meetings were initiated in order to brief Federal officials on the City's Olympic Bid and ensure a coordinated approach.

It is our understanding that a Cabinet submission will outline a process to determine the financial obligations and desired infrastructure improvements to be made by the federal government.

2.3Transportation:

Council raised a number of transportation issues related to the Olympics, such as transit for the Olympics, consultation with the Gardner/Lake Shore Task Force and transportation legacies of the games and direct staff to report back in six months. Therefore, transportation issues will be addressed in detail in the report to the November 25th, 1998 Council meeting. The following summarizes the action to date.

City Olympic Office staff initiated discussions with staff from Works and Emergency Services, Urban Planning and Development Services, the Toronto Transit Commission, and GO Transit regarding the status of the bid and the transportation issues which were raised by Council in March and July, 1998. An overview of the bid status and the transportation issues raised to date is being prepared for the Gardiner/Lake Shore Task Force and the City Cycling and Pedestrian Committees. These groups will also be invited to participate in the focus groups in November.

The transportation issues raised by the bid for the Olympics fall into several broad categories:

(i)The Transportation Operations Plan to accommodate the athletes, dignitaries, spectators and visitors during the Olympics and Paralympics.

(ii)Transportation plans for each of the venues and the surrounding area, including the athletes' and media villages, both during the Olympics and as permanent facilities.

(iii)Transportation accessibility to satisfy the transport needs of people with disabilities and particularly paralympic athletes and spectators.

(iv)Transportation infrastructure priorities which could enhance the bid.

Phase 1 of public consultation, developing principles to guide the Olympic bid, includes a focus group in November, specifically on transportation which will involve transportation advocacy groups, operators and agencies and will include representatives of the disability community.

The City Olympic Office will work closely with other City departments and agencies to coordinate transportation planning with TO-Bid and to address transportation issues as they are raised by Council throughout the bid preparation.

2.4Cultural Programming:

The Commissioner of Economic Development, Culture and Tourism was requested by Councillor Tzekas to submit a report to Council through the Economic Development Committee on the 2004 Cultural Olympiad and how City Council and the 2008 TO-Bid Committee can incorporate the concept of culture into the City of Toronto's Olympic Bid.

In response to this motion, staff from TO-Bid have already begun to coordinate efforts with respect to the 2000 Cultural Olympiad in Sydney, Australia and will make contact with representatives from Athens to ensure that the concept of culture is incorporated into the Olympic Bid in a manner consistent with both the experiences of the 2000 Olympics in Sydney and the 2004 Olympics in Athens.

2.5 Other Motions:

Coordination with Toronto 2000 Initiative:

The CAO was requested by Councillor Davis to investigate with the Board of Trade the issue of the City's participation in Toronto 2000 as a means of showcasing the City of Toronto as part of the Olympic bid process.

In response to this motion, staff met with representatives of the Toronto 2000 organization, and further meetings will be set up this winter to begin to coordinate the efforts of both initiatives. The year 2000 will be very important in terms of raising the profile of Toronto's bid to host the 2008 Olympics and the staffs of Toronto 2000, City Olympic Office and TO-Bid will ensure that opportunities for showcasing the City of Toronto's bid to host the Olympics will be maximized.

Diversity:

The CAO was requested by Councillor Davis to submit a report to the Economic Development Committee on issues related to ensuring diversity in the award of contracts, master licensing agreements, etc., which may include 'set asides' and/or other mechanisms to ensure economic participation in a successful Olympic Bid of minority-owned businesses.

With respect to this motion, all access and equity policies adopted by the former municipalities within Toronto are in effect in the new City until Council declares otherwise. As such, these policies are directly relevant to the City's current purchasing practices and will be referred to TO-Bid for application to their contract and purchasing activities. Staff will report back on this matter and discussions with TO-Bid as part of the next update report scheduled for the Strategic Policies and Priorities Committee meeting of November 18, 1998, and Council meeting of November 25, 1998.

Council Task Force:

The Commissioner of Economic Development, Culture & Tourism was requested by Councillor Ashton to submit a report to council through Economic Development Committee on the composition, mandate and Terms of Reference of a City Council Task Force to provide oversight and independent assessment in the areas of social and fiscal responsibility for the Olympic Games; the Members of such Task Force to be recommended by the Striking Committee.

Staff are continuing to work to respond to this direction and will report on this matter to the November 25, 1998, Council meeting as part of the next update report.

Relationship of the Bid to the City's Official Plan process:

The Commissioner of Urban Planning and Development Services was requested by Councillor Jones to submit a report to the Urban Environment and Development Committee on the possible impacts of the Olympic Bid on the new City of Toronto Official Plan process.

In response to this motion, a memo was sent to the Commissioner requesting that a response be coordinated to go to through Urban Environment and Development Committee to the same November 25, 1998 Council meeting at which the next update report will be considered.

City Solicitor's report on the Mayor's position:

The City Solicitor was requested to submit a report to the Economic Development Committee on the Mayor's ability to participate as the Chief Executive Officer for the City of Toronto given the composition of the Bid Committee.

The City Solicitor will be responding to this motion in a separate report to the October 1, 1998 Council.

Mr. David Hulchanski's June 24, 1998 Communication:

Council directed that the communication dated June 24, 1998 from Mr. David Hulchanski, Professor of Housing and Community Development be referred to several parties.

In response to this motion, Dr. Hulchanski's communication entitled "Housing and social Impacts of the Olympics: An Update from Sydney" has been forwarded to the TO-Bid Committee staff, the Commissioner of Community and Neighbourhood Services and the Homeless Advisory Committee.

Additions to Groups List:

Councillor Miller added several groups to the list of groups set out in the June 24, 1998, report.

In response to this motion, the Parkdale Tenants' Association, the Parkdale community Legal Services, Parkdale Intercultural Association, the Parkdale Liberty Economic Development Committee and the Parkdale Business Improvement Area groups were all send copies of the brochure and invited to participate in the public consultation process now underway.

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Appendix 3

Report on the inaugural TO-Bid Board meeting

The inaugural TO-Bid Board meeting was held on September 1, 1998. According to the Council direction, the meeting was open to the public and over 40 people attended in addition to the Board members, staff from TO-Bid and the City Olympic Office. The agenda for the meeting included adopting the Bid City Agreement, the Bid Corporation By-laws, and the committee structure and membership.

At the meeting, the Board confirmed the Bid City Agreement, adopted the Toronto 2008 Olympic Bid Corporation By-law, and endorsed the initial 17 members of the Executive Committee, (including as ex-officio members, the Mayor of the City of Toronto, the President of the Canadian Olympic Association, and the Chairman of the Bid). One member will be added to the Executive Committee following the planned expansion of the Board at its next meeting.

It is further planned that the Executive Committee will name the chairs of the 13 Board subcommittees. The subcommittee chairs, in turn, will collaborate in developing their respective committees' membership.

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The Strategic Policies and Priorities Committee also submits the following communication (September24,1998) from Michael Shapcott, on behalf of Bread Not Circuses Coalition:

Our Coalition is unable to attend today's meeting of the Strategic Policies and Priorities meeting at which the Commissioner of Economic Development Culture and Tourism will present an October Update Report on the 2008 Toronto Olympic bid. Therefore, I am requesting that this letter be circulated to all committee members for their information and action.

The obsessive secrecy of TO-Bid not only defies the basic principles of democratic accountability, but also is a violation of the letter and spirit of a direct motion of Toronto City Council. In July of 1998, on a vote of 46 to 6, Toronto City Council adopted a motion from Councillor David Miller that resolved that: "the Olympic bid be an open and public process" and that "TO-Bid hold open and public meetings except where matters require confidentiality" and that "TO-Bid fully disclose to City Council and the people of Toronto all budgets and financial statements".

Bread Not Circuses has made numerous oral and written requests to TO-Bid since January of 1998 requesting bid budgets and financial statements. In May, we also requested financial information from Mayor Mel Lastman and Commissioner Joe Halstead. Since the July motion requiring public disclosure of financial material, our Coalition has made several written and oral requests. Every request for financial information has been denied even though bid president David Crombie has publicly admitted that the committee's staff produces monthly cash-flow statements, among other financial materials.

We are asking that SPPC direct TO-Bid to comply with the specific direction of City Council and release the relevant financial information, as requested by Bread Not Circuses.

In addition, TO-Bid has made a policy decision that meetings of the important Executive Committee of TO-Bid will be held in secret. It appears that Messrs. Godfrey, Lastman, Hudson, Ginou, Halstead and other members of the committee do not wish to be publicly accountable for their discussions and decisions. These are not the only secret meetings. At the TO-Bid meeting in early September, Mr. Crombie publicly thanked Mr. Godfrey for chairing a series of secret meetings over the summer at which important decisions regarding the composition of TO-Bid were apparently made. Our Coalition has made several oral and written requests for information on meeting of TO-Bid. In the case of both the first full board meeting, and also the first Executive Committee meeting, we learned of the meeting dates from articles in the media rather than notices from TO-Bid responding to our specific requests.

We are asking that SPPC direct TO-Bid to comply with the specific direction of Toronto City Council to hold open and public meetings, including open and public meeting of its Executive Committee. As part of this request, we are asking that TO-Bid respond to specific requests from members of the public by providing proper notice of such meetings.

I want to remind members of the Strategic Policies and Priorities Committee that the 2008 Olympic Games if they are staged in Toronto, will be the biggest and most costly mega-project in the history of our city. Democratic accountability to the people and elected officials of Toronto has to be one of the foundations of the bidding process.

(City Council on October 1 and 2, 1998, had before it, during consideration of the foregoing Clause, the following report (October 1, 1998) from the Commissioner, Economic Development, Culture & Tourism:

Purpose:

To seek endorsement of the additional members to the Board of Directors to the 2008 Toronto Olympic Bid Corporation (TO-Bid).

Financial Implications:

None arising from this report.

Recommendation:

It is recommended that Council endorse the additional appointments to the Board of Directors of the 2008 Olympic Bid Corporation (TO-Bid), those persons named in Appendix 1 of this report.

Comments:

At its meeting on July 8, 9 and 10, 1998 Council endorsed 62 appointments to the Board of Directors. Further to a Council motion on July 8, 9 and 10, 1998, a number of nominees were forwarded to TO-Bid for consideration as additions to the Board of Directors. A consensus was reached between the City, COA and TO-Bid and the following additional appointments (Appendix1) are presented for endorsement.

Contact Name:

Joe Halstead, Commissioner

Economic Development, Culture & Tourism

Telephone: (416) 395-6188 / Fax: (416) 395-0388.

Appendix 1

Toronto Olympic Bid Corporation

Additional Board Members

(October 1, 1998)

4

Development of the Municipal Grants Policy

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendations of the Municipal Grants Review Committee embodied in the following transmittal letter (July 27, 1998) from the City Clerk:

Recommendations:

The Municipal Grants Review Committee on July 27, 1998, recommended to the Strategic Policies and Priorities Committee, and Council:

(i)the adoption of the report of the Commissioner of Community and Neighbourhood Services;

(ii)that consultation on the Municipal Grants Policy be as follows:

(a)through local Councillors, including initiatives such as questionnaries; and

(b)through solicited written submissions and meetings with stakeholders identified by staff and Councillors; and

(iii)that deputations on the Municipal Grants Policy be heard only at the Municipal Grants Review Committee; and that the necessary Bill be introduced at Council to give effect thereto, if necessary;

The Municipal Grants Review Committee reports, for information, having:

(1)requested the Commissioner of Community and Neighbourhood Services to:

(i)develop a questionnaire for Councillors to distribute to their respective communities, in order to achieve the broadest consultation possible; and

(ii)report to the Municipal Grants Review Committee on the feasibility of a University or private sector polling company undertaking a study, including the development of a questionnaire, as part of the consultation process on the Municipal Grants Policy;

(2)referred to the Commissioner of Community and Neighbourhood Services the communication dated June 9, 1998, from Councillor Frank Faubert; and

(3)requested the Special Committee to Review the Final Report of the Toronto Transition Team to give consideration to amending the Council Procedural By-law to provide for a more effective process for the hearing of deputations in an effort to eliminate duplication.

Background:

The Municipal Grants Review Committee had before it the following report and communication:

-(July 20, 1998) from the Commissioner of Community and Neighbourhood Services providing an overview of the work to date on the development of a Municipal Grants Policy; identifying key issues for consideration; providing a workplan for the remainder of the policy development process; and outlining recommendations in regard thereto; and

-(June 9, 1998) from Councillor Frank Faubert respecting policy development with regard to evaluation of grant applications.

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(Report dated July 20, 1998, addressed to the

Municipal Grants Review Committee from the

Commissioner of Community and Neighbourhood Services)

Purpose:

This report provides an overview of the work to date on the development of a Municipal Grants Policy, identifies key issues for consideration and provides a workplan for the remainder of the policy development process. Appendix "A" provides a brief description of the program reviews occurring within the various grants service areas.

Funding Sources, Financial Implications and Impact Statement:

N/A

Recommendations:

It is recommended that:

(1)the direction being taken in the development of a Municipal Grants Policy outlined in this report be endorsed;

(2)the workplan outlined in Appendix "D" be approved, with specific reference to when the Municipal Grants Review Committee will hear deputations regarding the Municipal Grants Policy;

(3)this report be forwarded to the City Task Forces addressing Seniors, Access and Equity, Community Safety, Children and Youth, and Homelessness for comment; and

(4) the appropriate City officials be authorized and directed to take the necessary action to give effect thereto.

Council Reference/Background/History:

Council approved the report entitled "Municipal Grants Review Committee" (Clause No. 15, Report No. 3 of the Strategic Policies and Priorities Committee) on March 4, 5 and 6, 1998, which established the Municipal Grants Review Committee and directed the Committee to oversee the development of a Municipal Grants Policy.

A three tier policy development structure was established, including: the Municipal Grants Review Committee to oversee the development of the Policy; the Grants Managers Workgroup to address issues of co-ordination and develop policy options for Committee consideration; and Service Area Review Groups to review individual grants programs and to plan for grants program delivery in 1999.

Comments and/or Discussion and/or Justification:

Policy Context:

The establishment of a Municipal Grants Policy at this point in the development of the new City is complicated by the fact that Council has not yet defined its key policy directions. Typically Council policy direction is articulated in a range of key documents including the Official Plan, Strategic Plan, Social Development Strategy, Environmental Plan, etc. Given the time frames required to develop these policies and the need for a Municipal Grants Policy to guide the provision of grants programs in 1999, the latter must be developed ahead of an overall Council policy framework.

Council has established a number of task forces to address specific issue areas or target populations such as Seniors, Access and Equity, Community Safety, Children and Youth, and Homelessness. It is anticipated that the work of the Task Forces will result in a range of recommendations related to municipal grants programs. Again, the timing of the reporting for task forces to Council is later than that of the Municipal Grants Review Committee (most task forces will be providing final reports late in 1998 or early 1999).

Given the challenges with respect to the timing of various City policy initiatives which may affect municipal grants programs and practices, the Municipal Grants Policy will require regular review and revision. In the longer term, it may be appropriate to review the Municipal Grants Policy regularly at the beginning of each term of Council.

Key Concepts:

Given the policy context noted above, it is useful to frame the Municipal Grants Policy within the City mission statement developed by the Toronto Transition Team. The draft mission statement is: "The government of the City of Toronto will promote, protect and support the economic, social, environmental and cultural strength and vitality of the City and its diverse neighbourhoods. It will provide accessible and accountable governance, leadership that brings people together, and responsive, affordable civic services." Flowing from this, the following key concepts can be used to guide the development of the Municipal Grants Policy:

(1)Civic Participation:

Strategic funding enhances the ability of communities to engage in partnerships with the City, which, in turn, facilitates community/resident input and participation in democratic governance.

(2)Community Capacity:

Strategic funding assists communities to locate, utilize and enhance existing talents, resources and infrastructures, and develop new ones. Further, funding enhances the ability of communities to develop and implement community appropriate responses to identified needs, changing needs, and the needs of newly arrived residents.

(3)Equity:

Strategic funding facilitates the achievement of equity objectives.

(4)Relation to City Mission:

Grants programs are a strategically defined mechanism to achieve a politically established mission, priorities and objectives. As the key policy documents noted above are developed, grants programs and purposes will require review and revision to ensure they conform with Council policy direction.

The above list is provided as a starting point in the definition of the key concepts required to underpin the Municipal Grants Policy. It is anticipated that additional key concepts will be identified through the consultation processes now underway.

Why the City Makes Grants:

Grants are one of a range of tools Council can use to achieve its goals and objectives. In determining if and at what level direct financial support is to be provided to community organizations there are a number of questions that must be answered, including what City objectives are met through the provision of grants and why are grants the tool used to achieve those objectives over other possible policy options or service delivery mechanisms. The Municipal Grants Policy will need to define why and when this mechanism is used. In addition to the key concepts noted above, the benefits and costs associated with community based service delivery need to be clearly articulated. Benefits may include affordability, access directly into communities, leverage of additional community resources, and employment creation.

Definitions:

A grant is a transfer of money in return for defined programs, activities, actions, events, services, or products. The nature of the funding provided can vary in terms of what is funded (event, service, project, program, core/sustaining), the potential duration (one-time, ongoing, multi-year), and who can apply (open/competitive, targeted, and negotiated with an identified service provider). The Municipal Grants Policy should further define the range of grants program design options and the considerations to be used in deciding when to use one type of program over another.

All grants programs purchase some kind of service or activity and as a result it is difficult to draw a clear distinction between purchase of service funding and grant funding. Purchase of Service funding tends to closely define not only service outcomes, but also specific details regarding how the service is provided. Purchase of Service also tends to fund 100 percent of the cost of the service provided and is often a service required by Provincial legislation.

Non Cash Benefits Provided by the City:

The City provides a range of supports to community agencies, organizations and groups. These supports include: grants, below market municipal space, surplus equipment, staff support and assistance, tax relief, and other various in-kind supports. The Municipal Grants Policy will define the relationship between grants and other forms of municipal support, however, the policy focus will be on the administration of cash transfers.

There may be an assumption that the administrative systems and skills required to administer one form of support are immediately transferable to the administration of another form of support. This assumption will need to be tested to determine if different skills are required to administer the various forms of municipal support. Regardless of the final administrative model, a consistent approach to the provision of supports to community agencies and groups will be required.

Once the Municipal Grants Policy is developed and approved, elements of the policy may be useful for application to all forms of municipal support.

Administration:

Based on the consultations which have occurred, the research to date and the work of the Grants Managers Workgroup, the following initial directions with respect to an administration framework have emerged:

(1)That for each given funding purpose and program, the responsible department should be given the mandate to undertake the program administration (as is largely the case currently).

(2)That the required mechanisms to ensure adequate and appropriate co-ordination between grants programs, regardless of which Department they are administered by, be developed and implemented.

(3)That there should be no duplication of core funding from City sources. This means that an individual agency/organization can receive core support from only one City grant program, but that a single agency may apply for and receive funding under one or more program or project funding programs.

The specific elements of grants administration under review include: identification of the criteria and information requirements common to all grants programs and other forms of municipal support; development of options for the management of common administration elements/tasks; review of the concept of a two step applicant review process where by the agency eligibility for municipal funding could be determined through a centralized mechanism and program (or activity) eligibility would be determined at the Department/Division level; and identification of the resources and structures required for the range of options identified for consideration.

Consultation:

One of the real challenges for staff has been to determine how to consult in the most effective and efficient way. The Municipal Grants Policy is a significant and complicated policy initiative. The approach has been to carry out consultation primarily at the service review level. Appendix "A" provides a brief summary of each service area review including the consultation work to date and what is planned over the next few months.

Additional consultation on the broader, cross program aspects of the Policy will take place through focus groups with specific stakeholders and through the deputation process at the Municipal Grants Review Committee.

Specific Issues to be Addressed in the Policy:

The Grants Managers Workgroup has identified a range of administrative principles and practices which may apply to all municipal grants programs. These principles and practices will vary in application according to the unique needs addressed through various grants programs. The principles and practices identified can be grouped into the following general areas: accessibility/non discrimination, customer service, program definition, and process. Appendix "B" provides a draft list of the principles and practices being developed.

Research on Grants Practices in Other Cities:

The research to date has focussed on comparable American cities and further research is now being undertaken on Canadian cities and cities in other countries. Two significant initial findings are: no other city has undertaken to develop a Municipal Grants Policy comparable to the work being done here and grants administration is decentralized in the majority of cities which have been contacted. Appendix "C" provides a summary of the research findings to date. A complete report regarding the research on grants practices in other cities will be submitted to the Municipal Grants Review Committee in September.

Update on Policy Development Workplan:

A draft policy will be submitted to the Municipal Grants Review Committee for consideration and discussion at its September 1998 meeting. Staff will edit and revise the proposed policy in accordance with Committee direction and submit a final policy for consideration at the October Committee meeting. Appendix "D" provides a revised Committee workplan.

Conclusions:

The task of developing a Municipal Grants Policy, a process which appears to be unique within a North American context, at this point in the development of the new City structures and strategic policies, is extremely challenging. This report outlines some of the initial considerations and directions being considered and is intended to generate discussion with regard to the general directions to be articulated in the Municipal Grants Policy.

Contact Name and Telephone Number:

Chris Brillinger, Tel: 392-8608/Fax: 392-8492, cbrillin@metrodesk.metrotor.on.ca

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Appendix "A"

Access and Equity Grants:

Overview:

The Access and Equity (former multicultural) grants program has been operating since 1980. The 1998 program provided a total grants fund of $307,000.00 to 29 community-based non-profit organizations to (1) strengthen an anti-racism climate in Toronto, and to (2) promote respect and value for Toronto's multicultural and multiracial character. The program criteria supports three categories namely, (1) activities on anti racism, (2) access and equity development, and (3) anti-hate initiatives.

The review features consultations with a broad range of stakeholders including staff and board members of funded and non-funded organizations, Councillors, other funders and municipal staff. Consultations began in June and continue through September 1998. Comments are also welcomed through mail, fax, e-mail or the website. Nineteen consultations have also been conducted through the Task Force on Community Access and Equity with the broader public on access and equity issues, including the grants program.

In response to the concerns expressed by the Task Force on Community Access and Equity, the Access and Equity Centre is co-ordinating a policy review with grants staff from all of the City's grants programs, in order to formulate a City access and equity policy including a non-discrimination agreement applicable to all City grants programs, users of municipal space, and not-for-profit agencies that receive a tax rebate. The policy will be part of the 1999 Municipal Grants Policy recommendation.

Initial Findings:

The following issues are being consulted on:

(1)what principles and policies should the City adopt for all its grants programs?

(2) Toronto being such a diverse city - should the City continue to fund anti-racism, anti-hate, access and equity grants? Why/why not?

(3)what are your suggestions about how to prioritize funding within the access and equity program?

(4)wow should the grants administrative process be improved?

(5)what types of accountability mechanisms should the City use?

Key Findings:

(1)Aboriginal communities are distinct and have a special constitutional relationship in Canada. Issues concerning Aboriginal persons should be a City priority.

(2)The City needs to provide grants by identifying sectoral priorities based on "high need" and "communities at risk" indicators. Within each of these sectors, there are individuals and groups of people who are disadvantaged due to racism or ethnocentrism and thus are socially, politically, economically and culturally deprived or isolated.

(3)The Access and Equity grant fund is extremely small in relation to the needs it addresses and the size and diversity of the population it serves. Participants suggested a budget of $1.6million providing 40 agencies a sum of $40,000.00 each to support one staff person.

(4)Participants addressed the change in the "name" of the program. The move to anti-racism from multiculturalism signalled a move toward naming the kernel of the issue. It represented a move towards clarity of language and commitment. It also helped address the specific problems resulting in measurable solutions. In view of the program's history and mandate, they proposed that the name of the program should be amended to, "Anti-Racism/Anti-Hate Grants Program". If the City increases the program budget to fund all disadvantaged groups covered under the Human Rights Code, then the name should be changed to "Anti-Racism, Access and Equity". In the meantime, with such a small fund and with so many groups from different equity sectors requiring funding, it is resulting in pitting equity groups against each other.

(5)The program plays a crucial role in enhancing the capacity of communities both in supporting them to build a community infrastructure to address systemic inequities and to educate residents on human rights issues.

(6)Participants were satisfied with the staff review process. New, emerging organizations were in favour of a "peers advising staff review model."

(7)The program should be reflective of the City's strategic priorities. Merging the administration of the program within a grants secretariat was a serious concern for participants. They feared that the value of such a program may be eroded and eventually may be eliminated.

A complete analysis of the consultations will be submitted in September 1998.

Challenges/Limitations:

Several reports and studies provide information on systemic inequities affecting disadvantaged populations. The City needs to respond to communities at high risk with equitable funding, with a monitoring mechanism to ensure that access and equity principles are adhered to by grant recipients, and ensure that City systems are transparent and accessible.

Contact Name

Cassandra Fernandes, 392-3834.

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Arts and Culture Grants

Progress Report:

To help guide the review of arts and culture grants policy, an Advisory Committee was formed comprising members of Council, representatives of the Toronto Arts Council and Etobicoke Municipal Arts Commission, and several members of the cultural community. Councillor Chong and Councillor Ashton, who is chairing the Advisory Committee, represent Council.

The review of arts and culture grants policy is mid-way through a public consultation phase that includes three key elements.

First, more than 1,600 copies of a discussion paper have been circulated widely with an invitation for written comments. Second, two public workshops were attended by more than 150 people on July6 and 7 at the North York Civic Centre. The results of these workshops are currently being synthesized for consideration by the Advisory Committee. Lastly, the Chief Administrator's Office is conducting confidential interviews with a random sample of previous and current grant applicants.

In promoting the consultation, an effort has been made to give notice both within the funded community and beyond the cultural sector. This includes direct mail to all grant applicants, a notice made available in galleries and theatre lobbies across the City, information posted on the City's website, and advertisements in NOW and six community newspapers (Etobicoke Guardian, City of York Guardian, Bloor West Guardian, Scarborough Mirror, East York Mirror, North York Mirror).

The Advisory Committee will meet again in August to discuss the results of the workshops, interviews, and written submissions before recommendations to the Municipal Grants Review Committee are formulated.

Preliminary Findings:

The consultation has focussed on several key issues in preparation for the development of the policy. Some of the questions posed during the consultation include:

(a)What should be the City's objectives in making arts and culture grants?

(b)Should the City try to support the broad range of cultural activity, or should it focus its support in key areas?

(c)How should the City's role in funding arts and culture differ from that of the private sector or the Provincial and Federal Governments?

(d)Should the City use a system of "peer review" to evaluate applications submitted?

(e)Should grants be allocated through an arm's length funding body?

Preliminary findings of the consultation suggest that there is strong support for the arts and culture grants program to fund a broad range of cultural activities, rather than target funding in key areas. In terms of review and approval mechanisms, the majority of respondents support the allocation of grants through an arm's length body using peer review for the evaluation of applications. One of the major challenges to be addressed through the arts and culture grants policy is service rationalization. In particular, the policy must address the issue of whether the four programs of grants to individual artists (choreographers, composers, writers, visual artists), previously available only in the former City of Toronto, can be extended city-wide.

Conclusion:

The public consultation phase of the Arts and Culture Grant Program Review is well underway. During August the program review advisory committee, chaired by Councillor Ashton, will review the data collected during the consultation, and advise staff in the formulation of its recommendations for consideration by the Municipal Grants Review Committee later this fall.

Breaking the Cycle of Violence Grants:

The review for the Breaking the Cycle of Violence (BTCV) grants program will consider the program's purpose, impact in the community, and administration in order to provide options for the delivery of the program in 1999. Consultation meetings are being held in August with community groups, and will include opportunity for participation by funded groups, unfunded applicants and groups in former municipalities where the program was not previously available.

A workgroup has been established to support the consultation and review process, including four members of the Task Force on Community Safety, as well as staff representing the Healthy City Office, Community Resources Unit of Social Development Division and Equal Opportunity/Status of Women's Committee. Additional meetings will be held with community organizations and City staff to address issues that may arise in later stages of the review. Research will be done into other funding programs addressing similar issues, and the work of the Task Force on Community Safety will be considered, especially the survey of community concerns and resources and the inventory of city programs and activities related to safety.

The review will identify other resources for the community for prevention of violence initiatives, including funding that may be available from other levels of government and private funders.

Key Issues:

Purpose:

The BTCV grants program was provided by the former City of Toronto to support community organizations in working to prevent violence against women and other vulnerable groups, and to increase access to services by women who faced barriers related to language, disability, cultural basis of service delivery, housing or income status. Funded projects have included activities related to woman abuse, crime prevention, community education, increased safety, prevention of hate crime, support for vulnerable youth, elder abuse prevention, capacity development in vulnerable communities and workplace harassment. All funded projects must identify the role their activities play in preventing violence against women, recognizing that women continue to face unacceptably high levels of public and private violence.

The primary decision related to the purpose of the program is whether there should be a more specific focus (on prevention of woman abuse, or support for community-based crime prevention activities, for instance), or whether the current, broad-based approach of the program can continue to be effective.

Impact in the Community:

The Breaking the Cycle of Violence grants program continues to be in high demand in the community, attracting over 80 applicants each year. Between 55 percent and 65 percent of each year's applications are from new groups. The annual budget is $485,000.00 and 50-55 projects are funded each year. The program currently is able to draw on a variety of community development and education supports for applicants from within the City's departments. These supports are often crucial for the development of successful projects and partnerships.

The key decisions to be addressed in looking at the impact of the program are:

(i)What should be the level of staffing and funding resources for delivering the program across the new City of Toronto?

(ii)How should the program balance the project funding criteria with organizational needs for core funding?

(iii)How can effective evaluation of the program activities be integrated into the grants process?

Several options will be outlined for consideration, including maintaining the program at current levels, or increasing the staff and funding resources.

Review Mechanisms:

The BTCV program has operated with staff review of applications, and recommendations were made to the former Toronto City Council through the Grant Review Board, a subcommittee of the Neighbourhoods Committee. A member of the Safe City Committee participated in the Grant Review Board meetings where grant recommendations were decided on. The Safe City Committee also provided annual advice to staff about outreach priorities for the program, and assisted in identifying under-served communities and new community groups. Funded groups were invited to the Safe City Committee to present information on their project accomplishments.

With the amalgamation-related changes to City structures, key decisions will need to be made about the appropriate review mechanisms for this program, and how the community will be involved in establishing annual priorities. The Task Force on Community Safety will be addressing a variety of issues, including ongoing mechanisms for co-ordinating safety issues and managing the City's safety programs. A challenge for the review of the Breaking the Cycle of Violence grant program review is that the Task Force report will not be presented until early in 1999, after the 1999 grants process must be initiated. This may result in the grants review process recommending interim processes for this grants program, until it is clear what the Task Force recommends and what City Council decides.

Administration:

The current administrative structure and practices of the program have supported applicants from the former City of Toronto, through staffing in the Healthy City Office and Finance Department. In the six years since the program was implemented in 1993, more than 80 applicants per year have been managed by staffing of approximately one FTE. The practices for receiving, reviewing and recommending applications will be considered, along with the expectations of the City and the community groups for monitoring and ongoing support.

Administrative changes for the program are anticipated, and will be directed at co-ordinating grant application expectations with other programs to ensure that potential efficiencies for applicants can be realized, as well as establishing stronger community support and information capacities for the program.

Community Service Grants Program Review:

Introduction:

The 1998 Community Service Grants program represents a combination of ten existing grants programs provided by the seven former municipalities as the primary means of municipal support for community-based agencies. The former ten programs were: East York Community Grants ($32,800.00); Etobicoke Community Service and Development Grants ($298,700.00); Metro Community Resource Funds ($8,292,900.00); Metro Emergency Support Fund ($1,200,000.00); Metro Special Projects ($689,000.00); North York General and Sustaining Grants ($436,000.00); Scarborough Grants to Organizations ($266,800.00); Toronto General Grants ($676,800.00) and York Community Service Grants ($330,700.00). In 1998, 433, agencies applied for municipal support under the Community Service Grants Program (C.S.G.P.). Of the 433 agencies that applied for grants, 387 were recommended for funding.

1998 Policy for Administration of Grants:

In 1998, agencies were reviewed under the 1997 eligibility criteria of the former municipal programs through a simplified review process, providing flatline allocations to returning agencies that did not have identified performance issues and considering new applicants using funds made available by non returning agencies or those with reduced allocations.

Consultation Process:

The consultation plan involves consulting with key stakeholders, peer experts, agencies presently receiving grants, agencies not receiving a grant, staff and Board members of community-based agencies, community members, City staff and other funders. The consultation plan involves the publication and distribution of a position paper with a request for written comments, three public workshops held across the City and with evening times to which any interested community member can attend, targeted discussion groups and informal drop-in discussions with staff in local areas.

The position paper will be directly distributed to all existing applicants and other interested groups. To date, surveys were done in individual interviews with agency's staff and Board members as part of the review process for the 1998 grants. A draft report of initial findings and suggested mechanisms to deal with key issues will be prepared in September for the Municipal Grants Review Committee. The draft report will be distributed to interested groups for feedback. This feedback will be integrated into the final report that will be presented to the Municipal Grants Review Committee in October. As well, historical information on previous municipal consultations on grants, funding strategies at other levels of government and research on other municipal grants programs will be collected and analysed in order to provide a framework for the 1999 grants program.

Key Issues:

There are a range of issues for the service area review, including: the appropriate level of agency accountability under the amalgamated program and the staff resources required to ensure agency accountability; how the City, as a funder, can improve its ability to determine the effectiveness and impact of grants as a tool to address the needs of communities; and what mechanisms and policies are needed to facilitate the redistribution of the resources within the Community Services Grants Program. Some of the issues that the review will seek to address are listed below.

Priority for Funding:

Should the Community Services grants program continue to place emphasis on disadvantaged and/or underserved communities, proposals to address gaps in service, and small and medium sized organizations?

New and Emerging Needs:

How can a policy be developed that allows the grants program to be responsive to new and emerging needs and provides a framework for the equitable distribution of resources? How should innovative or preventive approaches to service delivery be funded?

Need for Municipal Funds:

A number of agencies have considerable capacity to raise funds through user fees and/or productive enterprises and/or donations and/or grants. Given the need in the community for funding support, should consideration be given to reallocating funds to organizations with a greater demonstrated need in the future?

Redistribution:

Although redistribution of grants funds was a priority under the largest of the existing programs (Metro Community Resources Fund) staff did not attempt to undertake redistribution in the 1998 transition year. In 1998, any funds made available through attrition within the program were allocated to new applicants. A focus for the review will be assessing what mechanisms and policies are needed to facilitate the redistribution of the resources within the Community Services grants program and what is needed to better track the impacts and achievements of rationalization of funding to better meet access and equity goals.

Developmental Funds:

Should there be developmental or seed grants for new agencies or new programs? How should this funding be balanced with the need to sustain existing agencies.

Core Funding and Project Funding:

What should be the balance between grants that go to core operations, sustaining programs and project funding within the grants program? What is the role of the municipality in ensuring that there is a viable community-based sector to deliver services?

Other Levels of Government and the Grant-making Sector:

What is the role of the Community Services grants program in relation to other grant-making institutions? What are the key linkages that should be formed?

Strategic Funding:

Should grants be given on the basis of a more strategic approach in order to ensure that the work of funded agencies remains relevant and useful? If so, then what mechanisms need to be developed in order to increase the impact of grants and in order to move from giving grants as charity to investing in communities, from being reactive to being proactive, from one-time grants to multi-year involvements, from granting to individual projects to granting to strategic systemic solutions.

Review and Assessment of Agencies:

What review and assessment procedures should the City use in awarding grants? A variety of review processes will be examined as well as examining what information is required from agencies.

Challenges/Limitations:

The new grants program will need a flexible model that acknowledges the diversity of size and types of grant that fund services in the community. The policies and framework that make up the program should also remain attentive to local needs as well as assure equity of resources across the new City. A good foundation is already present in that the program will be built on the best components of the former municipalities' emphasis on local initiatives and the former Metro system that looked at city wide issues.

Homeless Initiatives Fund Service Review:

Overview:

The Homeless Initiatives Fund (HIF) was established by the former City of Toronto Council in 1992 after extensive consultation with community agencies who work with homeless people. The HIF is not a grants program in its traditional sense, but is integrated into the work of the Housing Division and is an instrument to develop and implement City policies. Shelter Housing and Support Division staff work with community agencies funded through the HIF to develop long term solutions to homelessness. The approved budget for 1998 is $783,500.00.

The program is based on the former City of Toronto's "Off The Streets" policy which recognized that homelessness is a multi-faceted problem which requires a variety of different problem solving approaches depending on the individual circumstances of homeless people. There are three objectives of this policy:

(1)prevention of homelessness;

(2)outreach and support to vulnerable people living "on the streets" or in unsafe or precarious housing; and

(3)support for homeless people who are able to make changes in their lives and move into more permanent forms of housing.

Funding is provided for projects of short and long term duration. Projects are usually selected through targeted proposal calls. Over the past six years funding has fallen into the following three categories:

Pilot Projects:

These projects are designed to develop new initiatives and community-based responses to problems experienced by homeless people. In many cases there are no or limited services available to address these problems. Projects are identified through targeted proposal calls directed at community agencies who have expertise in the appropriate areas. Projects typically involve action-research components where front-line workers work directly with homeless people to learn more about issues, provide assistance, and develop responses. The projects are assisted by resource groups or steering committees which include Shelter Housing and Support Division staff. At the end of pilot projects recommendations for longer term solutions are made.

Longer Term Initiatives:

These projects receive multi-year funding for developing and operating unique services which assist, involve and/or employ homeless people in some capacity. A range of projects are currently funded including community economic development projects, housing help initiatives, street outreach and connections to services, and information and communications projects. Projects are initially selected through targeted proposal calls. Housing Division staff work closely with each project to address unmet needs, monitor progress and evaluate the project's effectiveness in meeting its objectives.

Innovations:

The intent of these projects is to utilize the skills, imagination and ideas of homeless and formerly homeless people and the staff who work with them to develop small scale projects that are of benefit to their peers, their neighbourhood, or the greater community. "Seed" or start-up money is provided to groups through open proposal calls. Projects which show potential for on-going viability may attract longer term funding from other sources. Housing Division staff assist in project development, monitoring, and evaluation and in locating in-kind and donated resources. Recent examples include a market garden for residents of Streetcity 2, a Voice and Electronic Mail project for people without access to telephones and computers, a woodworking co-op etc.

The Housing Division also provides capital support for transitional and permanent housing through a "sister" program, the Capital Leverage Fund. There are two projects currently in the development stages:

(1)the Dixon Neighbourhood Homes permanent housing project for 40 formerly homeless men and women being constructed on the 30 St. Lawrence site; and

(2)a transitional housing program for street youth being developed at 11 Ordnance. Both of these projects involve partnerships with community groups, donation of City-owned land and a capital grant.

Consultation Plan:

Program priorities for the Homeless Initiatives Fund are established through ongoing consultation with members of the Alternative Housing and Services Committee and through annual workshops which propose strategies to address emerging issues. For example, the "Housing Strategies for Homeless Persons" series of workshops in 1997 identified three priority areas for 1998: (1) the development of alternative housing options; (2) Housing Help projects which assist vulnerable people in securing or maintaining permanent housing; and (3) outreach and support to chronically homeless men who live in parks, ravines, and on the streets and have limited access to existing community services.

The consultation plan that will develop priorities for 1999 and upcoming years include a series of workshops that are being conducted that will describe the "Continuum of Support" for homeless people that currently exists in Toronto, identify gaps, and recommend priorities for the Homeless Initiatives Fund over the next few years. The first workshop was held in early May and participants emphasized that poverty, housing, health, education, and employment issues were intertwined in a complex web that led to homelessness. The participants recommended that two workshops focusing on Community Economic Development and Funding Issues be conducted. These will be held in the fall of 1998.

Housing Division staff will also be meeting with staff from service areas of the City that provide support to community agencies that work with homeless people to make existing funding programs more effective and ensure that there is no duplication of funding or services.

Key Issues:

The focus of the HIF is to develop long term homeless responses rather than short term or emergency initiatives. In the absence of long term or core funding from the Federal or Provincial governments, the success of these responses depends on working closely with community agencies to identify problems and developing solutions and by partnering existing City resources with those of the community and private sector. These resources could include staff, surplus land or properties, and, in the case of housing supply, other development incentives currently being examined by committees of Council.

Homelessness is also a complex problem and involves more than the lack of shelter. Homeless people are not a homogeneous group and come from all walks of life, age groups, ethno-cultural groups, and vary in their mental and physical well-being. Needs vary considerably from newly homeless people who have recently lost their housing due to economic eviction to someone who has lived on the streets or in parks or ravines. This diversity of needs necessitates a variety of responses and co-ordination between service areas. Housing, health, employment and or income supports must all be addressed in order for responses to be ultimately successful.

Homeless Initiative Fund projects provide strategic interventions that help people from becoming homeless, improve access to affordable housing, improve the condition of many homeless people, and provide vital services to the community. The problem of homelessness, however, is growing due to structural changes to the economy, systemic changes in the social safety net, and the downloading of key social services to the municipal level of government. Developing new initiatives to meet emerging needs in the community is one of the most important challenges that must be dealt with over the next few years.

Challenges/Limitations:

In 1998, HIF project funding was only available to community agencies with the Toronto Community Council District. Identifying issues, developing community partnerships, and providing funding support to projects in the new expanded City of Toronto is one of the biggest challenges for 1999.

Issues are further complicated by the growing tension between residents' and business associations and homeless people and the agencies that work with them in the downtown core. The polarization of opinions on "fair-share" distribution of social services and programs, panhandling and other forms of street activity in the downtown core complicate the development of cohesive homeless policies for the new City of Toronto.

Changes in Provincial legislation, particularly The Tenant Protection Act, may have a profound impact on the ability of low income people to find and maintain affordable housing. Community agencies are very worried that this new legislation coupled with record low vacancy rates and no new rental construction will lead to higher rents and abuses to the system. This will put increased pressure on existing access, prevention and supply projects funded through the Homeless Initiatives Fund.

The downloading of social housing to the municipality and the pressure to keep operating costs low will put added pressure on housing programs. Although the Province has decided to keep the "supportive housing" portfolio, many "alternative" housing projects that house homeless people are scheduled to be downloaded as they do not meet the Provincial definition for supportive housing. These alternative housing projects require additional operating funds in order to provide the supports necessary to enable vulnerable people to live independently in the community.

Decreased staff resources at housing projects and community agencies who have received funding cuts from other Provincial programs will limit the community resources available to take part in new HIF initiatives. In addition, some community programs that have received core funding from the Province in the past may not receive it in future years. This will put additional pressures on the municipality.

Many of these issues are being examined in more detail by the City's Homeless Action Task Force. The Task Force will be making specific recommendations in its final report due in the fall of 1998. These may include policy recommendations and suggestions for specific initiatives. In addition, the Provincial Homeless Task Force will be issuing its own recommendations some of which may be in conflict with existing City policies. Finding new program funding and developing new strategies to meet identified needs will be a challenge.

Conclusion:

The Homeless Initiatives Fund supports a range of community-based initiatives that improve the lives of homeless people. Housing Shelter and Support staff work closely with community agencies to identify unmet needs and develop strategies to address them. Priorities for 1999 will be developed through ongoing consultation with community groups through the Alternative Housing and Services Committee and through workshops planned in the fall of 1998. Additional priorities may be identified by the Homeless Action Task Force which will be making its final report in the fall of 1998.

Public Health Grants Service Review Consultations:

Consultation Purpose and Process:

Consultation was undertaken with key stakeholders regarding the principles, priorities, and practices of Public Health's two community grants programs - Drug Abuse Prevention and AIDS Prevention. Each grant program distributed a background paper, and encouraged participation at consultation meetings or comments directly to staff. The AIDS Prevention and Drug Abuse Prevention Program (DAPP) review panels, in consultation with Public Health staff, facilitated separate community consultations attended by representatives from funded agencies, staff from health districts in Toronto (without similar grants programs), and staff from similar programs implemented by the Provincial and Federal governments. The review panel co-chairs - Councillors Rae, Bussin, and Korwin-Kuczynski - facilitated discussions. Forty-five attended the AIDS consultation and 57 attended the DAPP consultation.

Key Practices/Issues Reviewed:

The background papers and consultation agendas for the DAPP and AIDS Prevention consultations varied somewhat, dependent upon the issues confronting each grant program. Overall, the issues addressed relate to:

(a)eligibility;

(b)application, assessment, approval and appeal processes;

(c)project reports;

(d)staffing and administration;

(e)principles guiding the grants programs;

(f)priorities; and

(g)level of funding for each grants program.

Initial Findings, Challenges and Service Rationalization Issues:

Findings and recommendations will be detailed in autumn reports to the Municipal Grants Review Committee and the Board of Health. At this time, some comments can be made and directions indicated. In summary, the consultation meetings indicated a high level of support to maintain existing programs and practices, while expanding the programs throughout the new City.

(a)Eligibility, application, assessment, approval and appeal processes: Direction given to staff is to allow more time between application issuance and the application deadline; and to reassess use of deputations within the AIDS Prevention program. Funded groups strongly support establishment of review panels made up of City Councillors/Board of Health members and informed citizens; the review panels should retain lead roles in both the review and appeal steps, with appeals being made before the appropriate review panel. In the case of AIDS Prevention, it is important to continue involvement of people living with HIV or AIDS.

(b)Staffing, reports and administration: Direction given to staff is to maintain site visits and twice-yearly written reports; clarify with funded agencies how reports are utilized in monitoring and assessing project activities. Participants argued strongly to maintain staffing levels that ensure the type of contact and relationship between agencies and staff that has occurred to date, e.g., staff involvement in development of projects/groups, application development, reporting and on-going support. Participants at both consultations asked staff to explore mechanisms to support funding of more than one year's duration; AIDS service organizations also encouraged further exploration of how to support core/sustaining funding in addition to project funding.

A key challenge facing the AIDS Prevention grants program is that this program has a historic accounting practice that relies on program approvals in one fiscal year to authorize spending split between two fiscal years. Public Health staff are working with staff in various other service areas to develop resolution proposals. One proposal to resolve this problem was before the Budget Committee in July, 1998; it has been referred to the Commissioner of Community and Neighbourhood Services for report back and this issue will be integrated into the fall report.

(c)Principles: Consultation participants strongly recommended maintaining Public Health grants management and delivery within the Public Health Division, with the Board of Health having program authority. (See also (b) above, regarding review panels.)

(d) Priorities, potential levelling up and service rationalization: No significant changes in priorities were suggested. Staff will report back further about mechanisms to balance access to new groups, especially groups in other parts of the new City, with groups in Toronto district which have a proven track record; how to balance funding of City-wide projects and service organizations with local neighbourhood/district projects; and balancing projects targeted to at risk and high need populations with projects targeted to general need populations.

Leveling up for both Public Health grants programs was strongly supported by consultation participants. At the June 23, 1998, Board of Health meeting, the Board recommended that the two community-based funding programs be "expanded across the new City of Toronto with appropriate funding, and that this expansion be reflected in the Toronto Public Health 1999 budget." Estimated costs to level up were identified in "Reinvesting in Public Health," before the Board of Health in January, 1998. Leveling up issues will be reported in detail in the fall report.

Additional rationalization issues confronting the AIDS Prevention grants programs relate to increasing consistency in management of grants and AIDS, sexual health and STD contracted services, and finalizing policy and mechanisms related to currently separate service area funding programs (e.g., AIDS programs funding by Community Services Grants Program).

Recreation Grants Services Review:

Overview:

The new City is designing a framework for recreation funding that encourages and develops partnerships between the City and the voluntary sector. This is particularly important in a city with such diverse needs. Organizations, both large and small, provide community recreation programs and deliver them with the assistance of thousands of volunteers. Funding for these organizations, however, has not been provided consistently or uniformly in the six former municipalities. The challenge in the future will be to find a mechanism to provide funding for these services in an equitable manner across the new City of Toronto, so that all residents can participate in recreational and leisure activities within their local neighbourhoods.

Consultation Process:

The consultation plan involves the publication of a discussion paper with a request for written comments, two public workshops and some targeted discussion groups. The discussion paper will be directly distributed to all existing applicants and sports/recreation groups operating in the new City. One workshop will be conducted with Board and staff of current grant applicants and the other will be open to all. To date, an initial discussion has been held with the Coalition of Neighbourhood Services. Network groups such as Community Voices of Support, Boys and Girls Clubs of Greater Toronto, Association of Community Centres, Council of Agencies Serving South East Asians, Ontario Council of Agencies Serving Immigrants (OCASI), Centre for Spanish Speaking Peoples, and the Chinese Information Centre and Community Services of Greater Toronto for example will also be invited to participate. The availability of the consultation plan will be promoted through the City's website, media release and local community centres. The public consultations will be held in August.

Key Issues:

The review will focus on four key questions:

(1)Why should the City support local community groups?

The City must have a clearly defined principle for the provision of financial assistance to voluntary organizations to ensure that residents have the opportunity for enjoyable and creative use of leisure time.

(2)What activities should the City's grants program support?

Prior to amalgamation, eligibility criteria for fundable activities varied widely among the recreation programs within the former cities ranging from large operating grants to small travel grants. Programs varied from elite performance to local recreational. Consensus will be difficult; so priorities will have to be addressed.

(3)What process should the City use in awarding recreation grants?

A variety of review processes will be examined including a sole review by staff, the use of peer assessment and/or interviews in some configuration that may include staff, citizens and/or politicians.

(4)What models of delivery should be used?

Current practice has three different models of delivery for Recreation Grants within the new City including Purchase of Service, a pre-approved list for Major Recreation Grant recipients and the Minor Recreation process. Various models will be reviewed to ensure that the City utilizes the most efficient and effective service delivery.

Challenges/Limitations:

Service Rationalization:

The City of Toronto's Recreation Grants Program must serve the entire City. For 1998, former municipalities' criteria were used in accepting and reviewing Recreation Grant applications. No recreation applications were received or awarded to the former Cities of East York, Etobicoke and Scarborough. Of the one hundred and fifteen organizations that received grants this year, eight applications were from the former City of York, twelve applications were from the former City of North York and ninety-five were from the former City of Toronto. To ensure equitable access to local organizations within their neighbourhoods, there must be some leveling up of resources within the Program itself, or, by defacto, leveling down will occur. The Recreation Grants Program cannot continue to serve only 50 percent of its constituents. It must be available and accountable to the larger community, whose tax dollars support this program. Given current budget restrictions, this will be challenging.

Redistribution:

A review of programs that have received City funding over the past ten years indicates that many organizations are comprised of and serve new Canadians and provide recreational opportunities not provided by the City. There are some new and innovative programs. However, it is difficult to move funds from organizations that have traditionally received grants to new and emerging community groups. Priorities established through public consultations may provide a framework for some redistribution of resources.

Contact Name:

Cathi Forbes, Cultural Affairs Officer, North York Civic Centre (395-6192)

Youth Grants Administered by the Planning Department:

Graffiti Transformation Program:

The former Toronto City Council established a program for the removal of graffiti and the transformation of the defaced sites into murals. It was designed to employ youth and enhance the affected neighbourhoods. A Community Economic Development (C.E.D.) model involving the hiring of youth by local organizations who would provide training and development for them while carrying out the service was the chosen approach. This is the third year of operation within the boundaries of the former City.

The review process will involve focus groups comprised of current recipients and youth participants, youth serving agencies from non-participating former municipalities. Spokespersons for neighbourhood residents and local retail strips will be included on the advice of the pertinent Councillors.

Key questions to be explored will include the extent of graffiti vandalization in communities and current methods of dealing with it, the appropriateness of murals as a response, the potential interest of youth and the agencies working with them, suitable funding, administrative and delivery structures as well as eligibility and evaluative criteria and processes.

Employer Outreach Grants:

Despite a recent upturn in the economy, youth unemployment remains high. The Youth Employment Counselling Centres Employer Outreach Grant was established thirteen years ago by the former City of Toronto to support the placement of disadvantaged youth in permanent jobs and/or training positions. The grants have been available to Youth Employment Counselling Centres as established under previous Provincial programs.

Although restructuring and renaming of those programs has technically meant that some of these groups are no longer involved in the new Provincial program, the need is still high and grants were maintained this year on the same basis as in the past since they are all still involved in youth employment.

The consultation will be in the form of a focus group including current recipients and youth employment agencies from all former municipalities as well as other funding bodies.

Key questions would include whether the program still serves a useful function given program changes by other funders; if so, are revisions to the program called for; who is interested and what funding, delivery and administrative structures make sense, as well as eligibility and evaluative criteria and processes. Both of these consultations will be completed and reported on in the fall.

Economic Development Service Review Strategy:

Economic Development administers three grant programs that are viewed as economic development tools. The programs target sector specific initiatives in the area of tourism, film, theatre, recording industry, fashion, food and beverage, information technology and telecommunications, biotechnology, retail, sustainable transportation and area specific initiatives that address commercial revitalization, business improvement and local community economic development. Each program has specific guidelines and criteria that characterize it and a set of indicators by which success can be assessed. The suggested consultation process for the three grant programs is as follows:

(1)Economic Development Partnership Program (EDPP) (former City of Toronto):

Applications for funding are accepted three times a year. The goal of the Program is to provide seed monies to facilitate the initiation or expansion of projects which will have substantial long term economic development benefits for the City of Toronto by contributing to the size of the local economy and/or to the generation of future economic growth and job creation. Applicants are eligible to apply on a one time only basis or for a maximum period of five years. Applicants are required to submit a business plan and detailed budget showing projected revenues and expenditures. Each applicant must demonstrate an ability to attract corporate support for their initiative. Applicants applying for support can be either non-profit (incorporated or unincorporated) or a private business. Applicants may request funding for a wide variety of initiatives which include, but are not restricted to: sector specific incubators (e.g., photography incubator); festivals that generate substantial tourism activity and/or have an industry, trade show or marketplace component incorporated into the range of festival activities (e.g., the Industry Centre that forms an important part of the International Film Festival); co-operative ventures that involve the production, distribution and retailing of specific products (e.g., a baking co-op organized around immigrant women specializing in North African breads), Economic Impact studies (e.g., Gay Pride and First Night), conferences (e.g., The Humane Village Congress), cross sectoral alliances (e.g., Festival Alliance Toronto project). Organizations applying for ongoing support must provide a report on the initiative in accordance with identified performance indicators before a subsequent request for support is considered. Projects that deal with job and life skills development or training are ineligible for funding under the EDPP funding guidelines.

The EDPP was re-evaluated and fine-tuned in 1995 at which time application deadlines were set and program guidelines were made clearer and more specific to follow. Prior to amalgamation, requests for funding were reviewed by staff and evaluated by a designated sub-committee of a standing committee (in this case, the Economic Development Committee). Appeals were made directly to the standing committee. This year, staff made recommendations directly to the Municipal Grants Review Committee.

The Economic Development Partnership Program is a partnership program. Grant recipients work with Economic Development staff on an ongoing basis, where necessary, to achieve maximum results from pre-approved goals. There is often an opportunity to maintain ties and dialogue with grant recipients even after funding ends. Therefore, in terms of any consultation required vis-a-vis this program the issues are really ones of establishing a suitable review team that could report directly to the City's Economic Development Committee and of determining a suitable deputation and appeals process for applicants. There are several additional issues for which consultation needs to occur. Included here are issues surrounding the fiscal and administrative impact of extending the program City wide. Lastly, there is the issue of identifying and determining the City's role in continuing support, past the five-year funding maximum set by the Program, for certain initiatives and activities of importance to the City, that are reaching the end of their five-year funding cycle, i.e., the Theatre Alliance or the International Film Festival.

(2)Festivals and Special Events Program (former City of York):

The Festivals and Special Events Program, in place since 1995, supports local festivals and special events by providing seed monies that create local community economic development benefits, build volunteer commitment and develop strong organizational structures and financial support. Local festivals and special events are also viewed as important tools in rejuvenating commercial and residential districts by attracting visitors to these areas, developing these areas as tourist destinations as a long term goal and instilling local area pride.

The Program makes funding available to organizations initiating or carrying out ongoing festivals and special events. Examples of festivals and events funded under this program include the Annual Marcus Garvey Day Celebration, the Junior Carnival Parade, and the Urban Harvest Oakwood Village Festival of the Arts. Organizations applying for funding can be non-profit (incorporated or unincorporated) or private business. Festivals and special events recommended for Program funding have been community-based organizations and Business Improvement Areas where a significant amount of community involvement is proposed. Applications are currently evaluated by civic staff from the former City of York's "Interdepartmental Festival and Special Events Liaison Team" and recommendations made to Council for final decision, accordingly.

The Festivals and Special Events Liaison Team intends to convene for a half day consultation session, in September 1998 with past grant recipients to initiate a review process. Issues to be discussed will include the application process, level and length of funding, peer review as part of the review process, inclusion of in-kind services in determining grant totals, application deadlines, the appeal process and retention of funds to address successful appeals. A questionnaire is also to be developed to address the above issues in greater detail. On a broader note, the issue of extending and advertising this program across the newly amalgamated City also needs to be addressed.

(3)Commercial Research Program (former City of Toronto):

Initiated in 1986, the Commercial Research Program provides modest grants to business associations to assist them in hiring professional consultants to undertake research required to plan effective revitalization strategies. The participating business associations must pay at least half of the study costs themselves, and manage the day-to-day operation of the projects. The City gains public access to the studies that are undertaken. The reports are used to provide research models and information valuable both to other business associations and to City staff working on commercial revitalization and business improvement issues. Examples of studies funded include the Bloor Yorkville BIA urban design/streetscape improvement study/guide, the Bloor/Bathurst/Madison BIA parking study and the Yonge Street Business and Residents Association Christmas lighting and decoration study/program.

Staff are currently reviewing the support offered to BIAs and business associations and evaluating the future of this program as part of the review of grant programs affecting BIAs and business associations across the amalgamated City, with the target of recommending an integrated program for implementation in 1999. The consultation process recommended here continues to be one of monitoring and facilitating, where appropriate, BIA and business association related research and activities with the aim of making each area a more desirable place in which to shop and recreate.

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Appendix "B"

Draft Municipal Grants Principles and Practices

The following is a working draft of grants principles and practices. The Grants Managers Workgroup will revise, add and delete, based on the results of the various service area consultations.

(A)Accessibility/Non-Discrimination:

(1)be non-discriminatory, racially sensitive, culturally appropriate;

(2) ensure flexibility to meet new and emerging needs; and

(3) include an outreach strategy to provide access to grant program information.

(B)Customer Service/Public Information:

(1)provide information to applicants/public regarding the total amount of grants available, range of grant amounts, number of grants made annually, and the duration of grants;

(2) provide notification of receipt of applications;

(3) provide staff assistance in advising applicants and in devising applications prior to the deadline; and

(4) provide information accessible to the public about decisions.

(C)Process:

(1)collaborate and cooperate with other funders as appropriate (internally, externally);

(2)involve individuals with appropriate expertise in the review process which may include a peer/citizen review mechanism;

(3)have an established review cycle and timetable;

(4)have defined decision-making processes and evaluation criteria;

(5)provide an appeal process and provide review results in writing in time for applicants to exercise any rights to appeal;

(6)provide for staff follow-up and evaluation of how funding was used;

(7)develop evaluation and monitoring strategies to ensure that individual agencies achieve their outcomes and that funding programs achieve their stated objectives;

(8)administrative processes need to be realistic, i.e., provide sufficient time to complete and submit applications; and

(9)information required from applicants must be related to the review and monitoring processes.

(D)Program Definition:

(1) have clearly articulated goals and objectives;

(2)have clear, written eligibility criteria;

(3)have clear statement of expectations of funded agencies/groups/individuals;

(4)have predetermined budget allocations;

(5)develop an appropriate open process for the regular review of both program criteria and program priorities; and

(6) have program flexibility in order to meet new and emerging needs.

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Appendix "C"

Municipal Grants Administration/Policy Research - Interim Report:

Introduction:

The purpose of this research is to look at the municipal grants administration policies and systems in the United States and other countries. The first phase focuses on US cities; the second phase looks into a number of cities in Canada and Europe. This interim report summarizes the key findings of the first phase of the research.

Out of nine US municipalities initially contacted for this research, information from seven of them have been gathered, based on a survey involving interviews with senior management staff, and review of relevant documents.

The seven US municipalities are: City of New York; City of Los Angeles, City of Portland, City of Philadelphia, City of Seattle, City and County of San Francisco, and the City of Boston.

Summary of Findings:

Initial findings from the information so far gathered indicate that structurally, municipal grants administration is decentralized to the various operating departments, rather than centralized in one grants office. Grants are administered according to policies adopted by the administering unit or department, in accordance to the laws, regulations and requirements of both the external funding sources (Federal, State) and the City's internal ordinances and policies.

Reasons for Decentralized Grant Administration:

Cities recognize that departments possess the expertise and experience in knowing the needs of the community and the capability of community-based groups to deliver the services to be funded. The departments that directly provide services or work with community to provide services, conduct consultations and do outreach work, and, are the most knowledgeable and familiar with the state of the community's needs, the capability of the existing social infrastructure to absorb those needs, and the ability of community-based groups to provide the services that the funds are intended for.

Thus, departmental staff are considered to be in the best position to take on the various functions of assessing eligibility of community-based organizations for specific funds, and making grant allocation decisions, negotiating bids and making decisions in awarding contracts.

Centralized Functions:

In cases where a central grants unit exists, its functions are mainly in the area of accounting, setting up central information systems to account for each grant, and ensuring overall compliance to Federal and State laws, and City ordinances and policies in the administration of grants.

Among the functions of the centralized grant management office are:

(1)to ensure that financial conditions required by the funding source, such as Federal or State statutes and municipal regulations are followed;

(2)to serve as a centralized automated contract information system that facilitates the accounting and monitoring of the City's grants, e.g., one model is able to identify each grant through a code and to produce a profile for the grant (indicating source, amount, award period, type of reimbursement, whether it is a contracted grant or loan); and/or

(3)to assist departments with their accounting and financial management procedures and the development of forms and contracts, or to help standardize accounting procedures to be followed by departments administering grants.

Grant Allocation: A Bidding Process

Generally, departments contract out funds to non-profit community-based organizations as grants or loans won through a bidding process called Requests for Proposals. Funds given out as loans to organizations and individuals through a Call for Investments generate income for the City, both interest and principal paid back by funded entities to the municipality; called Program Income, these funds are added to the funding pot. Recipients of funds are primarily non-profit organizations; however, there are a number of funds available for-profit contractors, in such areas as job training.

Although there are variations on staff involvement in making allocations recommendations, staff generally make a determination which community-based agencies can best address the needs identified in a city's Consolidated Plan - which contains needs data, population data, and strategies for addressing needs.

Departmental staff are also involved in monitoring and evaluating the performance of an agency receiving funds. Some cities use staff, called assessors or contract monitors, in the evaluation of funded initiatives. While some Cities involve community representatives in the evaluation, some do not. Projects are evaluated according to legal requirements, financial expectations, and results or quality outcome.

Funding Sources and the Budget Process:

Funds are sourced from the Federal and State governments, and the City's own. Through an annual budget process that includes community participation, allocations to the various City departments are made according to availability of funds and identified needs.

The departments then put out bids for needed programs and services, and non-profit community-based groups participate in the bidding process. A contract is made by the City with the successful bidder.

Final Approval of Grants:

In most of the Cities reached, final approval of grants allocation recommendations rests on City Council and the Mayor. Allocation recommendations are the combined result of staff and community input, through committees created for the purpose.

Municipal Grants Policy:

There is no single policy that cities use in municipal grants administration or allocation. The entire grant allocation process, however, is expected to be done according to the laws, regulations and grant conditions and requirements stipulated by funding sources, as well as the city's own ordinances, policies, plans and strategies.

Examples are requirements for citizen participation in overall budget planning, public policies to promote affordable housing development, municipal strategies to reduce poverty, funding guidelines promoting equal opportunity, and the city's own pledges contained in various certifications to uphold and comply with specific government regulations, requirements and statutes concerning the use and disbursement of federal formula and non-formula grant funds.

A City's Consolidated Plan, for instance, has to have a citizens' participation component, as required by the Federal Government. The Consolidated Plan covers four kinds of grants that cities apply Federal funding for, including the Community Development Block Grant - the biggest chunk of Federal funds.

Other Forms of Support:

Most cities provide other forms of support to community-based agencies, such as technical support in areas like training; use of public space for a nominal sum; and tax write-offs for some projects.

One city that gives out as loans for some projects intended for low income people, "forgive" the loans if the project keeps and maintains its facilities/services for the benefit of low income people for long periods of time, such as 30 years.

Rationale for Providing Grants to Community-Based Groups

The main reason cities fund community-based services is it is an effective way of delivering/achieving municipal services or objectives.

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Appendix "D"

Municipal Grants Review Committee - Revised Workplan - July 20, 1998

Meeting DateAgenda Tasks

July 27, 1998Review of Municipal Grants Policy - update report

Miscellaneous grants administration reports

September 28, 1998Review of draft Municipal Grants Policy - deputations on draft policy

Review of the various Service Area Reviews - deputations on service area reviews

Miscellaneous grants administration reports

October 26, 1998Municipal Grants Policy report - deputations on Municipal Grants Policy

Service Area Review Reports and Recommendations - deputations on service area reports and recommendations

November, 1998Miscellaneous grants administration reports (if required)

5

Audit Division Restructuring and Staff Redeployment - Update

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee submits, for the information of Council, the recommendation of the Audit Committee embodied in the transmittal letter (September14,1998) from the City Clerk, and reports having received same.

The Strategic Policies and Priorities Committee reports having requested the City Auditor to report further to its next meeting on October 20, 1998, in the event that the two remaining staff requiring redeployment have not been accommodated.

The Strategic Policies and Priorities Committee submits the following transmittal letter (September 14, 1998) from the Audit Committee:

Recommendation:

The Audit Committee on September 11, 1998, recommended to the Strategic Policies and Priorities Committee that the report (August 31, 1998) from the City Auditor be received for information and Council so advised.

Background:

The Audit Committee had before it a report (August 31, 1998) from the City Auditor providing an update of the Audit Division restructuring and staff redeployment.

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(Report dated August 31, 1998, addressed

to the Audit Committee, from the City Auditor)

Recommendation:

It is recommended that this report be received for information.

Background:

A report dated June 25, 1998, prepared by the City Auditor outlined the actions taken up to that point in regards to the redeployment of surplus audit staff. This report is an update to the June 25, 1998 report.

Comments:

The report dated June 25, 1998 indicated that 20 of 30 surplus audit staff had been accommodated in terms of voluntary separation, mandatory retirements or redeployment elsewhere in the Corporation. Since that time, of the 10 staff requiring redeployment, a further 8 have been accommodated as follows:

Voluntary exits (Bargaining unit employees)2

Voluntary exit (Excluded)1

Placement outside Corporation (Bargaining unit employee)1

Placement within the Corporation (Bargaining unit employees)2

On Long-Term disability (Bargaining unit employees) 2

8

Consequently, there remains 2 further staff who require redeployment. The following actions have been taken in regards to these staff.

(1)Staff terminations relating to these 2 individuals were delayed until August 31, 1998, so that they had the opportunity to apply for positions becoming available within the Corporation.

(2)A meeting was arranged with representatives of the Ministry of Revenue to explore a significant number of auditor positions currently being recruited by the Province. This meeting was held in the Office of the City Auditor and all staff who had not been placed were invited to attend. The Ministry is currently attempting to hire over 500 auditors and expressed an interest in interviewing surplus audit department staff. However, audit staff requiring redeployment chose not to attend this meeting;

(3)Contact was made with the Treasurer of the City of Markham in regards to Markham's requirements for hiring financial analysts and operational auditors. I am not aware that staff have made contact with the City;

(4)Contact has been made with the Toronto Hydro and the Toronto Transit Commission in regards to potential vacancies. No vacancies currently exist; and

(5)Ongoing enquiries have been made with the Human Resources Division in order to determine what vacancies may exist.

Conclusion:

Out of a total of 30 staff requiring redeployment, 28 have been accommodated. In regards to the remaining two, all possible means have been investigated in attempting to redeploy staff elsewhere in the Corporation as well as positions outside the Corporation. These efforts will continue for the duration of the staff's period of recall.

Contact Name and Telephone No.:

Jeff Griffiths 392-8461

The Strategic Policies and Priorities Committee also submits the following communication (September 15, 1998) from the President, CUPE Local 79:

We have reviewed the report, "Audit Division Restructuring and Staff Redeployment - Update" (August 31, 1998). It explains the actions taken regarding the placement of surplus audit staff as a result of the decision to contract out the attest audit functions.

For the information of Committee members, we would like to outline the Corporation's responsibility for the placement of union members. The Collective Agreement states that it is the policy of the City to place in other positions Permanent Service employees of the City who may be displaced by reason of...the contracting out of any work...and the deletion or elimination of a position or job classification... The Human Resources Department has the responsibility to meet these obligations and find suitable positions for displaced employees.

There are two bargaining staff remaining who require placement. Both of these permanent employees have twenty-two years of service with the former City of Toronto and are highly qualified in their field. Given the hundreds of job classifications in the City, it is inconceivable that there is not a single suitable position for long term employees with their excellent skills.

Instead, they have been laid off. This is a terrible waste of experience and a serious issue for the Corporation and Local 79.

We request that the Members of the Audit Committee direct the Executive Director, Human Resources, to immediately find positions for these members, in keeping with the terms of our Collective Agreement.

6

1997 Over-Expenditure - Information Technology Services Division

- Former City of Toronto

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendations of the Audit Committee embodied in the following transmittal letter (September 14, 1998) from the City Clerk:

Recommendation:

The Audit Committee on September 11, 1998, recommended to the Strategic Policies and Priorities Committee and City Council the adoption of the report (June 23, 1998) from the City Auditor.

Background:

The Audit Committee had before it a report (June 23, 1998) from the City Auditor respecting the 1997 over-expenditure - Information Technology Services Division for the former City of Toronto.

The Audit Committee also had before it the following reports from the Commissioner of Corporate Services:

-(June 26, 1998) responding to the 1997 over-expenditure report in the former City of Toronto's Information Technology Services Division; and

-(August 19, 1998) providing more information to the Audit Committee on this matter.

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(Report dated June 23, 1998, addressed to

the Audit Committee, from the City Auditor)

Recommendation:

It is recommended that:

(a)In view of the budget implications, the Commissioner of Corporate Services report the 1997 over-expenditures in the Information Technology Services Division (ITSD) of the former City of Toronto and the action taken to date, to the Budget Committee, for information;

(b)the Executive Director, Information Technology perform a review of the agreement with the outside provider of data processing services at the former City of Toronto, to confirm the nature of services provided, the cost of all charges and the budget implications on the division's 1998 and future budgets;

(c)the 1998 budget of the Information Technology Division be monitored to determine the potential impact of unbudgeted commitments on the division, and appropriate action taken; and

(d)the Chief Financial Officer and Treasurer finalize the necessary budget control processes, including the provision of effective management reports, to assist departments in monitoring expenditures against budget.

Background:

Early in 1998, the Commissioner of Corporate Services requested that the City Auditor investigate an apparent over-expenditure in both the capital and 1997 operating accounts of the Information Technology Services Division, former City of Toronto. In addition, the Commissioner advised and kept the Chief Administrative Officer apprised of the situation, and requested the Chief Financial Officer and Treasurer for her assistance in resolving the apparent over-expenditures in an appropriate manner.

Discussion:

The objectives of this review were to:

(a)confirm the over-expenditure in both the operating and capital accounts of ITSD as at December 31, 1997;

(b)determine, if possible, the cause(s) of the over-expenditure; and

(c)implement the necessary budgetary controls and purchase/payment procedures, to prevent a recurrence.

The review included interviews with various Information Technology, Corporate Services, Finance and Budget staff of the former City of Toronto, as well as a review of relevant transactions, management reports and related documentation. The findings of the review, including the actions taken to date, are outlined below:

(i)Operating Budget Over expenditure:

The over-expenditure in ITSD's operating budget for 1997 was $1.27 million. In addition, during our review, we identified a further $562,000.00 in 1997 expenses which had not been accounted for, increasing the division's operating deficit for 1997 to just over $1.8 million.

The overspending on the operating budget was mainly due to unrealized savings anticipated from the former City of Toronto's outsourcing of data center operations in 1997. It would appear that senior ITSD staff believed the overspending problem would correct itself by the year end, following the cancellation of certain software licenses and maintenance contracts that had been encumbered for the entire year. While several licenses and contracts were eliminated, other costs related to the outsourcing more than negated any savings. It does not appear that these additional costs were factored into any variance reporting exercise. In addition, the hiring of 11 additional staff late in 1997 and the payment of lieu time to IT staff at the end of the year, despite variance reports projecting an over expenditure, made an already significant deficit, worse.

The overspending of $1.8 million in ITSD's 1997 operating accounts has been covered by under-expenditures in other operating accounts in the former City of Toronto. Nonetheless, the over-expenditure should be reported to the City's Budget Committee for information.

(ii)Capital Over-expenditure:

The Information Technology Strategy and Plan (ITSP) initiative at the former City of Toronto consisted of 4 separate projects: Corporate Infrastructure; Financial Information Systems (FIS); Electronic Office; and Geographic Information Systems (GIS). ITSD was responsible for the Corporate Infrastructure and Electronic Office projects.

Capital funding for the Corporate Infrastructure project, approved in 1995 and 1996, totalled $7.44 million. An additional $3.85 million was approved in 1997 in a corporate "at large" operating account for the ITSP initiative, of which approximately $3.3 million was available for the Capital Infrastructure project.

Our review indicated that the capital over-expenditure in the Corporate Infrastructure project was just over $2.6 million. The over-expenditure was due to the continued purchase of computer and related equipment by the division during the year, despite variance reports in March and July of 1997, indicating that the project was overspent.

The over-expenditure in the capital account has been financed from the 1997 surplus in the former City of Toronto's current operations. The over-expenditure should however, be reported to the Budget Committee for information.

(iii)Other Factors:

The following factors contributed to the oversight in identifying both the capital and operating over-expenditures in the Division:

(a)The lack of formal financial control procedures with respect to the purchase/payment process, and more importantly expenditure control, within the Division;

(b)Management reports not being available for several months following the mid year conversion to the new Banner Accounting system, making it difficult to properly monitor expenditures against budget;

(c)Funds for computer and related equipment purchases being provided in both the Capital Infrastructure project account and an "at large" operating account, complicating the monitoring of expenditures against budget;

(d)The disabling of the "funds availability" check on the new system; and

(e)The lack of reliable information from and proper analysis by Administration staff in the Division.

(iv)1998 Budget:

During our review we identified additional commitments not provided for in the former City of Toronto ITSD's 1998 budget request. These additional commitments are estimated at $1.4 million. The magnitude of these unbudgeted items could put significant pressure on the consolidated Information Technology Division's 1998 budget, and could result in the division being overspent at year end. Immediate action is therefore required to control the magnitude of the potential over-expenditure in 1998, and minimize the impact on the division as a whole.

(v)Outsourcing of Data Processing Services:

The transfer of the City's data processing operations to an outside provider occurred in July, 1997. The agreement with this provider extends to the year 2000. The City's usage charges are higher than original projections. In addition, a delay in the conversion to the provider's net shared environment, resulted in a surcharge being applied by the provider for the first 6 months of 1998. Consequently, the 1998 expenditure for these services will be significantly greater than budget. A review of the service contract is therefore required to confirm the nature of the services provided, the cost of all charges and the implications on the division's 1998 and future budgets.

(vi)Action Taken:

Appropriate purchase and payment procedures have been implemented by Audit Division staff for the division, including an interim delegation of financial signing authority schedule. Section managers are accountable for their respective budgets and monthly variance reports will be forwarded to them for their review and explanation of variances and any action required. A consolidated monthly variance report for the Division is prepared by the Administration Section and forwarded to the Acting IT Director for his review and approval. A list of licenses and service contracts has been compiled to determine the dollar value of commitments and confirm whether sufficient funds are available to cover these commitments.

As of June 15, 1998, the move to the data processing services provider's net shared environment was completed. As a result, the surcharge, estimated at $150,000.00 per month, will no longer apply.

(vii)Accountability for Over-expenditures:

While the factors identified in section (iii) of this report may have contributed to the over- expenditure situation, senior management is ultimately accountable for the over-expenditures in both the operating and capital accounts. Staff of the former City of Toronto Budget office advised that they attended various meetings with senior ITSD and Corporate Services staff during July and August of 1997, at which budget issues including IT over-expenditures in both capital and operating accounts, were discussed. Budget staff were of the understanding that no further equipment purchases would be made in 1997 and that all spending in this regard would be deferred to 1998. They also advised senior staff that the savings expected from the outsourcing of the City's data processing operations were not materializing and as a result recommended that vacancies in the division not be filled. In spite of the advice from Budget staff and variance reports indicating an over-expenditure, computer purchases continued to be made, additional staff hired and lieu time paid to IT staff.

It should also be noted that based on discussions with Budget and Finance staff, there appeared to be a lack of clarity with respect to the role and reporting responsibilities (Budget Office or Financial Reporting Unit) of budget variances in the former City of Toronto. Staff also indicated that the philosophy regarding the analysis changed to a more consultative approach, wherein departments were accountable for their spending as well as for analyzing and explaining any variances. We agree that the accountability for budgets rest with departments/divisions, and that it is divisional management's responsibility to operate within their approved budget. However, Finance still has an important role in terms of ensuring the financial interests and position of the Corporation are protected. To this end, Finance is responsible for ensuring proper control procedures exists to detect significant variances and other financial issues, reporting these issues to senior management and/or Council on a timely basis, and ensuring that the necessary action is taken.

(viii)Conclusion:

The over-expenditures that occurred in the former City of Toronto clearly demonstrates the need for effective budget control processes to monitor expenditures/commitments against budget so that unanticipated over-expenditures, in both the operating and capital accounts, can be prevented.

With the amalgamation to the new City and commitments being made and accounted for in 7 different systems, each with a different account structure, effective budgetary control is difficult. Commissioners and senior managers must be given the assurance that appropriate processes will be implemented to assist them in monitoring spending against the budgets they are ultimately accountable for. It is our understanding that Finance staff are in the process of developing budget control and related processes, and will communicate these to appropriate City staff as soon as possible.

Contact Name and Telephone Number:

Tony Veneziano, 392-8353.

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(Report dated June 26, 1998, addressed to the

Audit Committee from the Commissioner of Corporate Services)

I have reviewed the City Auditor's report relating to the 1997 over-expenditure in the former City of Toronto's Information Technology Services Division, and confirm that the actions outlined in the report have been addressed; these are:

Purchase and payment procedures have been implemented, including an interim financial signing authority.

Section managers have been made accountable for their budgets and for maintaining and explaining variances.

A list of licences and contracts for the former City of Toronto Information and Technology Services Division has been compiled and sufficient funds are available in the 1998 budget to cover these commitments.

Additional rationalization of the data processing costs will be reviewed with the service provider now that the former Metro and City of Toronto are operating in the same production computer environment.

The conversion referenced in the Audit Report was completed on June 15, 1998. The additional costs associated with running on two computer environments will now be avoided.

Procedures are now in place to monitor the Division's 1998 budget expenditures and status will be reported, as part of the Department's variance reporting exercise.

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(Report dated August 19, 1998, addressed to the

Audit Committee from the Commissioner of Corporate Services)

Purpose:

To provide more information to Audit Committee.

Funding Sources, Financial Implications and Impact Statement:

N/A

Recommendations:

N/A

Council Reference/Background/History:

At its meeting of July 21, 1998, the Audit Committee requested that the Commissioner of Corporate Services provide the Committee with a further report on the 1997 over-expenditure by the Information Technology Services Division (ITSD) of the former City of Toronto, specifically addressing the hiring of additional staff and the purchase of computers by the division.

Comments and/or Discussion and/or Justification:

The responses to the request from the Audit Committee are provided below.

a)Additional Staff Hiring:

The IT division in the former City of Toronto proceeded in mid 1997 to hire an additional 11 employees. It was recognized that with amalgamation, the new hires would possess skills that could be used in a new consolidated Information & Technology Division. The recruiting process was intended to attract staff with database, system integration and networking skills. This hiring was approved by the then Management Board. Also, at that time, there was recognition by the Provincially appointed Financial Advisory Board that Information & Technology staff were necessary and were exempted from the Financial Advisory Board approval process. The funding for these positions was to come from the proposed savings associated with the outsourcing of the mainframe processing which was estimated to result in 20 less staff (only eight computer operators were transitioned to the outsourcer; the others were retrained). The savings expected from the outsourcing contract did not materialize in this time frame, and senior divisional staff did not take into account an over-expenditure in the division as a whole. Consequently, the hiring of additional staff and the payment of lieu time to staff increased the overall over-expenditure in the division, albeit, not significantly.

b)Purchase of Computers:

Four hundred and ten desktop computers were purchased at a cost of $1.0 million, plus 69 portables at a cost of $0.351 million, for a total expenditure of $1.351 million in November, 1997. The Information and Technology Services Division assumed that funds were available, based on the financial information provided at that time. Around this time, discussions also took place between the Information and Technology Directors of the former six cities regarding how the new property tax system could be implemented with existing technology. The Director of Information and Technology Services Division, for the former City of Toronto, indicated that his division might be able to assist by providing some computers from the 479 purchased. Subsequently, the computers for the new tax system were funded from the tax project and the 479 computers were deployed to departments in the former City of Toronto. No computers from the former City of Toronto were deployed to other municipalities.

Conclusions:

N/A

Contact Name:

Jim Andrew

Executive Director

Information and Technology

392-8421

7

Use of Long Term Consultants

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendations of the Audit Committee embodied in the following transmittal letter (September 14, 1998) from the City Clerk:

Recommendations:

The Audit Committee on September 11, 1998, recommended to the Strategic Policies and Priorities Committee and City Council that:

(1)the report (August 31, 1998) from the City Auditor respecting the use of long term consultants, be adopted; and

(2)the firm of Gore & Storrie Limited be put on notice that the City of Toronto requires from them, audited statements of the summary of expenses covering the five-year period from 1993 to 1997, within sixty days of approval of this action by Council.

The Audit Committee advises that it has requested the City Auditor to report back to the Audit Committee on the possibility of a clause being inserted into new construction contracts that if audited financial statements are not submitted within a certain period of time, a financial penalty will be assessed.

Background:

The Audit Committee had before it a report (August 31, 1998) from the City Auditor, reporting as requested by the Works and Utilities Committee on the use of consultants at the Main Treatment Sewage Plant and to look at the issues around long term use of any particular consultant by the municipality.

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(Report dated August 31, 1998, addressed

to the Audit Committee from the City Auditor)

Recommendations:

It is recommended that:

(1)All consulting contracts should be awarded in accordance with By-Law No. 7-1998 and in accordance with City of Toronto policy;

(2)In accordance with past practice, a report be prepared for the information of Council by the Commissioner of Works and Emergency Services indicating the status of all long term consulting contracts and related expenditures;

(3)The standard report on the status of all long term consulting contracts and related expenditures be expanded to include all future commitments, as well as the expected completion date of the appropriate contracts;

(4)All consultants with long term contracts should be required to provide annual financial statements accompanied by a certificate of an auditor licensed under The Public Accountancy Act stating that, in his opinion, the fees charged to the City for the year are appropriate;

(5)The Chief Administrative Officer be requested to report to Council every six months on the use of consultants by the City and all its Agencies, Boards and Commissions;

(6)All departments be requested to identify and report to the City Finance Department consulting arrangements with individuals including incorporated individuals. In addition, Finance staff evaluate all such contracts to determine whether or not an employee/employer relationship exists. If this relationship does exists, appropriate employee deductions should be made;

(7)The City Solicitor be requested to report on whether or not the extent of staff involvement in various consultant's design projects would impact any future legal claim in relation to design issues; and

(8)This report be forwarded to the Works and Utilities Committee for their information.

Background:

At its meeting on March 25, 1998, the Works and Utilities Committee requested that the Audit Committee examine the use of consultants at the Main Treatment Sewage Plant. At its meeting held on May 21, 1998, the Audit Committee requested:

(1)the City Auditor to look at the issues around the long term use of any one particular consultant by the municipality; and

(2)the City Auditor to report on whether or not the design of the Main Treatment Plant had been approved by staff of the municipality.

The Audit Committee also requested the City Solicitor to report to the Works and Utilities Committee on what recourse is available to the municipality to correct the design problems at the Main Treatment Plant at the consultants' expense.

Our examination included a review of Corporate policies and procedures, supporting documentation related to the use of consultants, discussions with department representatives, and other audit procedures wherever appropriate.

Comments:

Long Term Use of Consultants

The majority of significant long term consulting contracts exist in the area of the Sewage Treatment Plants of the Works Department. For this reason, the major focus of our review has been in this particular area. We have, however, identified three additional long term consulting agreements in the Solid Waste Division of the Works Department. We have a number of comments on these contracts also. There may be other long term contracts in existence at other departments, particularly in relation to long term transportation projects. We have not identified these at the present time. However, if our ongoing audit work identifies other long term consulting contracts, we will review them at that point and report to the Audit Committee appropriately.

The Works Department of the former Municipality of Metropolitan Toronto signed a number of consulting engineering contracts in the early to mid 1970's in connection with the Main Treatment Plant at Ashbridges Bay, the Highland Creek Treatment Plant and the Humber Treatment Plant. We have been advised that These contracts were awarded subsequent to a competitive bidding process at that time. Details of these contracts were as follows:

Date SignedConsultantProject

November 1972Gore & Storrie LimitedStage III of the Construction of the Main

(Now operating as CH2MTreatment Plant

Gore & Storrie Limited)

May 1973James F. MacLaren LimitedStage III of the Construction of the (Now operating as FencoHumber Treatment PlantMacLaren Engineers, Inc.)

June 1976Proctor and Redfern LimitedStage IV of the Construction of the Highland Creek Treatment Plant

Prior to 1990, these consultants were awarded contracts in relation to work at each of these locations. Generally, this work did not go out to tender but was awarded to each of the above consultants mainly in recognition of the familiarity and expertise each consultant had in relation to the location.

In September 1990, the former Metro approved and adopted a policy for the selection and retention of architectural and professional engineering consulting services. The intent of the policy was to ensure that individuals and firms providing architectural and professional engineering consulting services have fair access to assignments. Provisions relating to the policy are outlined in Appendix A attached.

The long term agreements relating to each of the Consultants remain in effect on a limited basis with respect to works designed prior to 1990 but not yet built. We have been advised that for continuity of technical expertise as well as for economic reasons, the Department has deemed it beneficial to retain the same engineering firm that performed the detailed design to provide administration and site supervision during construction. It is for these reasons the Agreements remain in effect.

The work required from each consultant was similar. Specifically it included:

(1)Preparation of detailed design, contract plans, specifications and tenders;

(2)General administration during construction including approvals of alternatives in methods and materials, approval of shop drawings, related advice and correspondence together with other matters normally related to those functions of general administration which are performed in the office of the Consultant;

(3)Resident services during construction of the work including placing on the site of the work such resident consultants and inspectors as the Commissioner deems necessary to ensure that the execution of the work is in accordance with the plans and specifications therefor;

(4)Availability of such representatives of the Consultant as the Commissioner deems necessary to serve as witnesses and to assist in the preparation of evidence in any lawsuits that may arise out of the construction of the work;

(5)Such plant startup services of operational assistance as the Commissioner deems necessary;

(6)Pre-design services; and

(7)Periodic plant scale reports.

Each of these agreements was approved by the former Metro Council as have the many revisions to the agreements over the years. The revisions relate to fee increases, changes in criteria for determining maximum payments, computer charges, limits on design fees, etc.

Our review of new design/study projects commissioned by the Works Department at the Main Treatment Plant over the last five years has revealed that a total of 15 new projects were awarded. The award of 14 assignments was in compliance with the former Metro approved policy for the selection and retention of architectural and professional services. An exception was the contract awarded to Gore & Storrie on the Bio-solids Truck Loading Facility. We are advised by management that in order to meet specific timetables, as specified by Council, the normal selection process was bypassed and the contract was awarded to Gore & Storrie Limited under the provisions of their existing long term engineering services agreement with the Metropolitan Corporation. The cost of the project was in excess of $500,000.00 which included the feasibility study, design of the facility and administration and site services during construction. The award of this particular engineering consulting assignment was not reported to Council.

Fees to be paid to each of the consultants are outlined in general terms in the original agreements and are specific in terms of actual services to be rendered. Each design assignment has a maximum fee level as provided for in the agreement. Fees are based on a percentage of the total construction costs of the project. In any event, each agreement contained a provision which required both parties to renegotiate certain components of the fee at five year intervals. To date, no party has initiated a renegotiation of engineering fees. Due to the numerous contracts awarded in connection with the agreements, it would have proved extremely difficult and time consuming at this time, to attempt to verify total fees paid with the original agreements.

As of March 1998, the following cumulative payments have been made to each of the consultants:

ConsultantAmount Paid

Gore & Storrie Limited $70,586,000.00

James F. MacLaren Limited$28,049,000.00

Proctor and Redfern Limited$12,742,000.00

Based on discussions with staff, estimated future commitments are as follows:

ConsultantCommitments

Gore & Storrie Limited$ 2,405,000.00

James F. MacLaren Limited$ 1,735,000.00

Proctor and Redfern Limited$ 710,000.00

The status of these long term agreements and related expenditures have been reported annually to Council. The last report was made to the former Metro Environment and Public Space Committee in January 1997. We suggest that an updated report be issued for the information of Council as soon as possible.

There are a number of issues relating to these long term contracts which require clarification or additional management action. Each of the agreements contains a provision relating to final contract costs which indicates that "Upon completion of all the services performed by the Consultant pursuant to this Agreement, the Consultant shall submit to the Commissioner a final statement, duly certified under oath by a senior professional engineer who is a duly authorized representative of the Consultant setting forth in detail all services performed and all disbursements claimed under this Agreement and at the time of submission of such final statement or within a reasonable time thereafter the Consultant shall submit to the Commissioner the certificate of an auditor duly licensed under The Public Accountancy Act to the effect that in his opinion the charges set forth in such final statement are properly chargeable under this Agreement."

In 1995, during our audit of the former Metro Works Department, we recognized the impracticality of having to provide an auditor's statement covering an unreasonable period of time. For this reason, we recommended that management should request that the three consultants provide frequent audited statements. Based on this recommendation, management requested each of the three consultants to provide audited statements for expenditures incurred up to December 31, 1994.

James F. MacLaren Limited and Proctor and Redfern Limited submitted audited financial statements in accordance with the 1995 requirements of the Department. Subsequent to these initial audits, James F. MacLaren Limited has been providing annual audited statements, the latest of which was for 1997. Proctor and Redfern Limited have not provided financial statements since their initial submission.

To date, no audited statements have been received from CH2M Gore & Storrie Limited. We have been advised by management that a letter was received from CH2M Gore & Storrie Limited informing them that audited financial statements covering the 5 year period from 1993 to 1997 will be provided in the near future. In addition, effective 1998, the company will be providing audited statements annually. We suggest the Department request all consultants with long term agreements to provide audited financial statements annually.

Other Long Term Consulting Contracts:

The Solid Waste Management Division of the Works Department also has long term contracts with three firms for engineering and consulting services relating to the Keele Valley Landfill Site. The agreement limits have been revised through reports to appropriate Committees and Council. These firms are:

(1)Conestoga-Rovers & Associates Ltd. (agreement dated August 1983 and expiring on April1,1998). On May 13, 1998, Council adopted Clause No.8 of Report No.4 of the Works And Utilities Committee, authorizing the amendment of the agreement to December31, 1999 at payment limit of $2,892,790.00 (Payment to date $2,508,020.00);

(2)Dixon Hydrogeology (agreement dated July 1984 and expiring on December 31, 1999) at payment limit of $2,685,100.00 (Payment to date $2,280,697.00); and

(3)Golder Associates (agreement dated May 1984 and expiring on December 31, 1998) at payment limit of $7,176,255.00 (Payment to date $7,170,788.00).

These three consulting firms were retained at the inception of the Keele Valley Landfill Site. According to the Department's reports to Council, their contracts were extended for provision of services mandated by conditions of the Provisional Certificate of Approval governing the development and operation of the Keele Valley Landfill Site at its progressing stages of development. Given their extensive knowledge of the landfill site, and for continuity between the engineering design, the approval process required by the Ministry of Environment, and implementation of present and future work, department management recommended continuing employment of these consulting firms. These recommendations were accepted by the former Metro Council.

Services provided by these consulting firms include the following:

(1)Conestoga-rovers & Associates Limited for general consulting services, landfill gas consulting services including gas utilization and ambient air monitoring, leachate disposal, moisture recirculation, final cover, progressive rehabilitation and site closure requirements at the Keele Valley Landfill Site;

(2)Dixon Hydrogeology Limited for consulting services with respect to groundwater monitoring/modeling, purge well systems, construction supervision/monitoring, producing associated technical reports related to the development of the site and ongoing monitoring and reporting required by the Ministry of Environment and the Certificate of Approval; and

(3)Golder Associates for provision of consulting services with respect to design of the final cover, on site supervision of liner construction, borrow pit development and extraction, geotechnical testing, design and installation of monitoring devices in and under the clay liner, interpretation of data generated, devising geotechnical programs as required, and reporting on a quarterly and annual basis to the satisfaction of the department and the Ministry of Environment.

To date, no audited statements have been received from these three consulting firms. We have since advised management to request from them audited financial statements covering the 5 year period from 1993 to 1997 and annual audited statements in the future.

At this point, we are not aware of other long term contracts in the Works Department of the former Municipality of Metropolitan Toronto or at the other amalgamating municipalities.

General Concerns in Relation to Long Term Contracts with Consultants:

We have raised concerns in prior years relating to arrangements that exist with staff who are employed on a contract/consulting basis. As a result of this arrangement, payment made to these individuals are not subject to statutory payroll deductions. Irrespective of any contractual arrangement which the City may have, Revenue Canada will deem these individuals to be an employee if an employer/employee relationship exists.

Significant tax consequences could arise where an employee fails to withhold income tax when required to do. These penalties are as follows:

(1)A 10 percent penalty for failing to withhold; and

(2)Interest on a daily basis at approximately Treasury Bill rates plus 2 percent.

The status of all contracted individuals should be reviewed. If an employee/employer relationship

does exists, then Revenue Canada's directives pertaining to salary deductions should be complied with.

Staff Approval of Design at the Main Treatment Plant:

The Audit Committee requested the City Auditor to report on whether or not the design of the Main Treatment Plant had been approved by the staff of the municipality. As the Main Treatment Plant has been operating for a number of years, numerous design projects have been commissioned for the Plant. Rather than review each individual project, we have validated the process by a review of the design procedures used for the Bio-Solids Truck Loading Facility.

At its meeting on October 12, 1994 of the Works Committee, Metro Council authorized the design and construction of a biosolids truck loading facility at the Main Treatment Plant at a cost not to exceed $3.85 million. This demonstration facility, with an initial target commencement date of June1, 1995, is designated for the storage and loading of dewatered biosolids to haulage trucks for removal of biosolids off site. For a minimum of five years, this demonstration program is to utilize approximately 50 percent of the plant's sludge for beneficial reuse. It was anticipated that if the results of the trial proved successful, a new full scale facility would be constructed to receive all the plant's sludge.

Results of our discussions and review of documentation have revealed that the Works Department, in commissioning Gore & Storrie Ltd. to conduct a feasibility study on the Bio-Solids Truck Loading Facility in August 1994, specified the study to include design details of a facility to be located south of the Incinerator Building. The final contract drawings prepared by Gore & Storrie were dated December 1994. The facility became operational in August 1996.

According to minutes of regular meetings and correspondence at the time, Works Department staff were closely involved in reviewing the design of this new demonstration facility. In particular, there were discussions on the many challenges facing the project (e.g. space constraints, odour control initiatives and truck loading arrangements). We have been advised that the intent of staff's involvement is to highlight potential operational and maintenance concerns so that they are addressed at the design phase. Management advised us that while relying on the consultant's professional expertise, the Works Department representatives primarily review the consultant's finished products (such as final design drawings, tender documents, operation manual) for obvious omissions. The final design drawings bear the professional stamps and approval of the consultants.

The existing long term agreement under which the contract with Gore & Storrie Limited was commissioned, also stipulates that the Metropolitan Corporation has the rights "to recover damages from the consultant arising from the failure of the consultant to perform such professional services in accordance with the terms of the agreement". Based on our review, final design approval and responsibility is that of the consultant. While staff may be involved in the design process, it is the consultant who ultimately signs off in a professional capacity on all such projects. Whether or not the extent of staff's involvement would impact any future legal claim in relation to any design issues is a legal matter and should be reviewed by the City's Legal Division.

Contact Name and Telephone Number:

Rafiq Dosani 392-8438.

(A copy of Appendix A, titled "Municipality of Metropolitan Toronto Policy for the Selection of Architectural and Professional Engineering Consulting Services", referred to in the report, was circulated to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting of September 24, 1998, and a copy thereof is on file in the office of the City Clerk.)

8

Progress Report on Amalgamation

(City Council on October 1 and 2, 1998, amended this Clause by adding thereto the following:

"It is further recommended that the Chief Administrative Officer be requested to submit:

(1)any future administrative changes that will directly or indirectly affect service levels to the relevant Standing Committee, prior to adoption; and

(2)all proposed changes having policy implications to the appropriate Standing Committee at an early stage, for direction.".)

The Strategic Policies and Priorities Committee recommends the adoption of the report (September 11, 1998) from the Chief Administrative Officer:

Purpose:

The purpose of this report is to update Council on the status of amalgamation of the administration that has been underway since the creation of the new City of Toronto on January 1, 1998 and to respond to related requests of Council.

Source of Funds:

There are no funding implications with respect to this report.

Recommendations:

It is recommended that the Chief Administrative Officer report back within six months, but no later than March, 1999, to the Strategic Policies and Priorities Committee on the progress of amalgamation within the Corporation.

Background:

City Council, at its meeting of February 4, 5 and 6, 1998, had before it a report entitled, "City of Toronto Administrative Structure," dated January 22, 1998, which outlined options for the departmental structure and the clustering of services for the new City. Council directed that "the Chief Administrative Officer report on a regular basis to the Strategic Policies and Priorities Committee on the progress of implementation of the administrative structure." Council also requested that the CAO report to the Special Committee to Review the Final Report of the Toronto Transition Team on progress reports, on the strategic directions secretariat, on the names of the service clusters, and on the title of positions below the Commissioner level.

Phased Approach to Amalgamation

At the February 4, 5 and 6, 1998, meeting of City Council, the report, "Strategic Restructuring Initiative" (January 19, 1998), outlined a three-phased approach to corporate restructuring for 1998.

Phase One was the establishment of the overall administrative structure of the new organization. This phase was completed with the adoption by Council of the creation of six departments to be headed by Commissioners reporting to the Chief Administrative Officer. The hiring of all Commissioners was completed by April, 1998.

Phase Two was the design of the internal organization of each department. The first component was the design of the main divisions and the creation of positions reporting directly to the Commissioner. The second component was the design of the sub-units within the divisions and creation of management positions below the Executive Director and General Manager level. Corporate organizational design guidelines were developed to ensure consistency across the Corporation while recognizing the need to allow sufficient flexibility to meet individual departments' needs. The design aspect of Phase Two will be completed by the fall of 1998 and hiring completed by early 1999.

Phase Three of the corporate restructuring process is the integration and rationalization of the municipal services previously provided by the seven former municipalities. This phase, which is in its initial stages, will examine opportunities for delivering services more efficiently and effectively, drawing on best practices elsewhere, exploring ways to reduce costs and to meet 1999 reduction targets. The initial analysis should be completed by the end of 1998 in order to prepare for the 1999 budget process.

The three-phased approach is outlined in Figure 1.

Process of Restructuring Departments

Amalgamation has been an enormous undertaking. The phased approach to amalgamation has provided a means to manage and coordinate this ambitious initiative. Three major issues underlie this approach. First, there has been the need to stabilize the new organization and establish a clear management accountability structure, as quickly as possible. Second, there has been the need to meet major cost reduction targets in 1998 and beyond. A 10% reduction in overall costs in amalgamating departments has been targeted as one of the critical outcomes of this process. Third, and most important, has been the need to continue to provide uninterrupted delivery of high quality municipal services through this period of uncertainty and major transition. This has required extraordinary effort on the part of staff in all areas, which should be recognized.

Significant staff effort has gone into the process and analysis for creating new departmental structures. The Amalgamation Office, within the CAO's Office, has had a lead role in marshalling internal and external resources, providing guidelines and frameworks for departments in carrying out their restructuring efforts, ensuring consistency across the corporation, identifying inter-departmental issues and linkages, tracking the corporate downsizing targets, developing a communications strategy and generally maintaining the impetus for administrative amalgamation.

Each department has appointed senior level Amalgamation Team Leads to oversee the restructuring effort and subsequent service rationalization phases. Departments have invited staff at various levels to provide input into the development of the vision and business goals for the department and how the department should most effectively be structured to achieve these goals.

External consulting firms have been engaged to complement internal resources assigned to departments and, particularly, to provide an outside, objective opinion on the organizational design proposals of departments based on their expertise and knowledge of best practices in other organizations within and outside of Canada. Council approved, at its meeting of April 29 and 30, 1998, funding of $2.5 million for external consultants to assist in the restructuring effort. To date, approximately $2.0 million has been expended on thirty projects involving ten consulting firms to assist in the organizational design of divisions. A more detailed breakdown on expenditures and work by external consultants will be forwarded in a separate report to the Budget Committee in October, 1998.

Many human resources initiatives have been undertaken to complement the restructuring effort. A major internal recruitment effort has been underway over the past five months to fill the new positions in the organization. All departments have been requested to develop downsizing plans to meet financial targets. Human resources policies have been developed to ensure fair and equitable recruitment processes, to address interim compensation issues, and to create employee exit plans that treat employees fairly while addressing the needs of the employer.

The overall goal of these efforts is to achieve an interim organizational structure that is well-thought out, that is the result of rigorous analysis, that includes staff in its development and that effectively meets customer and client needs. All this must be achieved within a fiscally sound framework. Corporate restructuring will be a continuing process over the next several years as the organization reviews its services and methods of operation in greater detail, and Council develops a vision for the City and makes fundamental policy decisions on major service delivery issues.

Status of Departmental Restructuring

The senior administrative structures for the six departments of the new City of Toronto are now complete (see Figure 2). In the majority of departments, the entire management structure is in place. However, in departments with the largest number of staff, or which began the process later, the structuring process is still underway but should be completed by the end of 1998.

This section briefly describes the status of restructuring in each department, as of September, 1998.

Finance Department

This department has a budget of $41 million and approximately 716 full time equivalent staff. The design of the management structure was finalized and approved by the CAO in June, 1998. The recruitment for all senior management positions was completed by July, 1998. ( Figure 3)

Urban Planning & Development Services

This department has a budget of $70 million and approximately 1,014 full time equivalent staff.

The management structure for the Buildings, Municipal Standards and Urban Planning Divisions was finalized and approved by the CAO in July, 1998. Recruitment is complete in the Buildings Division while the process is still underway in the other two Divisions. A review of the organizational structure of the Licencing Commission is currently underway. (Figure 4)

Community and Neighbourhood Services

This department has a budget of $2.4 billion and approximately 9,304 full time equivalent staff. The amalgamating components of this department are Public Health, Toronto Public Library and Housing. The organizational design for Public Health was finalized and approved by the beginning of June and senior management appointments completed in July, 1998. The organizational structure for the Toronto Public Library was finalized and approved in July, 1998. All senior management positions are now in place. The Housing Division is currently in the process of developing an organizational structure. (Figure 5)

Works and Emergency Services

This department has a budget of $1.1 billion and approximately 9,420 full time equivalent staff. The organizational designs for the Solid Waste, Technical Services, Transportation, and Water and Wastewater Divisions were finalized and approved by the CAO in July, 1998. All senior management positions are in place, and work is continuing on the design of the rest of these divisions as well as the recruitment process. Recruitment at various management levels of Fire Services is completed. Ambulance Services is an amalgamated service but structures may change as a result of Phase Three work, would be reported on further to Council. (Figure 6)

Corporate Services

This department has a budget of $237 million and approximately 2,528 full time equivalent staff. Organizational designs for audit services, city clerk's, communications, facilities and real estate, fleet, human resources, information technology and legal services have been finalized and approved by the CAO over the last several months with the final division approved in September, 1998. The senior management structure of this department is now complete and most senior management positions have been filled. Recruitment continues at other management levels in the various divisions. (Figure7)

Economic Development, Culture & Tourism

This department has a budget of $240 million and approximately 3,963 full time equivalent staff. The delayed hiring for the Commissioner's position, until April, 1998, has resulted in this department lagging behind the others in finalizing its organizational design. However, the organizational design for the senior management structures of five of its six divisions - Administration and Support, Economic Development, Parks and Recreation, Policy and Development, and Special Events - was finalized and approved by the CAO in August, 1998, and recruitment is underway. The organizational design of the Culture Division is awaiting the final resolution of the governance issue regarding Heritage Toronto. (Figure 8)

Corporate Management Framework

While restructuring has been a major priority of the organization, other related initiatives have also been underway as the organization moves from Phase Two to Phase Three. The corporate management framework is intended to provide an overall context within which major change will take place within the organization over the next several years. This framework was outlined in the report, "Corporate Management Framework" (April 27, 1998), which was approved at the Council meeting of May 13, 1998. The four key elements of the framework are:

(a)Creation of a broad Council vision for the community through the development of a strategic plan

(b)Development of multi-year program plans to implement the strategic plan and define departmental service objectives and capital investments

(c)Development of annual budget plans to operationalize program plans, set annual services levels, approve capital projects and define performance expectations

(d)Introduction of individual performance standards linked to defined objectives and measures of success

Work is underway in all four areas. In particular, it should be noted that a report on a terms of reference for a strategic planning process will be before the Strategic Policies and Priorities Committee meeting of September 24^th, 1998.

Senior staff have already begun to engage in a discussion of corporate values and aspirations. Some emerging themes include:

(a)ensuring a high quality of life for citizens through the provision of quality, customer driven services, which result in high levels of satisfaction

(b)having a reputation for innovation and leadership in the municipal sector

(c)being an employer of choice and one that communicates effectively and openly at all levels both internally and externally

(d)being a fiscally prudent organization, one that plans actively and with a long term view.

These are preliminary directions which will be refined and elaborated on further through engaging staff at all levels in the organization and by linking up with Council's vision for the City.

Service Integration and Rationalization

As part of Phase Three, major departmental initiatives are underway to integrate the services of the seven former municipalities. City Council, at its meetings on July 8 and July 29, 1998, approved a series of major one-time transition projects to assist the City in moving towards an integrated and streamlined set of services. Council approved thirty-two transition projects at a total 1998 cost of $36,652,000.00.

As one of the transition projects, Council also approved $2.5 million for departments seeking external assistance for specific service rationalization initiatives. A key criteria for approval of projects is that they must show a significant return on investment. To date, twenty projects in four departments have been approved.

Major projects are also underway with respect to:

(a)the harmonization of user fees (as first discussed in a report before City Council at its meeting of June 3, 1998)

(b)service level reviews (which will be before the September 24, 1998, meeting of the Strategic Policies and Priorities Committee)

(c)alternate service delivery approaches

(d)restructuring the delivery of internal support services

(e)developing a space planning strategy, including the role of the six civic centres.

All of the above initiatives have major policy implications. All policy issues will be brought before the appropriate committee and Council for direction and final decision.

Communications

An important element of amalgamation is to ensure effective communications to Council, to employees and to the public. Given the rapid pace of change, this is a particularly challenging aspect of the amalgamation effort.

To date, the first two of a planned series of Councillor briefings have been convened to which all members of Council were invited, to provide an update on the progress of amalgamation. These briefing sessions will continue over the coming months. In addition, there have been monthly updates which will also continue. A Council Panel has been set up to oversee the use of external consulting assistance. This Panel has met at various times this year. Progress reports to Council will continue. I am recommending that the next report be within the next six months but no later than March, 1999.

Given the significant movement of staff within the former municipalities, key staff contacts which individual Councillors have in the past dealt with may no longer be available. Council can be assured that services are continuing but it is recognized that these changes impact on members of Council in trying to respond to individual citizens' inquiries and to address community council issues. Every effort is being made by departments to ensure that key contact names are available to members of Council. The decentralized service delivery model in the major operating departments, through the creation of service districts, is focused on ensuring the appropriate delivery of services at the community level. As the organization stabilizes and positions are filled, the issue of key contacts should diminish. Staff know that this is a matter of concern and will continue to monitor the situation.

An extensive effort has also been underway to keep employees at all levels in the organization informed about changes as they occur. A monthly employee newsletter, Inside Toronto, has been set up since the beginning of this year. Departmental newsletters have also been created. A communications liaison has been assigned to each department. The CAO and Commissioners have had a series of meetings with staff of the former municipalities to advise them of the progress of administrative amalgamation and to respond to questions. The CAO and Commissioners have also visited a number of work locations to see operations at first hand and to answer questions from staff.

A comprehensive communications approach for the new City has been developed with the assistance of external consultants. Implementation of the strategy will be the responsibility of the Communications Division.

Council, staff and the public need to know what the organization has accomplished over the past number of months during this time of major transition. A list of key accomplishments was circulated to Councillors and staff in June (see Appendix).

Other Issues

There are various directives of Council resulting from its meeting of February 4, 5 and 6, 1998, concerning the role and function of the Strategic Directions Secretariat, the names of service clusters and linkages, and the issue of job titles, which are addressed below.

Strategic Directions Secretariat

The Final Report of the Toronto Transition Team recommended the creation of a Strategic Directions Secretariat, reporting to the CAO, to coordinate the amalgamation effort, to address inter-governmental and inter-sectoral issues and to promote a corporate perspective on Toronto as a healthy city. All these matters are currently being addressed and coordinated in the CAO's Office.

Initial organizational design work has been completed regarding the corporate policy functions and the Director position has been filled. Work is continuing on the role of the office and the functions that it will perform. This will include matters such as strategic planning, healthy city monitoring, intergovernmental coordination and corporate performance tracking. The CAO has also established an interdepartmental committee on the environment and is reviewing opportunities for similar cross-departmental teams to address key areas.

The Transition Team's Final Report also recommended the creation of the Office of Economic Development in the CAO's Office. Given the scope, magnitude and importance of economic development to the future health and well-being of the community, Council's decision has been to place this important function within the Economic Development, Culture and Tourism Department. This results in its integration with related activities as well as ensuring that significant senior management resources are in place to manage this critical function. Its importance is further highlighted by Council's decision to create a standing committee on economic development.

Service Cluster Names/Linkages

The Special Committee to Review the Final Report of the Toronto Transition Team requested the CAO to report on any suggested changes to the names of service clusters (i.e. departments) and title of Commissioners. All Commissioners have been requested to review this request and to forward any proposed changes for discussion by the Senior Management Team this month. Any proposed changes will be forwarded to the Special Committee in October, 1998, for consideration.

City Council also requested that the issue of linkages and improvements between departments be addressed, particularly with respect to recreational programs for high needs communities. A discussion paper has been prepared by the Economic Development, Culture and Tourism Department, which is before the September 18^th, 1998, meeting of the Economic Development Committee, outlining key issues and opportunities in the department. The report recognizes the need to build linkages to other departments in the planning and delivery of services. This issue will continue to be monitored.

Job Titles

City Council, at its meeting of February 4,5 and 6, 1998, requested the CAO to review the titles used for positions below the Commissioner level, including the use of the title, "Commissioner," and to report back to the Special Committee. A consulting firm specializing in compensation matters has been commissioned to review all aspects of job descriptions and compensation within the new organization. Its terms of reference encompass the requests described above. This study will be completed early in 1999. Recommendations arising from the study will be forwarded to Council for consideration.

Conclusion:

Significant progress has been made over the past nine months on the administrative amalgamation of the seven former municipalities into a unified City of Toronto. The management restructuring process is completed or near completion in all departments. Major initiatives are underway in a number of areas related to the integration and rationalization of services. The findings and recommendations of these projects will have significant policy implications which will need to be addressed by Council over the coming year.

City Council, the Strategic Policies and Priorities Committee and the Special Committee to Review the Final Report of the Toronto Transition Team had directed staff to provide various progress reports on amalgamation to these committees. In order to simplify and coordinate the presentation of these progress reports, it is instead recommended that the next report be forwarded to the Strategic Policies and Priorities Committee within six months but no later than March, 1999.

Contact Names:

Brenda Glover, Executive Director, Human Resources and Amalgamation, 397-9802

Roda Contractor, Senior Policy Advisor, Amalgamation Office, 397-0459

(Memorandum dated June 24, 1998, addressed

to Members of Council, from the Chief Administrative Officer)

At my request, staff from all the departments have been compiling a list of achievements in the City's first 150 days. I am pleased to provide to you a copy of those accomplishments that you may wish to refer to when speaking with your constituents.

As I scan this list I feel a great deal of pride in what we have all been able to accomplish - with Council and staff working together in our first six months.

On behalf of all staff I would like to thank you for your support and thoughtful direction to date. We look forward to continuing to build a positive and productive relationship with Council.

--------

150 Day Departmental Success Stories

We are half way through our first year as a unified City of Toronto and we have accomplished so much in such a short time together! Here are highlights of our accomplishments in our first six months:

Corporately,

(i)an operating budget with no increases in taxes was delivered on time and was adopted by Council in April;

(ii)a senior management team comprised of the CAO and six Commissioners was confirmed by Council;

(iii)a strategy to combine seven municipalities into one was developed, external consultants hired and amalgamation teams established;

(iv)the organizational structure was established and 80 per cent of the staff who lead the divisions have been hired;

(v)a reduction of 1278 staff has been identified and is on target;

(vi)key human resources strategies for the new organization were approved by Council;

(vii)Council approved a new logo for the City;

(viii)a centralized one-number call centre for general inquiries to the City was put in operation and now handles an average 4000 per week;

(ix)"Our City booklet was distributed to every household in the City;

(x)more than 1000 proclamations and letters of greetings were sent to residents and businesses;

(xi)a City of Toronto Web site was developed and now receives up to 7000 "hits" a day;

(xii)Council selected City Hall as the seat of government and approved plans for renovations;

(xiii)all former civic centres have been linked electronically;

(xiv)more than 50 Council and Community Council meetings and over 130 committee meetings were held;

(xv)almost 500 applications from citizens for positions on Boards and Commissions have been received;

(xvi)a smog alert response plan for the City was developed, approved by Council and implemented for the first time on June 25;

(xvii)a surplus property disposal project with the objective of raising $60 million in additional revenue was implemented;

(xviii)a corporate plan for dealing with the year 2000 problem was developed.

In the area of Community and Neighbourhood Services,

(i)Council appointed a Children's Advocate and established a Children's Action Committee;

(ii)a strategy to fund additional child care for Ontario Works from welfare savings was developed;

(iii)an average of 4,183 people were assisted by Hostel Services per night;

(iv)community grants programs were consolidated and funding to agencies maintained;

(v)an average of 84,764 social assistance cases were served each month;

(vi)40,434 social assistance cases were helped to become independent of social assistance;

(vii)Council established a Strategy Committee for People Without Homes and an Action Task Force on Homelessness;

(viii)Library Answerline was established, a city-wide library policy for circulation and fees approved, and more than 11.4 million items are now in circulation;

(ix)a city-wide Healthy Babies, Healthy Children program was established;

(x)an additional $1.2 million in funding was secured for the Child Nutrition programs that serve more than 30,000 children in 240 schools and community locations;

(xi)a Parents Helping Parents program was established and is set for a July 1 launch;

(xii)community grants programs were consolidated and funding to agencies maintained.

In the area of Economic Development, Culture and Tourism,

(i)A successful Winter Carnival was held in February and Celebrate Toronto Street Festival is set for July 1;

(ii)A Millennium Task Force has been established;

(iii)Council and Canadian Olympic Association approval was obtained for Toronto's bid for 2008 Olympics;

(iv)a Youth Employment Summit was held in April.

In the area of Planning and Urban Development Services,

(i)a uniform building permit bylaw was approved by Council;

(ii)standardized fees for building permits and planning applications were introduced;

(iii)several important bylaws have been consolidated for Council's approval;

(iv)the process to develop a new Official Plan for Toronto was approved by Council and is underway

(v)Work began on the Yonge/Dundas redevelopment project as soon as approval to proceed was received by the OMB;

(vi)Numerous major development projects are now underway such as Downsview, the Railway Lands Settlement, and the Air Canada Centre among others;

(vii)a review of the taxi cab industry is underway;

In the area of Finance,

(i)A $ 50 million grant and $ 100 million loan to offset transition costs were secured from the Province;

(ii)A contract for consolidated banking services, which will save more that $400,00.00 annually was approved by Council;

(iii)Standardized due dates, a convenient pre-authorized tax payment program and standardized administrative service charges related to property taxes have been approved

(iv)The majority of the City's insurance program has been consolidated at a cost saving of $4.9 million, or 54 per cent from 1997 costs;

(v)Information about business opportunities (request for proposals) is now available on-line through the City's Internet site.

In the area of Works and Emergency Services,

(i)Fire and Ambulance Services are now headquartered at 4330 Dufferin Street;

(ii)$8 million was secured from the Province to fund the City's Ambulance Communications Centre;

(iii)Breaking down the geographic boundaries of the former municipalities has resulted in initial savings of resources in the area of roads maintenance and waste collection, with additional savings expected as amalgamation proceeds;

(iv)a coordinated winter maintenance status reporting system was implemented resulting in better equipment and manpower allocation during snow storms;

(v)Environment Days have been, and continue to be held and clean-up days have been organized citywide;

(vi)a new computer aided dispatch system for ambulance services was installed;

(vii)a new fire command system that replaces the six former command systems is now in place;

(viii)Alarmed for Life, a residential smoke detector inspection program, has been implemented.

9

Response to Bill 56, the "Greater Toronto Services Board Act"

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the report (September 16, 1998) from the Chief Administrative Officer:

Purpose:

To outline a Toronto City Council response to Bill 56, the "Greater Toronto Services Board Act."

Funding Sources, Financial Implications and Impact Statement:

There are no immediate financial implications.

Recommendations:

It is recommended that:

(1)the provincial government be requested to make the following amendments to Bill 56:

(a)provide a definition of the term "strategy" in section 1 (1);

(b)amend section 22 to provide that:

(i)the Board be required to adopt strategies for municipalities within the GTA with respect to the provision and optimal use of infrastructure;

(ii)infrastructure strategies that the Board adopts respect the provisions of official plans as amended from time to time;

(iii)infrastructure planning undertaken by the Province has regard to the strategies of the Board;

(iv)the actions of the Board, its operators and agents be consistent with the Board's strategies; and

(v)municipalities be required to certify to the Board consistency of proposed new municipal infrastructure with Board strategies as part of the demonstration of need in the Environmental Assessment process;

(2)Council inform the Minister of Municipal Affairs and Housing that the City of Toronto opposes the method of levy apportionment based on weighted assessment, as set out in clause28 (2) of Bill 56, and request the provincial government to work with City staff to identify alternative approaches to levy apportionment by the GTSB;

(3)Council request the provincial government to amend Bill 56 by removing the GTSB's power to directly access financial markets;

(4)Council request the provincial government to amend section 41 of Bill 56 in order to increase the City of Toronto's representation on GT Transit to 50 per cent;

(5)this report be forwarded to the Minister of Municipal Affairs and Housing, all Regional and Area Municipal Councils in the GTA, the Council of the Regional Municipality of Hamilton-Wentworth and Mr. Alan Tonks, the GTSB Moderator, as the City of Toronto's response to Bill 56; and

(6)The appropriate City Officials be authorized and directed to take the necessary action to give effect thereto.

Background:

On June 25, 1998 the Ontario Legislature approved First Reading of Bill 56, the "Greater Toronto Services Board Act." The legislation, if enacted, will provide for the creation of a Greater Toronto Services Board and a Greater Toronto Transit Authority (GT Transit), effective January 1, 1999.

The introduction of Bill 56 follows the review by Mr. Alan Tonks, GTSB Moderator, of draft legislation that the provincial government circulated to municipalities throughout the GTA in March 1998. Council adopted its response to the draft Bill on April 16, 1998 (Clause No. 14 of SPPC Report No. 4). Some, but not all, of Council's recommendations, are reflected in Bill 56.

It is anticipated that the Bill will come before the Legislature for Second Reading during the Fall Session and then be sent to a Committee of the Legislature for review and public input.

Comments:

The Act establishes the Greater Toronto Services Board whose objects are to promote and facilitate co-ordinated decision-making among the municipalities in the Greater Toronto Area and to exercise general direction and control over GT Transit. The primary object of GT Transit, which the Act also establishes, is to operate the regional transit system (GO rail and bus services) serving the GTA and the Regional Municipality of Hamilton-Wentworth. The highlights of Bill 56 are outlined in Appendix1.

Establishment of a GTSB:

The GTA Task Force, Burnham Review Panel, Who Does What Panel, Milt Farrow Final Report and the Final Report of the Toronto Transition Team all concluded that there is the need for an institution to deal in a unified and co-ordinated way with the problems facing the GTA. Legislation to create the GTSB is a step in the right direction.

Infrastructure Co-ordination:

The GTSB will present a major opportunity to address region-wide infrastructure planning and provision in a co-ordinated manner.

A GTSB role in transportation infrastructure co-ordination will benefit the GTA because, in the past several years, the provincial Ministry of Transportation has decreased its own role in the co-ordination of transportation. This is especially pertinent now given the exit of the Ministry from municipal road infrastructure financing.

The GTSB has the potential to take a lead role in long-term GTA-wide transportation planning and the creation of a GTA transportation master plan. In addition, the GTSB could take a lead role in the co-ordination of new transportation infrastructure that is proposed to cross municipal boundaries. Examples of future projects could include the Morningside-Markham link, the rapid transit link to the airport and future extensions of subway/rapid transit services to the north and west. The GTSB could also help co-ordinate the introduction of Transportation Demand Management measures across the GTA and could provide the lead role in the identification and advocacy for alternative sources of transportation revenue.

The formation of a Commissioners GTA Round Table Forum on Solid Waste Management as well as a forum of GTA Public Works Committee Chairs in 1998 signals recognition of the need to co-ordinate responses to solid waste management, water supply and wastewater treatment issues across the region. The GTSB will be able to play a valuable role in assisting and formalizing these efforts at infrastructure integration among GTA members.

The role for the GTSB in promoting co-ordination and developing advisory strategies for municipalities in the GTA with respect to social assistance and social housing is welcome. This is a particularly appropriate role for the GTSB now that costs of these programs are pooled across the GTA. In addition to considering the costs and administration of social assistance and social housing, the GTSB will have the potential to support a more co-ordinated approach in identifying needs related to these programs and developing co-ordinated strategies to address the needs.

Other forums to discuss GTA issues do exist. These include the GTA Mayors' and Regional Chairs' Committee and the Greater Toronto Co-ordinating Committee under the auspices of the provincial Office for the Greater Toronto Area. These forums have generally only been successful where the Councils of the affected municipalities could reach a mutually beneficial agreement, often with provincial subsidies provided as an incentive. They have failed to resolve major issues related to growth management in the GTA. In addition, they lack formal powers or even the formal accountability structures to be persuasive.

The GTSB will provide a more balanced forum for the debate of GTA issues. Its representative structure and legislated mandate will provide a more accountable means for setting and addressing the region-wide agenda than groups such as the GTA Mayors' and Regional Chairs' Committee. It is recommended that Council support the establishment of a GTSB as constituted in Bill 56, subject to the following comments.

Growth Management Issues:

Ensuring that urban growth respects the natural environment and provides the most cost effective and efficient use of infrastructure and scarce public resources is a major challenge facing the GTA. Growth management requires co-ordinated decision-making and the co-operation of all levels of government in the development of land and the provision of infrastructure and services. Bill 56 is a significant first step in meeting the challenge but has some shortcomings that can be addressed through amendments to the Act.

Paragraph 1 in section 3 of the Act lists one of the objects of the GTSB as being to "promote and facilitate co-ordinated decision-making among the municipalities in the Greater Toronto Area."

Section 22 (1) states that "for the purpose of carrying out its object under paragraph 1 of section 3, the Board may promote and facilitate co-ordinated decision-making among and adopt, by by-law, strategies for municipalities within the GTA with respect to the provision and optimal use of infrastructure.

The Executive Director of City Planning/Chief Planner advises that the provisions in section 22 give rise to the following concerns:

(i)Fundamentally, the Act does not link strategies of the Board respecting inter-regional infrastructure to land use and planned growth as expressed in approved official plans. The "Planning Act" provides that all municipal by-laws and public works must conform to the provisions of official plans. The "Planning Act" also provides that, where regional official plans are in effect, local municipal plans must conform to them. The Ministry of Municipal Affairs and Housing has approved official plans for all regions within the GTA. These plans provide for long-term population and employment growth and establish urban settlement boundaries. It is important that the pre-eminence of planning policy be recognized in the provisions of Bill 56.

(ii)Bill 56 contains no definition of the term "strategy." A definition would provide clarity.

(iii)The adoption of a strategy under section 22 is not a requirement of the Board. It is an option. This weakens the Board in its role of promoting and facilitating co-ordinated decision-making.

(iv)There is no provision for the Board, its operators and agents to act in a manner consistent with Board strategies. This is an important omission. For example, a Board strategy aimed at curbing urban sprawl could be compromised if, under section 61 (1) (j), the Board entered into agreements with upper tier or single tier municipalities for the provision of transit services outside the transit area (that is, the GTA and Hamilton-Wentworth), which could promote sprawl.

(v)The Act makes no reference to provincial infrastructure planning being required to have regard to the strategies of the Board. This type of co-ordination is necessary for the Board to be effective.

(vi)There does not appear to be any requirement for new municipal infrastructure to be consistent with the Board's strategies. It is not clear how compliance would be assured.

In order to address these concerns, it is recommended that the provincial government make the following amendments to Bill 56:

(a)provide a definition of the term "strategy" in section 1 (1);

(b)amend section 22 to provide that:

(i)the Board be required to adopt strategies for municipalities within the GTA with respect to the provision and optimal use of infrastructure;

(ii)infrastructure strategies that the Board adopts respect the provisions of official plans as amended from time to time;

(iii)infrastructure planning undertaken by the Province has regard to the strategies of the Board;

(iv)the actions of the Board, its operators and agents be consistent with the Board's strategies; and

(v)municipalities be required to certify to the Board consistency of proposed new municipal infrastructure with Board strategies as part of the demonstration of need in the Environmental Assessment process.

Financing Issues:

The Chief Financial Officer and Treasurer advises that the draft legislation's provisions concerning the GTSB's ability to finance its proposed responsibilities give rise to several issues. These issues include the manner in which the GTSB apportions costs and is able to levy a charge against member municipalities, and implications for the management of debt.

Ability to Levy the Member Municipalities:

While the Act does not provide the GTSB with the authority to tax directly, it proposes that the GTSB would levy against the Regions of Durham, Halton, Peel and York and the City of Toronto an amount sufficient to pay the estimated operating costs of the GTSB. These levies would be apportioned among the GTA municipalities in accordance with the legislation and the monies owed by the GTA municipalities under this levy would constitute debt of the municipalities.

With respect to GT Transit, the GTSB would be able to impose two levies on its member municipalities (including the Region of Hamilton-Wentworth):

(i)to cover the amount by which the cost of operations and non funded liabilities exceed revenues; and

(ii)for the cost to the GTSB of capital borrowing for GT Transit.

These levies would constitute debt of the member municipalities.

Levy Apportionment:

The method of levy apportionment, as set out in section 28 (2) of the Act, would be based upon the total weighted assessment of each of the member municipalities in proportion to the total weighted assessment of the GTA. This method bears no relation to the issue of affordability and ability to pay or to the amount of service that would be utilized by the residents of a municipality. If this method is used to apportion debt obligations and debt charges, it could have negative implications for Toronto's credit rating since the City could be responsible for a level of debt that is in excess of its capacity and impair the City's ability to issue debt for other projects.

In time, if the GTSB's role evolves to encompass a broader range of responsibilities, the balance of whose benefits are broadly distributed across the GTA, including the City of Toronto, a system of levy apportionment based on weighted assessment may make sense. At present such an approach is not in the City's best interest. It is recommended that Council inform the Minister of Municipal Affairs and Housing that the City of Toronto opposes the method of levy apportionment based on weighted assessment, as set out in section 28 (2) of Bill 56, and request the provincial government to work with City staff to identify alternative approaches to levy apportionment by the GTSB.

Borrowing for Capital Purposes:

The draft legislation provides for the GTSB to be permitted to borrow for GT Transit's capital requirements (not including operating) with the passage of a by-law by a 2/3 majority of the Board. Subsections 61 (1) (b) and (c) establish that the GTSB has the power to borrow money to fund the capital requirements of GT Transit and issue debentures, subject to the "Ontario Municipal Board Act." Under subsection 61 (1) (d), the GTSB also has the authority to direct one or more member municipalities to pay money to GT Transit in respect of its capital requirements and it is assumed that these municipalities will probably be issuing debt to finance these contributions. Thus, it appears that the legislation is contemplating a two-stage procedure. Initially the GTSB will require its members to issue debt to provide some initial start-up capital. The GTSB will then enter the financial markets on its own behalf in the future after it has had an opportunity to establish some credibility with potential investors and the credit rating agencies.

Until it becomes clearer how the GTSB's role within the GTA is going to evolve, it should not have direct borrowing powers as these could bring instability to financial markets and impair the flexibility of member municipalities with respect to the issuance of debt. Therefore, it is recommended that the provincial government be requested to amend Bill 56 by removing the GTSB's power to directly access financial markets. Instead, the Board should determine its capital financing requirements and request funding from the member municipalities, which would have the flexibility to raise the funds from reserves, current operations or the issuance of debt. This method could create more flexibility for the members who would not be subject to paying future debt charges that they cannot control and could substitute various forms of capital depending upon their individual circumstances. This would require the GTSB to have some "levying powers" as provided for in the Act.

Representation Issues:

In its response to the draft legislation of March 1998, Council expressed concern that the City of Toronto would be under-represented on both the GTSB and GT Transit in matters concerning GO Transit. The provincial government has addressed this concern in Bill 56 by ensuring that the City of Toronto has half the votes on the GTSB for all matters. The initial composition and weighted voting system gives Toronto 59 votes out of 118 on matters related to GT Transit and 55 votes out of 110 on other matters.

The composition of the GTSB will be reviewed after each national census of population and the composition of the Board will be adjusted to reflect the distribution of population in the GTA. Over time, Toronto's representation on the GTSB will decline as its share of total GTA population declines. However, given the timing of the census, Toronto's initial representation on the GTSB is expected to hold through the 2000 - 2003 term. If the results of the 2001 census are not available in time for the 2003 election, the initial representation model could hold for the 2003 - 2006 term as well.

Under Bill 56, Toronto will continue to be under-represented on the Board of GO Transit, having just one vote out of six. This under-representation is somewhat mitigated by the fact that general direction and control over the GT Transit Authority and allocation of its costs will be exercised by the GTSB, where Toronto will be fairly represented. Nevertheless, it is recommended that Council request the provincial government to amend Bill 56 in order to increase the City of Toronto's representation on GT Transit to 50 per cent.

Conclusions:

Numerous studies have concluded that there is a need to recognize that the GTA is an integrated and inter-dependent social and economic city-region. These studies have pointed to the need to co-ordinate the planning and development of infrastructure across the GTA. The "Greater Toronto Services Board Act" represents the culmination of many years of research and much debate.

The Act is a reasonable starting point and should be supported. It presents a window of opportunity to establish a representative political body that has a legislated mandate to begin to deal with GTA issues. It has taken many years to reach this stage. If the opportunity to create the GTSB is not grasped now, it may not be available for many more years. Yet the problems of uncoordinated growth and inefficient investment in the GTA and their implications for the City of Toronto and, ultimately, the entire city-region, will not disappear.

It is recommended that this report be forwarded to the Minister of Municipal Affairs and Housing, all Regional and Area Municipal Councils in the GTA, the Council of the Regional Municipality of Hamilton-Wentworth and Mr. Alan Tonks, the GTSB Moderator, as the City of Toronto's response to Bill 56.

Contact Name:

Phillip Abrahams, Strategic and Corporate Policy; 392-8102.

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Appendix 1

Highlights of Bill 56: "An Act to establish the Greater Toronto Services Board and the Greater Toronto Transit Authority and to amend the Toronto Area Transit Operating Authority Act"

(A)Composition and Mandate of the Proposed Greater Toronto Services Board

Composition

(1)The proposed GTSB would have an initial membership of 40, including at least one member from each municipality in the GTA, plus a chair, plus one member from Hamilton-Wentworth, appointed only for the purposes of GT Transit.

(2)The chair would be elected by the GTSB members, and would not be a member of any municipal council within the regional transit area, which includes all GTA municipalities and Hamilton-Wentworth.

(3)All GTA regional chairs and Mayors, and the regional chair of Hamilton-Wentworth, would be members. The City of Toronto would have 10 additional members, and the City of Mississauga would have one additional member (who is also a member of Peel Regional Council). The additional members would be appointed by their municipal councils.

(4)After each national census, the GTSB would be required to review the composition of the board to reflect population changes in the GTA. Each municipality in the GTA would continue to have at least one member.

Quorum and Voting

(1)A quorum for non-GT Transit matters must include a majority of members entitled to vote on an issue (at least 21 of the 40 members), and at least one member from a majority of the participating municipalities (one member from within the geographic areas of at least three of Durham, Halton, Peel, Toronto and York).

(2)A quorum for GT Transit-related matters would include a majority of members entitled to vote (at least 21 of 41 members, and at least one member from within the geographic area of four of Durham, Halton, Hamilton-Wentworth, Peel, Toronto and York).

(3)All GTSB members would have at least one vote. Votes would be weighted to achieve representation by population on a regional basis. The Hamilton-Wentworth representative would have a vote with a weight of four on GT Transit issues. (See attached chart.)

(4)The initial composition and weighted voting system gives Toronto 59 votes out of 118 on matters related to GT Transit and 55 votes out of 110 on other matters.

Mandate and Powers

(1)The board would promote co-ordination of decision-making among the municipalities of the Greater Toronto Area.

(2)It would exercise general direction and control over the GT Transit Authority, and allocate the costs of GT Transit and the borrowing to meet the capital requirements of GT Transit.

(3)While GTA municipalities would continue to be responsible for all their own service functions, the GTSB could have a number of roles. It could:

(a)promote co-ordinated decision-making;

(b)act as a liaison among municipalities and other levels of government;

(c)facilitate resolution of matters of inter-municipal concern within its mandate when asked by an affected municipality;

(d)facilitate resolution of matters outside its mandate on request from a member municipality and with a majority vote of the GTSB;

(e)provide for the co-ordination of economic development and tourism with the GTA; and

(f)promote co-ordinated decision-making among, and develop advisory strategies for, municipalities within the GTA with respect to the administration and costs of social assistance and social housing.

(4)The GTSB might also prepare strategies with respect to the provision and optimal use of infrastructure. Adoption would require a two-thirds majority vote. Strategies, once adopted, would have a strong persuasive value, but it would remain up to a municipality to determine whether to implement a GTSB strategy when planning for municipal infrastructure requirements. For example, a GTSB strategy that dealt with solid waste management could not mandate the use or location of existing or new landfill sites.

(5)The GTSB would be able to levy, to cover its own operating costs, against the City of Toronto and the Regional Municipalities of Halton, Peel, York and Durham. For GT Transit purposes, it could also levy against the Regional Municipality of Hamilton-Wentworth.

(6)The GTSB would - prior to December 31, 2000 - review its size and composition, the number of votes assigned to members, powers and boundaries. It would report to the Minister of Municipal Affairs and Housing on or after January 1, 2001. The review might consider redefining boundaries to exclude a municipality, but could not consider an expansion of the current GTSB boundaries.

(B) Composition and Mandate of Proposed GT Transit

(1)The legislation would establish a Greater Toronto Transit Authority (GT Transit) as a corporation without share capital. GT Transit's responsibilities would include the provision of GO Transit rail and bus services.

Mandate of GT Transit

(1)GT Transit has four objectives as proposed in the legislation:

(a)operate (or cause to be operated) a regional transit system (GO Transit) serving the regional transit area and other municipalities by agreement;

(b)operate (or cause to be operated) local transit systems within the regional transit area under agreements between the GTSB and the municipalities within which each local transit system is operated;

(c)exchange information on operation and design matters and integrate services with other transit systems; and

(d)perform duties and exercise powers conferred by this legislation or any other Act.

Composition and Chair of GT Transit

(1)Until 2000, members of GT Transit would include a chair appointed by the Lieutenant Governor in Council, the mayor of Toronto and the chairs of Durham, Halton, Hamilton-Wentworth, Peel and York regions. These are the members of the current Toronto Area Transit Operating Authority, which now operates GO Transit.

(2)After 2000, GT Transit would consist of six members, who are also members of the GTSB, and a chair. One member would be from Toronto, one from each of the regions of Durham, Halton, Peel and York, and one would be the chair of the Regional Municipality of Hamilton-Wentworth. If one of these members is chosen to chair GT Transit, the municipality that appointed the member would appoint another of its GTSB members as its GT Transit member.

(3)Each member of GT Transit would have one vote. The chair would vote only to break a tie.

Powers of GT Transit

(1)GT Transit would be subject to the general direction and control of the GTSB.

(2)Subject to this direction, GT Transit would have the power to undertake the objects set out above. Powers would be similar to those currently provided to GO Transit, including powers to:

(a)acquire and sell land, transit vehicles and equipment;

(b)operating parking lots; and

(c)enter into agreements in connection with the operation of a regional transit system.

GT Transit would employ a managing director, and such other officials and employees as it considered necessary to carry out its mandate.

GT Transit Levy

(1)In addition to levying for its own operating costs, the GTSB would be able to impose two levies against member municipalities for GT Transit purposes - one for the amount by which GT Transit operating costs and unfunded liabilities exceeded revenues, and the second for the cost to the GTSB for capital borrowing for GT Transit.

(2)The levy arising from operating costs would be determined for the transitional period by a formula set out in the legislation and in regulation. The GTSB would be able to amend the formula by a two-thirds vote.

(3)The levy for the cost of capital borrowing would be allocated by the GTSB, by a two-thirds vote, against one or more participating municipality.

(4)The GTSB could also direct regional municipalities and the city of Toronto to make payments for GT Transit capital requirements. They would have the power to borrow to make such payments; if they do so, this debt would be a debt of the participating municipality and not of GT Transit or the GTSB.

10

Invoices from Province for Social Housing

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the report (September 14, 1998) from the Chief Administrative Officer:

Purpose:

To request authority to pay bills submitted to City by the Province for City share of social housing costs

To outline how the Province determined the amounts of the bills.

Financial Implications:

The City has received invoices from the province for social housing costs totalling $106,117,704.99. This report recommends payment of the total amount on or before September 30, 1998. Interest penalty charges apply beginning October 1, 1998.

Recommendations:

It is recommended that Council:

(1)authorize the City Treasurer to pay invoices for social housing totalling $106,117,704.99 for the period January to June 1998 by September 30, 1998, subject to successful resolution of the issue on interest lost due to the delay in the assessment roll; and

(2)request that staff report back on resources required by the City to undertake analysis of costs of social housing providers, in anticipation of devolution of management to the City.

Council Reference/Background:

The billing process and costs are discussed in this section of the report under the following headings:

Billing Process

Equalized Billing

Budget Status

(1)Billing Process

The Social Housing Funding Act, 1997, provides legislative authority for the province to pass on its share of the cost of social housing to municipalities. Starting January 1, 1998, the City of Toronto became responsible for paying an equalized share of the total social housing costs for the Greater Toronto Area.

City staff have had two meetings with ministry officials about the two social housing bills received to date (see appendix A), and are in receipt of a ministry guide Ontario Social Housing Billing Process, August 1998, and a binder of presentation materials on the subject. The following description of the billing process is based on those meetings and documentation provided.

The social housing bill is based on three different social housing program areas: Non-Profit housing programs (includes private, municipal and co-operative non-profits), Public housing (Metro Toronto Housing Authority), and Rent Supplement Programs (agreements with private landlords to house tenants receiving a rent subsidy). All payments made to housing providers in each of the three program areas (net of the share paid by the Federal government under various cost-sharing agreements) are paid initially by the province, and then recovered from the municipal level.

Typical costs incurred by a non-profit or public housing provider include mortgage/debenture payments, property taxes, utilities, capital repairs/reserve fund and manageable costs (property management costs). For the rent supplement program, the cost amount is the difference between the rent paid by the tenant which is geared to their household income, and the market rent for the unit they occupy; the private landlord's operating and financing costs are not passed on.

Some program costs are not included in the bill. These are the ministry's internal program administration costs (although MTHA administration costs are included), costs incurred before January 1, 1998 and year-end reconciliation amounts for non-profit corporations related to budget years before 1998.

Costs set out on the monthly bills reflect monthly payments made by the ministry to housing providers. Each bill comprises a mix of actual costs, estimated costs and adjustments, depending upon the timing of payments to the housing provider in each program area. Payments for rent supplement are made in advance (paid first of the month to cover the entire month - the way rent is usually paid). Payments to non-profit housing providers are made in arrears (paid at the first of the month to cover costs for the previous month - like the way that mortgage payments are usually made). For public housing, payments are made at different times each month depending upon the type of cost (budget item) and, therefore, payments made before the 11^th day of the month will be reflected in the bill for the previous month.

Where costs have been estimated in one month, the following month's bill is adjusted when the actual payments are known. This method of "rolling reconciliation" ensures that reconciliation occurs monthly, rather than at year-end, thereby minimizing year end adjustments. Also, delays between payment of funds to the housing provider and receiving reimbursement for the expenditure from the City are minimized (minimizing carrying costs and interest loss).

For the non-profit and rent supplement programs, reconciliation adjustments will usually be relatively small, as the payments to housing providers tend to be the same from month to month. For the public housing program, expenditures can vary widely between months, leading to relatively large reconciliation adjustments in some months. For example, capital work carried out by non-profit housing providers is paid for through their individual capital reserve funds. The reserves are funded through subsidy payments at about the same level every month. Public housing capital work is paid for through operating funds. That means that the flow of funding is irregular; and becomes higher during the summer construction season. The largest expense for public housing are payments on debentures, which are made annually in arrears. Therefore, the January 1998 debenture payment has not been passed on to municipalities since it covered financing costs for 1997; 1998 financing costs for public housing, however, will be passed through in January 1999.

As mentioned earlier, the municipality will be billed monthly. The exception to monthly billing is the first bill, dated June 15, 1998, which covered three months This "transitional" bill was based on actual costs incurred in all three program areas because actual costs were known at the time the bill was sent.

(2)Equalized Billing

The GTA is unique from other parts of the province in that social housing costs are shared throughout the five "calculation areas" (also called Consolidated Municipal Service Managers, these are Peel, Halton, Durham, York and Toronto). In other areas, each calculation area pays for its own costs.

In calculating the bill, the Ministry sums all social housing costs in all program areas for the entire GTA for the billing period. For example, total GTA costs for July 1998 were calculated at $35,320,704.00. Next, this total is allocated among the five municipalities based on weighted assessment.

Toronto's weighted assessment, relative to the four regional municipalities, is 52.2424 per cent. For example, Toronto's bill for July 1998 will be:

52.2424 per cent x $35,320,704.22 = $18,452,349.00

(3)Budget Status

The City's share of the total estimated 1998 cost for social housing in the GTA represents just over 52 per cent (total GTA cost estimate by province as of May 1998 is $509,697,881.00; City's share is $266,278,406.00; based on a May 1998 release of data by the Ministry); about 74 per cent of all GTA social housing is located within the City. The cost passed on to the City is net of federal funding provided through cost-sharing arrangements for specific social housing program types.

On June 12, 1998, the Province announced that it would no longer require municipalities to assume the costs for dedicated supportive housing. For Toronto, this means that the previous cost estimate for social housing has been reduced, retroactive to January 1, 1998, by $11,784,329.00 according to a provincial estimate, and after being adjusted by GTA pooling. The actual of savings, before equalization, would have been about $19,695,185.00 (based on analysis of May 1998 data from province), which reflects the higher amount of supportive housing provided in the City as compared to the rest of the GTA.

After a review of social housing portfolios in Toronto, staff identified four supportive housing providers which might also fit the definition of dedicated supportive. The province has since advised that one of the groups identified does fit the definition and, therefore, the social housing costs for the group will not be passed on to the City. Based on data from the Ministry (May 1998), the total 1998 municipal cost for this group was estimated at $465,660.00; therefore, equalized share of additional savings to be realized by the City will be approximately $ 242,143.00 (52 per cent x $465,660.00).

Earlier this year, Council approved $266,600,000.00, within the 1998 Operating Budget, to cover anticipated social housing costs for 1998. Since that time, the province has "uploaded" the cost for some supportive housing projects retroactive to January 1998. The City's 1998 social housing costs may, therefore, be reduced by $11,784,329.00 and $242,143.00 to $254,573,528.00 which would reflect a reduction in total provincial downloading. A report is forthcoming in the next meeting of Council as an update on the provincial downloading impact to the City of Toronto..

Conclusion:

Finance and Community and Neighbourhood Services are satisfied with the method used to calculate the costs, but cannot comment on the accuracy of the costs themselves. City staff do not presently have the expertise or data available to make such an assessment, or to do much analysis. However, the Chief Financial Officer/Treasurer and Commissioner of Community and Neighbourhood Services have met with the Assistant Deputy Minister, Housing Operations Division, Ministry of Municipal Affairs and Housing, and have been provided with details about the bills.

We need to become more familiar with the social housing program in preparation for devolution, and have recommended that we report back on the resources that will be required. For more information about social housing devolution, refer to Response to Discussion Paper on Social Housing Reform, Commissioner of Community and Neighbourhood Services, September 1, 1998.

In the meantime, bills received to date from the province total $106,117,704.99, and this report recommends Council authorize payment of these bills by September 30, 1998, subject to successful resolution of the issue on interest due to the delay in the assessment roll, so that interest/penalty charges are not incurred (interest accrues on the outstanding amount beginning October 1, 1998).

Contact Names:

Joanne CampbellTrevor Houghting

General Manager, Shelter, Housing & SupportManager, Accounting Services

Community & Neighbourhood ServicesFinance

Phone: 392-7885Phone: 396-7240

Fax: 392-0548 Fax: 396-5677

Appendix A:Summary of Social Housing Bills received to Date

Total of all four bills is due September 1, 1998. Interest charges (penalty) start accruing October 1, 1998. Subsequent bills will be issued the month following the billing period, and interest charges will begin to accrue 30 days later. For example:

Billing period:September

Invoice sent:End of October

Payment due:Before Nov.30

Penalty Charges apply:After Nov.30

11

Children's Oncology Care of Ontario Inc.

(Ronald McDonald House)

- 356 Dundas Street West - Ward 24

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the following report (September 18, 1998) from the Chief Financial Officer and Treasurer:

Purpose:

To obtain City Council's direction regarding the payment of property taxes for the property at 356 Dundas Street West, currently owned by Children's Oncology Care of Ontario Inc. which has, by virtue of special legislation, been exempt from property tax since January 20, 1986. Should Council not require payment of taxes foregone, then its authorization is sought for the release of the agreement registered on title against the property and the repeal of By-law No. 487-87 exempting the property from taxation for municipal and school purposes. Children's Oncology is in the process of selling the property and has a closing date of September 30, 1998.

Funding Sources, Financial Implications and Impact Statement:

Should Council require the payment of taxes foregone, the City would receive $247,017.41 in exempt back taxes of which $135,350.21 would be payable to the School Board or Province.

Recommendations:

It is recommended:

(1)That Council not require the payment of taxes that have been foregone in the 10-year period preceding the sale of 356 Dundas Street West as a result of the property tax exemption;

(2)That Council authorize

(a)the release of the exemption agreement dated May 16, 1986 from title; and

(b)the repeal of By-law No. 487-87 effective from the date of transfer of the property; and

(3)That the appropriate civic officials be authorized to take whatever action is necessary to implement the foregoing, including the introduction of the necessary bill in Council to repeal By-law No. 487-87.

Comments:

Solicitors for Children's Oncology Care of Ontario Inc. (Ronald McDonald House) have advised that their client has entered into an agreement of purchase and sale with respect to its property at 356 Dundas Street West with a closing date of September 30, 1998. Council of the former City of Toronto had supported Children's Oncology Care of Ontario Inc.'s application for special legislation to exempt the property from taxes for municipal and school purposes (more fully discussed below). The solicitors have requested confirmation that there are no taxes outstanding against the property and that the agreement registered against title with respect to the property tax exemption be released.

The former City of Toronto adopted criteria (Executive Committee Report No. 28, Clause 32, (May20, 1982) to support tax exemptions from property tax through special legislation. One of the criteria was that "the exemption should not be supported by Council unless the legislation proposed provides that the City may enter into an agreement with the designated organization, whereby in the event that the exempted property is sold, then taxes foregone for ten of the preceding years shall be payable to the City, with provision for this liability to be forgiven should the organization have acquired another property in the City and continued its cultural and recreational community services".

Council of the former City of Toronto at its meeting held on May 14, 1984 (Executive Committee Report No. 14, Clause 42) authorized the support of Children's Oncology Care of Ontario Inc.'s application for special legislation to exempt its property at 356 Dundas Street West from taxes for municipal and school purposes in the form attached to the April 27, 1984, report of the Commissioner of Finance (discussed below).

The application for special legislation was approved by the Province and the Children's Oncology Care of Ontario Inc. Act, 1986 received Royal Assent on January 20, 1986. The legislation provides that Council may pass by-laws exempting from taxes for municipal and school purposes, other than local improvement rates, the property at 356-358 Dundas Street West so long as the land is occupied and used solely for the purposes of Children's Oncology Care of Ontario Inc. The legislation also provides that Council may provide that a tax exemption by-law does not come into force unless Children's Oncology Care of Ontario Inc. enters into an agreement with the City whereby, if the land exempted from taxes is sold, leased or otherwise disposed of, then the taxes foregone in the preceding period of ten years or in the period since the by-law was passed, whichever period is shorter, shall immediately become payable. The legislation also provides that where the City receives a payment under an agreement, it must retain for its own use its share of taxes foregone and must reimburse The Board of Education for the City of Toronto and the Metropolitan Toronto School Board and The Municipality of Metropolitan Toronto for their share of the taxes foregone.

Council of the former City authorized that an agreement be entered into with Children's Oncology Care of Ontario Inc. which incorporated the provisions of the Children's Oncology Care of Ontario Inc. Act, 1986. An agreement dated May 16, 1986 was entered into between the parties and registered on title July 22, 1987 as instrument CT 887642. By-law No. 487-87 was passed on July13, 1987 to authorize the tax exemption effective as of January 20, 1986.

This is the first instance in which a property in the former City of Toronto which has been exempted from the payment of taxes under special legislation is to be sold. The issue is the payment of taxes foregone. As noted above, the special legislation and the agreement both provide that if the property is sold, then any taxes foregone in the preceding ten years or since the by-law was passed, whichever period is shorter - which in this case would be ten years - are to be payable to the City. The taxes foregone for the last ten years total $247,017.41 of which the City (including Metro share) is $116,667.20 and the school board share is $135,350.21.

Despite the wording of the criterion referred to above, it was the intended, at that time, that the payment provision be included only to ensure that any property exempted from taxes by the City, not be sold in less than ten years from the receipt of the tax exemption and receive windfall capital profits, i.e. the financial benefit of nonpayment of taxes. In effect, the City wanted to ensure that a property which received a tax exemption continued to provide the services for which it received the exemption and not be sold for a short term benefit. Although that was the intent, both the special legislation and the agreement require the mandatory payment of taxes foregone, in this case, taxes foregone for the immediately preceding ten years.

Since the period of time that the property was used for purposes for which it received a tax exemption exceeds ten years, it would seem to meet the City's original intent that no taxes be payable to the City on sale of the property. However, since both the special legislation and the agreement require the payment of taxes foregone, Council must make a decision on whether it will require payment of taxes. It should be noted that Children's Oncology Care of Ontario Inc. owns another property at 26 Gerrard Street East which continues the purpose for which the Dundas Street West property was purchased. The Children's Oncology Care of Ontario Inc. Act, 1993, was passed to enable the exemption from taxation for that property -26 Gerrard Street East.

Conclusion:

Council's direction is sought as to whether any taxes foregone during the past ten years for the property at 356 Dundas Street West should be paid on sale of the property. It was the intent of the City at that time, that the payment provision be included only to ensure that any property exempted from taxes by the City, not be sold in less than ten years from the receipt of the exemption and receive the financial benefit of nonpayment of taxes for the shorter period. Should Council decide not to require payment of the taxes foregone, it should authorize the release of the agreement from title and the repeal of By-law No. 487-87.

The City Solicitor has been consulted in the preparation of this report.

Contact Name:

Paul Wealleans, Phone: 397-4208, Fax: 392-3649.

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The Strategic Policies and Priorities Committee also submits the following communication (September18,1998) from Betsy Wright, President, Children's Oncology Care of Ontario Inc:

We are writing in connection with the pending sale of the First House which is scheduled to be completed September 30, 1998.

In 1979, the First House first opened its doors to provide a home away from home for the families of children coming to Toronto for cancer therapy. Since that time, the First House has provided shelter and emotional support to thousands of families required to deal with the trauma of a gravely ill child. The First House quickly became an integral and respected part of the pediatric oncology regime in the City of Toronto. As a result, it was often filled to capacity with the result that many otherwise qualified families were not able to be accommodated.

In the late 1980s Ronald McDonald House, with the enthusiastic prompting of, among others, the Hospital For Sick Children, decided to expand its operation by the creation of a second House. That second House was eventually built at 26 Gerrard Street East (the "Second House") where it now serves the families of children suffering from all manner of life-threatening diseases including cancer and organ transplant-related illnesses. The Second House was created for two purposes:

(i)to expand the capacity of Ronald McDonald House including the creation of a more modern facility with more medically relevant amenities; and

(ii)to provide a site where all of the services offered by Ronald McDonald House in the City of Toronto could be consolidated under one roof if it became desirable or necessary to do so.

The creation of the Second House required Ronald McDonald House to incur an initial indebtedness in excess of $3,500,000.00. This has proved to be a significant financial burden. The facilities in the First House continued to age and to require costly repair and replacement. Moreover, the First House lacks such facilities as medically correct isolation rooms; the cost of making the necessary improvements to the First House makes any significant changes to that house impracticable. We have made application to the Committee of Adjustments to permit the addition of a further seven (7) isolation rooms to the Second House at an estimated cost of approximately $500,000.00. These factors, and others, convinced us that the time had come to sell the First House and to invest the proceeds into paying for, and improving, the Second House. While it is not possible to determine, precisely, the total cost of the First House, it is estimated to have been between $1,250,000.00 and $1,450,000.00. The current sale price for the First House, 19 years later, is $1,600,000.00.

It is important to be aware that we could not have sold the First House and then used the proceeds from that sale to purchase and build the Second House. If we had proceeded in that manner, there would have been a period of approximately 18 months during which Ronald McDonald House would have been virtually out of business while we waited for the Second House to be constructed. It was necessary that we proceed in the manner that we have in order to ensure continuity, and no disruption, of the services which we provide to our families.

We have requested the City of Toronto to release the First House from the Realty Tax Deferral Agreement (the "Agreement") and to permit us to invest all of the proceed from the sale of the First House into the Second House for the purpose of paying for the Second House as well as making significant capital improvements to it. We understand that the aggregate amount of the deferred realty tax is approximately $270,000.00. The loss of this money would have a serious adverse impact upon the operation of the Second House and, in particular, upon the proposed creation of the additional isolation rooms.

We believe that it is within the spirit, and the intent, of the Agreement that all of the proceeds from the sale of the First House should be available to be invested in the Second House. This is precisely what we intend to do. We hope that you will concur in this assessment and permit us to continue being one of Toronto's havens for families in crisis.

Thank you for your attention.

12

Toronto Atmospheric Fund (TAF) - Capital Reserves

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendations of the Budget Committee embodied in the following transmittal letter (September 16, 1998) from the City Clerk:

Recommendations:

The Budget Committee on September 15, 1998 recommended to the Strategic Policies and Priorities Committee, and Council, that:

(1)the joint report (August 28, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer be received for information;

(2)the Toronto Atmospheric Fund (TAF) review its granting policies and criteria with a view to:

(i)increasing support for city-initiated projects; and

(ii)ensuring that funding for communities are distributed across the new city;

(3)TAF seek ways to reduce administrative costs so it is in line with other charitable foundations, organizations and endowment funds and report back to the Works and Utilities Committee;

(4)TAF provide an annual report to Council on its spending, through the Works and Utilities Committee, containing a detailed summary of all expenditures of its members and administration;

(5)TAF confirm its mandate to help the City meet its goal of reducing greenhouse gas emissions - the major cause of global warming;

(6)a process be established so that TAF's expenditures for the coming year be subject to the same scrutiny as other departments, agencies, boards and commissions, for which the Corporation is responsible; and

(7)TAF attempt to document and quantify the economic and health benefits (and/or costs) which flow from energy efficiency and other TAF initiatives and include these in further analyses reports to Council.

Background:

The Budget Committee on September 15, 1998, had before it a joint report (August 28, 1998) from the Chief Administrative Officer and the Chief Financial Officer and Treasurer and the following communications:

(a)(July 27, 1998) from The Shaw House Board of Directors;

(b)(July 16, 1998) from Ms. Silvia Langer, Program Coordinator, Greenest City, forwarding a historical pamphlet entitled "The Smoke Evil, White Paper No. 309, Bureau of Municipal Research, Toronto, February 28, 1946";

(c)(April 17, 1998) from Ms. Margaret Chiu, Convenor, Environmental Sub-Committee, Toronto Chinese Health Education Committee;

(d)(April 23, 1998) from Mr. Peter K. Stokoe;

(e)(April 24, 1998) from Ms. Kathleen Cowan, Principal, Bowmore Public School;

(f)(April 24, 1998) from Mr. Paul Cryne, Rose Technology Group Limited;

(g)(April 24, 1998) from Ms. Clara M. Suter and Ms. Nadia Lypowecky, Teachers, Eastdale Collegiate;

(h)(April 27, 1998) from Mr. Jack Gibbons, Canadian Institute for Environmental Law and Policy;

(i)(April 27, 1998) from Jacky Kennedy;

(j)(April 27, 1998) from L.J. Rooney, Executive Director, Phoenix Community Works Foundation, and Janet McKay, Project Manager, Local Enhancement and Appreciation of Forests (LEAF);

(k)(April 27, 1998) from Mr. Jake Brooks, Executive Director. The Independent Power Producers' Society of Ontario (IPPSO);

(l)(April 27, 1998) from Mr. Tom Clement, Executive Director, Co-operative Housing Federation of Toronto Inc.;

(m)(April 27, 1998) from Ms. Louise Comeau, Sierra Club of Canada;

(n)(April 27, 1998) from Mr. Maurice F. Strong, Chairman, Earth Council;

(o)(April 28, 1998) from Ms. Eleanor Dudar, Environmental Education Officer, Toronto District School Board;

(p)(April 28, 1998) from Mr. William L. Holt;

(q)(April 28, 1998) from Dezso J. Horvath, Dean, Schulich School of Business, York University;

(r)(April 28, 1998) Ms. Pam Mazza, Co-chair, Island School Design Committee;

(s)(April 29, 1998) from Mr. H. Harrison McCain, McCain Foods Limited;

(t)(April 29, 1998) from Mr. Peter Victor, Dean, Faculty of Environmental Studies;

(u)(May 5, 1998) from Mr. William A. Farlinger, Ontario Hydro;

(v)(September 11. 1998) from H.G. McAdie, Ph.D., C.Chem., H.G. McAdie Associates;

(w)(September 11, 1998) from Dr. Jim Salmon, President, Canadian Wind Energy Association,;

(x)(September 11, 1998) from Mr. Steven W. Peck, Friends of the Don - East;

(y)(September 12, 1998) from Mr. Michael Harrison, President, Citizens Concerned About the Future of the Etobicoke Waterfront (CCFEW);

(z)(September 14, 1998) from Jacky Kennedy;

(aa)(September 14, 1998) from Councillor Elizabeth Brown, Rexdale-Thistletown, Ward 5;

(bb)(September 10, 1998) from Mr. Joe Berta; and

(cc)(September 14, 1998) from Mr. Alex Speigel, President, Orenda Development Consultants Inc.

Copies of the above communications are on file in the Clerk's Department.

The following persons appeared before the Budget Committee in connection with the foregoing matter:

-Ms. Silvia Langer, on behalf of Carol-Ann Coulter, Greenest City Program;

-Mr. Paul Bubelis,

-Mr. John Wellner, Toronto Environmental Alliance;

-Mr. Jack Gibbons, Canadian Institute for Environmental Law and Policy;

-Mr. Chris Winter, Ontario Centre for Sustainability;

-Mr. Steven Hall;

-Ms. Jenna Scott, Local Enhancement and Appreciation of Forests;

-Mr. Fraser Wilson;

-Mr. Peter D'Angelo;

-Dr. Jim Salmon, President, Canadian Wind Energy Association;

-Mr. Ian Morton, Pollution Probe;

-Ms. Miriam Hawkins, The Energy Action Council of Toronto;

-Mr. Tom Clement, Co-operative Housing Federation of Toronto;

-Ms. Donna Charbonneau, Rainbow Circle Co-operative;

-Ms. Shirley Thompson, Board, TAF Office;

-Ms. Eleanor Dudar, Environmental Education Officer, Toronto District School Board;

-Mr. Peter Duckworth Pilkington, Community Bicycle Network;

-Mr. Martin Liefhebber, ICLEI;

-Mr. Jeb Brugman;

-Dr. Quentin Chiotti, Environment Canada, and submitted a brief in regard thereto; and

-Councillor Jack Layton, Don River.

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(Joint Report dated August 28, 1998 addressed to the

Budget Committee from the

Chief Administrative Officer and the Chief Financial Officer and Treasurer)

Purpose:

To review options requested to increase the City's accessibility to the capital reserves of Toronto Atmospheric Fund (TAF, the Fund).

Funding Sources, Financial Implications and Impact Statement:

If the Fund is dissolved, total retained equity ($25.1 million at year end 1997) would become available to the City. In 1999, the City's budget could be reduced by $1.6 million due to the elimination of the provision for repayment of debt to the TAF, offset by an amount to provide for the TAF's continued operating activities, currently about $1.0 million for a net $600,000 saving. The use of TAF's capital reserves to reduce future borrowing needs could provide relief to the operating budget over the term of the avoided debt in the amount of $500,000 in 1999, increasing to $2.7 million in 2000.

Recommendation:

Receive as information and review in the context of the 1999-2003 capital budget to be considered this fall.

Background:

On April 20, the Budget Committee received a report entitled Toronto Atmospheric Fund, which described the operation of the fund, and presented options to provide the City with access to the Fund's equity capital. It was directed that the matter be considered after the budget process was completed.

Discussion:

As presented to the Budget Committee in April, 1998, the options for accessing the equity capita of the TAF range from using the Fund as a source of capital financing (borrowing), and dissolving the Fund so that its capital reserves revert to the City. Since that time, the TAF has continued to work with the City to identify financing opportunities consistent with the TAF's mandate, such as energy efficiency upgrades to Toronto City Hall.

Financial Considerations:

The 1998 operating budget for the TAF is approximately $1.0 million consisting of $650,000 in grants, $180,000 for special projects, and $150,000 in administration costs. In the future the TAF's budget could vary to adjust for fiscal constraints or new initiatives. For example, the 1998 budget was adjusted to account for the cancelled interest payment to the TAF from the City ($728,000). In January, 1998, the TAF Board of Directors voted to expand the granting budget to cover citizen projects in the new City of Toronto. To date, TAF has recruited and received applications for funding projects in East York, York, North York, Etobicoke and Scarborough, as well as the former City of Toronto (see attachment for listing of approved grants since 1993).

The TAF is able to attain its objectives with no impact on the City's operating budget because of revenues generated from the TAF's invested capital reserves. At a 5 per cent real rate of return, the TAF's equity capital ($25 million at year end 1997) is capable of supporting annual operating expenditures of about $1.25 million. The TAF also achieves its goals by lending its capital reserves to projects or organizations capable of supporting its mandate to improve air quality. The primary example is an existing loan to the City of Toronto with an outstanding principal of $7 million. (As long as the reserves generate a reasonable return, and the TAF's annual expenditures are consistent with the City's priorities, over the long term the City is no better off controlling the reserves directly).

Context:

The City currently has a high demand for capital relative to historical needs, and limited recourse to additional operating revenues to support these requirements. The City has also consolidated its grant envelope and administration through the Grants Review Committee. This report does not review the governance options for distributing grants given by TAF. Rather, it focuses only on the financial aspects of accessing the capital reserves of TAF that originated from partial proceeds from the sale of the former Toronto's lands. To add flexibility to the City's capital financing pressures, the City could consider collapsing the TAF to access the reserves for City purposes, or borrowing from the TAF. TAF's accumulated investment earnings can revert to the City at any time via a Council motion to dissolve the Fund.

Option 1 - Dissolving the Fund: Maintain $1 million in grants:

The legislation setting up the TAF permits the City to dissolve the Fund upon a majority vote of Council. To do so would have three potential impacts on the operating budget. First, the operating expenses of the TAF (approx. $1 million) would have to be considered for funding from the City's operating budget. Second, the budget for servicing the City's debt to the TAF (currently $1.6 million) would be eliminated. Third, the TAF's reserves (after netting out the City's remaining indebtedness to the Fund) could be applied to reduce borrowing needs, lowering debt servicing costs (assuming 10 year debt, by $500,000 in the first year and by about $2.2 million more for the next 9 years to a total $2.7 million). This latter option would only be undertaken if it is determined that avoiding incremental debt is a higher priority than retaining the reserves to offset future actuarial liabilities. The following graph illustrates the relative budget impact of each of the potential impacts of dissolving the TAF. If implemented in 1999 (year 1 on the graph), the net impact compared to the City's 1998 budget would be a reduction of about $600,000 from the collapse of the TAF, and another $500,000 potential savings from reduced debt service costs by using the TAF reserves to finance new capital.

In this option, grants in the amount of $1 million could be administered by the City's Grant Review Committee directly or be transferred to TAF for distribution similar to the grant envelope to the Toronto Arts Council. If this option were considered, a further report on the governance issue should be prepared.

Option 2 - Borrowing from the Fund and/or Applying for Operating Grants:

Rather than dissolving the Fund, the City could request to borrow from it for eligible projects. Borrowing from the TAF is reported in the City's accounts the same as borrowing from conventional sources, but in reality is not dissimilar to borrowing from the City's own reserves.

Another similar option would be to apply for funding under the TAF's grant program. In this way the TAF is kept intact, and proposed City projects are scrutinized and compared with external initiatives for funding eligibility. It is expected that there are many qualifying projects from the City that can be financed through TAF that would otherwise not be a priority for City financing directly. The issue with this approach revolves around the fact that these types of projects would receive preferred funding over other perhaps more critical projects not related to the aims of TAF ie road maintenance, TTC state of good repair.

Option 3 - Partial Approach:

Council may wish to consider partial implementation of the two options above. For example, rather than completely dissolving the Fund, it might be deemed that a portion of the equity reserves revert to the City at this time ie the forgiveness of the remaining $7 million in outstanding debt principal owed to the TAF by the City which would reduce the City's operating costs by $1.6 million in 1999 but also reduce TAF's granting ability. However, reneging on existing debt may not be a compatible strategy with seeking to borrow additional funds from the TAF. Also, any reduction in the value of the TAF's reserves reduces its ability to fund its current operations. A reassessment of the appropriate level of TAF operating expenditures would be necessary prior to a decision to reduce the value of the Fund's capital reserves.

Governance Issues:

In order to set up the TAF, special legislation was requested by the former City of Toronto and enacted by the Province of Ontario. The fund operates similarly to a standard reserve fund, such that it is dedicated to a specific purpose, and interest returns accrue to the fund. However, by setting up an arms length corporation (with the Board controlled by the City), the TAF achieves a certain independence to carry out its objectives without intervention from the City. Its annual budget is also set independently, subject to the applicable legislation and the TAF's own operating guidelines. Nevertheless, in recent years the City has been able to access the Fund's accumulated surplus by cancelling interest payments on monies borrowed by the City from the TAF.

Continuing to cancel interest payments in future will result in reduced operating budgets for the Fund.

Aside from increased independence, the TAF differs from a reserve fund in that the funds are expected to be invested in projects or corporations furthering the TAF's goals, rather than standard municipal investment vehicles. However, if the fund is collapsed, the opportunity to do so could be lost.

Other Considerations:

As a model for funding greenhouse gas reduction projects, the TAF has drawn serious national and international attention. A proposal to establish a National Atmospheric Fund based on the Toronto model is currently under discussion by officials of the Federal Department of Finance. The proposal, supported by the Federation of Canadian Municipalities, would establish a national atmospheric fund that would grant and loan money to cities and towns in Canada to pursue greenhouse gas reduction projects, including capturing methane from municipal landfill sites, building energy efficiency retrofits and educational projects. The National Atmospheric Fund was recently endorsed by the House of Commons Standing Committee on Environment and Development and the Order of Canada's National Climate Change Forum.

TAF is currently in discussion with the federal department of Environment to co-sponsor public education projects that reduce greenhouse gas and smog-causing emissions in the City of Toronto. TAF is urging the Federal Minister to make a financial contribution to the Fund's granting budget for these projects.

Conclusions:

This report reviews the impact of several options with respect to the City's relationship with the Toronto Atmospheric Fund.

Liquidation of the TAF would result in its capital assets being transferred to the City. Debt repayment obligations in the City's budget at $1.6 million would be eliminated, offset by new responsibility for funding the TAF operating budget of about $1 million annually. An additional opportunity exists to offset future debt service costs by using the TAF reserves to finance new capital, yielding another $2.7 million in temporary (10 year) budget relief (but only $500,000 in the first year).

The second option is to consider means for the City to access capital within the Fund's mandate, such as eligible borrowing and grant opportunities. The City and the TAF are currently reviewing a variety of opportunities for the Fund to invest in City projects, such as energy efficiency improvements to Toronto City Hall. Such borrowing would be reported in the same way as conventional borrowing, but the Fund's interest revenues on the debt would ultimately be controlled by City Council.

The TAF does offer some unique opportunities for the City which must be considered. First, the arms length arrangement provides some independence that is helpful in attaining long term goals in the face of short fiscal pressures on the City. Second, in order to further its air quality objectives the Fund is allowed, under special legislation, investment opportunities not provided to the City. Third, the Fund is attracting national attention which is good for the reputation of the City, and may lead to additional air quality investments in Toronto by the federal government.

Contact Name:

Rob Hatton, Finance, Budget Division, 392-9149.

13

June 30, 1998 Operating Budget Variance Report

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendations embodied in the following transmittal letter (September 16, 1998) from the City Clerk:

Recommendations:

The Budget Committee on September 15, 1998 recommended to the Strategic Policies and Priorities Committee, and Council, that:

(1)further draws be made on a severely restricted basis from the Corporate Contingency account and that the Chief Financial Officer and Treasurer report to the Budget Committee on a periodic basis as to the status of the Corporate Contingency account and any draws thereon;

(2)all program budgets, including the agencies, boards, and commissions, be requested to continue to maintain net expenditures within approved budgets;

(3)agencies, boards and commissions which are projecting year-end over-expenditures as of the June 30, 1998 operating variance submission, develop appropriate strategies to ensure that they will remain on budget for year-end and report back to the Budget Committee for its meeting scheduled on October 13, 1998;

(4)the tax deficiencies budget be decreased by $13.5 million to reflect the increased final 1998 assessment loss; and

(5)a surplus management and corporate contingency reduction strategy be developed for phase-in implementation over several years.

The Budget Committee reports having requested the Chief Administrative Officer and the Chief Financial Officer and Treasurer to report to the Budget Committee meeting scheduled for October13, 1998:

(1)on the following concerns and questions regarding the downsizing delay:

(a)Does the Amalgamation Office have a list of positions to be deleted by department, including the date(s) the positions were to have been eliminated, based on the budget?

(b)Are departments and the Amalgamation Office receiving the information necessary to allow them to effectively monitor departmental downsizing plans?

(c)Are departments or the Amalgamation Office monitoring downsizing plans, including status of all positions vacant due to exits (i.e. have or will some of these positions be filled; were these positions part of the downsizing)?

(d)Is someone keeping track of positions that have been deleted against the downsizing targets?

(e)Are department heads provided with regular status reports on the downsizing in their respective departments, along with corrective action required, if any?

(f)Several departments are behind in their restructuring and related downsizing plans? Do we know the dollar impact on the 1998 budget? Did all departments take into account the delay in downsizing when projecting their total year expenditures in the June 30th variance report?

(g)What action plans have been developed to expedite the downsizing so that departments meet their targets and so there is no additional pressure on the 1999 budget, especially since further staff reductions are planned for 1999?

(h)Will there be a separate report coming forward to Committee on the status of the downsizing plans in each department, financial impact of delays to date, along with any significant financial and other issues that must be addressed, and specific action that has or will be taken?; and

(2)providing details on the reduction in the surplus and how many of these are on-going financial concerns.

Background:

The Budget Committee on September 15, 1998, had before it a report (September 9, 1998) from the Chief Financial Officer and Treasurer regarding the June 30, 1998 Operating Budget Variance Report.

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(Report dated September 9, 1998 addressed to the

Budget Committee from the

Chief Financial Officer and Treasurer)

Purpose:

To provide the overall gross and net expenditure position of the City of Toronto for the six months ended June 30, 1998 and to identify the funding issues to-date. This is the first scheduled corporate variance report for 1998, with further variance reports scheduled for the periods ending September30 and December 31 (as a part of the operating budget process). Areas of significant variation, as reported by programs as of June 30, 1998, impacting the corporate position are highlighted within this report.

Financial Implications:

The six month variance report indicates that City departments and operations are overall on track with respect to the 1998 Operating Budget as approved by Council on April 28 and 29, 1998. The projected net under-expenditure to year-end is $22.8 million. A significant part of the under-expenditure position is related to reduced Social Services costs, with a net under-expenditure of $22.5 million year-to-date and $19.1 million year-end. Contained within the year-end under expenditures of $22.8 million, City directly controlled programs are projecting to be on-track while the Toronto Zoo, TTC and Police Services are projecting over-expenditures totalling $4.5 million.

The rate supported Water and Water Pollution Control operations are projected to be within budget by year-end.

Corporate revenues from investment income and supplementary taxes are projected to be $28.4 million under-budget, but are the subject of current discussions with the Ministry of Finance to recoup the revenues which have been impacted from the delay in the receipt of the Provincial assessment roll.

As identified in the Budget Committee report dated July 24, 1998, OMERS savings attributable to the 2 percent reduction effective January 1, 1998 and the one-year contribution holiday effective August 1, 1998, are not to be reduced from program operating budgets. Funds not required to be remitted to OMERS will be transferred to an Employee Benefit Reserve Fund or to a corporate account for the 2 percent savings.

Recommendations:

It is recommended that:

(1)further draws be made on a severely restricted basis from the Corporate Contingency account;

(2)all program budgets, including the agencies, boards, and commissions, be requested to continue to maintain net expenditures within approved budgets;

(3)the tax deficiencies budget be decreased by $13.5 million to reflect the increased final 1998 assessment loss; and

(4)a surplus management and corporate contingency reduction strategies be developed for phase-in implementation over several years.

Comments:

Year to Date and Projected Year-End Variances:

The Corporation's total gross expenditure for the period ended June 30, 1998 of $2,454.8 million is $164.8 million or 6.3 percent under budget. On a net basis, the year-to-date expenditure of $1,080.7 million is $111.5 million or 9.4 percent under budget, based on the 1998 budget prorated to June 30, 1998.

The Corporation's projected year-end gross expenditure on the levy is $5,382.5 million, reflecting $161.4 million under-expenditure or 2.9 percent under budget. On a net basis, the projected under-expenditure on the levy is $22.8 million, primarily attributable to $34.7 million in program under expenditures offset by an $11.9 million shortfall in the corporate accounts. Estimated savings attributable to the OMERS 2 percent reduction and the declared OMER's full contribution holiday to the Employee Benefit Reserve fund are approximately $26.6 and $20.0 million, respectively.

Approved draws to June 30, 1998 from contingency total $70.0 thousand, with an additional $5.1 million being approved on July 31 for the Year 2000 Project.

The 1998 operating budget projected a 1 percent assessment loss equivalent to a $27 million revenue loss. The final 1998 assessment roll contains a 1.5 percent assessment loss or an effective $40.5 million revenue loss. The 1998 net levy for city taxes has been reduced by this $40.5 million assessment loss. Technically, the City achieved a budget to budget decrease by absorbing the assessment loss. In order not to impact the City's zero tax increase, it is recommended that the corporate Tax Deficiencies budget be reduced by $13.5 million and appropriate action be taken to achieve the lower figure by year-end.

Based on the adjusted actual figures, the following table highlights the contributors to the projected year-end gross and net expenditure variances.

Projected Year-End Variances ($ Millions)

Gross ExpendituresNet Expenditures

Over / (Under) EstimateOver / Under Estimate

(1) Community and Neighbourhood Services(133.4)(30.9)

(2) Works and Emergency Services 1.9(2.5)

(3) Economic Development, Culture and Tourism(1.0) 1.9

(4) Urban Planning and Development Services( 0.4)(5.9)

(5) Corporate Services(0.6)(0.1)

(6) TTC(6.1)2.6

(7) Police1.71.1

(8) Corporate Accounts(22.2) 11.9

(9) Other (1.3) (0.9)

Projected Year-End Variance(161.4)(22.8)

The attached Appendices A and B support this report, reflecting the corporate gross and net variance.

Appendices C and D are attached to reflect the corporate salaries and benefits expenditures and corporate FTE reductions related to the Restructuring program.

Based on the submissions received, the programs= year-to-date expenditures for salary and benefits account for approximately 44 per cent of the annual salary budget. This is comparable with the expenditure pattern for the same period in 1997, of the former cities. Actual salaries and benefits to June30, 1998 are underspent by $29.5 million for levy operations and are forecast to be $16.0 million underspent by year-end. The Amalgamation Office in the City is monitoring the progress of the actual employee exits within the corporation against the anticipated levels. The actual exits have exceeded the estimates for the second quarter, on an overall basis. The situation will continue to be monitored internally by the Amalgamation Office and reviewed with departments.

(1) Community and Neighbourhood Services:

The adjusted net budget variance of Community and Neighbourhood Services is comprised of the following:

Expenditures Over / (Under) Budget

($ millions)

GrossNetNet

June 30, 1998June 30, 1998 1998 Projected

Year-to-DateYear-to-DateYear-End

Program Area

Children's Services(8.1) 0.5( 1.9)

Social Services(51.3)(22.5)(19.1)

Library(1.2)(1.3)0.0

Homes for the Aged(2.7)( 7.2)( 8.8)

Public Health(1.7)( 2.1)( 1.6)

Other (Hostels, Housing, Social Dev.)(2.1)( 1.2)0.5

Total Expenditures(67.1)(33.8)(30.9)

Children's Services:

The Children's Services program is experiencing a year-to-date gross under-expenditure of $8.1 million primarily due to:

(a)$0.4 million for fringe benefit savings, due to timing differences between actuals and budget assumptions;

(b)$2.5 million related to other expenditures not matching the budget distribution; and

(c)$5.2 million due to the Provincial transfer of management responsibility for purchased services such as special needs resources, resource centres, and wage subsidies being postponed until January 1, 1999.

On a net basis, June year-to-date the program reports an over-expenditure of $0.5 million primarily due to timing differences between budget and actual expenditures. These differences are not expected to continue to year end. Eliminating the timing differences, the program estimates a year-to-date net under-expenditure of approximately $1.6 million, related to higher than anticipated user fee revenue from a more favourable case mix associated with the delay in the Ontario Works implementation.

The casemix and revenue trends are expected to continue through year-end, with favourable gross and net, projected year-end under-expenditures of $29.3 million and $1.9 million, respectively.

Social Services:

The June year-to-date the Social Services program has a favourable gross variance of $51.3 million or 9.6 percent. The variance in gross expenditure is due primarily to:

(a)$20.3 million attributable to the change in budget assumptions relating to the number of transferred cases from provincially downloaded programs, as well as the delay in the transfer of these cases to the City of Toronto;

(b)$16.6 million related to Ontario Works Program, due to a revised Provincially approved Ontario Works Business Plan and amended targets subsequent to approval of the budget; and

$13.1 million attributable to lower than budgeted monthly average caseload. Actual average caseload to date is 84,363 versus budget of 88,000.

As a result of this favourable gross under-expenditure and a change in funding for the Ontario Works Program delivery from 50/50 to 80/20, the program's June year-to-date net savings is $22.5 million.

These same items are anticipated to impact the projected year-end position to create net $19.1 million under-expenditure. These net savings are after a projected $16.1 million is set aside for the Social Services Reserve Fund, established by City Council during the 1998 Budget approval process. This reserve is intended to protect the City against future caseload increases by redirecting savings incurred from social assistance, in the event the caseload drops below 88,000 cases and to provide interim funding for the 2,000 childcare spaces for clients leaving social assistance. A report will be submitted in October 1998 to further discuss and review this allocation.

Library:

In the variance submission, the Library reports year-to-date, gross and net under-expenditures of $1.2 and $1.3 million, primarily resulting from spending delays for library material and other services, to offset potential salary costs due to reorganizational delays. The Library is projecting to be on budget by year-end.

Homes for the Aged:

Home for the Aged is reporting a gross year-to-date under-expenditure of $2.7 million consisting of: $1.9 million due to salary and benefit expenditure patterns differing from the allocated budget, $0.3 million from Supportive Housing program restructuring to conform with the Ministry of Health's new direction, $0.2 million due to a temporary payment decrease to Homemaker agencies, and $0.3 million of miscellaneous under-expenditures. On a net basis, the under-expenditure is further increased to $7.3 million, due to one-time transition subsidy funding made available by the Ministry of Health.

The program is projecting a favourable year-end net under-expenditure of $8.8 million. The one-time transition funding is estimated to contribute $8.0 million of this total. Subject to results in the September variance report this under-expenditure attributable to the transition funding (at this time estimated to be $8.0 million) should be transferred to a reserve for capital for the Homes for the Aged.

Public Health:

The program reports a favourable year-to-date, gross and net under-expenditure of $1.7 and $2.1 million, due to salary and benefit savings. These same factors drive the favourable year-end net under-expenditure of $1.6 million.

(2)Works and Emergency Services:

The adjusted net budget variance of the Works and Emergency Services is primarily comprised of the following:

Net Expenditures Over / (Under) Budget

($ millions)

June 30, 19981998 Projected

Year-to-DateYear-End

Program Area (excluding Police)

Fire(6.0) 0.0

Solid Waste Management(2.3)(3.6)

Transportation 2.0 1.3

Ambulance(0.0)(0.2)

Total Expenditures(6.3)(2.5)

Fire:

While a significant net under-expenditure of $6.0 million has been experienced year-to-date, the cause is primarily related to the fact that the actual expenditure pattern to date does not match that used for distributing the budget and full implementation of the by-law's new fee structure not being completed until the second half of the year. These items are anticipated to self-correct by year-end, leaving the program in a favourable position of coming in on budget.

Solid Waste Management:

Year-to-date the Solid Waste Management Program reports a net under-expenditure of $2.3 million due to higher than estimated disposal revenue. The year-to-date actual revenue related disposal tonnage is exceeding budgeted amounts by approximately 50,000 tonnes.

A graph of the budgeted and actual tonnages for the years 1996-1997, along with the year-to-date actuals and projections for 1998 follows:

The following graph highlights the current year's budgeted and year-to-date waste tonnage revenues, along with projections for the remainder of the year.

This trend is projected to continue through year-end, resulting in projected revenue over budgeted amounts of $4.4 million. This in turn, is projected to be offset by over-expenditures of $0.8 million related to an increase in paid tonnage, and resulting from higher transfer and haulage costs at transfer stations and royalty payments to the Region of York at the Keele Valley landfill site. The projected net year-end position is an under-expenditure of $3.6 million.

Transportation:

Year-to-date in the Transportation program, $19.0 million of the 1998 winter budget of $26.0 million has been expended. Of the remaining budget ($7.0 million), $4.3 is allocated to fixed costs, leaving $2.7 million for storm clearance. Past experience reflects a need for approximately $4.0 million for storm clearance during the months of November and December. If this trend continues, the winter maintenance budget could be overspent by $1.3 million.

(3)Economic Development, Culture and Tourism:

The adjusted net budget variance of the Economic Development, Culture and Tourism is primarily comprised of the following:

Net Expenditures Over / (Under) Budget

($ millions)

June 30, 19981998 Projected

Year-to-DateYear-End

Program Area

Arts, Culture & Heritage8.9(0.6)

Economic and Tourism Development(0.1) 0.1

Parks and Recreation(5.7)1.6

Exhibition Place(1.5)0.1

Toronto Zoo(0.5)0.7

Other (Conservation, Special Events, Theatres

And Galleries) 1.3*(0.0)

Total Cluster Net Expenditures 2.41.9

* This amount is mostly attributable to the programs, Special Events and Theatres/Galleries, which have incurred expenditures, but the reallocation of the budget amounts have yet to be established through the restructuring process.

Arts, Culture & Heritage:

The six-month variance for the program entirely relates to budget allocation and posting issues, yet to be resolved between programs. These issues will be corrected as part of the budget and actual account reconciliation process to be completed for the September variance report..

By year-end, a $0.6 million under-expenditure is anticipated, relating to staff reductions (assuming the reductions occur by October 1, 1998).

Economic and Tourism Development:

Per the variance submission, year-to-date net under-expenditures of $0.1 million relate to deferred program initiatives, including advertising and marketing expenditures. These programs are anticipated to be implemented during the third and fourth quarters, resulting in a self-correcting of calendarized spending. However, delays in the approvals of the restructuring process are expected to impact the year-end net position with an unfavourable $0.1 million over-expenditure.

Parks and Recreation:

The program is reporting a projected year-end net over-expenditure of $1.6 million, primarily attributable to budget allocation issues, and delays in implementing staff restructuring where 50 percent of downsizing was estimated to commence by July 1, 1998. A more accurate projection will be made by the September 30 variance report.

Exhibition Place:

Operationally, year-to-date the Board of Governors for Exhibition Place reflects a $1.5 million net under-expenditure and a net year-end revenue position of $29.0 thousand. However, adjusting for the OMERS reserve contribution, the on-budget figure becomes a $97.0 thousand shortfall. Operationally, the year-to-date under-expenditure is attributable to expenditure deferrals during the first quarter, early time-lining of Canadian National Exhibition Association expenditures, and heavy use of operations staff for trade and consumer events. Notably, to-date the National Trade Centre's (NTC) food and beverage service revenue has exceeded plan by $0.2 million. On an annualized basis, these revenues should more than offset the under-budgeted facilities operating costs.

The months of July and August are crucial for Exhibition Place, as the National Trade Centre (NTC) enters into its dormant period, with projected losses for the period of $0.2 million. It is anticipated that Exhibition Place revenues generated from the activities of the Chin Picnic, Molson Indy, Caribana and the Canadian National Exhibition (CNE), will help to offset the NTC losses.

A casino program (unbudgeted during the 1998 budget approval process) has now been approved for the 1998 CNE with a projected net income of $0.3 million. This net income will serve to offset increased expenses incurred for mid-way concessions and special presentation events.

The budgeted naming rights net revenue of $0.2 million now appears doubtful, but the amount will be offset by increased utilization of trade show services and building/ground rentals.

Toronto Zoo:

The Zoo is projecting a $0.5 million net over-expenditure due to revenue shortfalls during the March break period because of inclement weather and wage settlements.

Funds in the amount of $0.2 million were requested of the Budget Committee to provide for wage settlements made earlier this year, which requested that a decision remain pending to see how the year-end is tracking. Another approximately $58.0 thousand will be required for the most recent contract negotiations with the other bargaining units. The June projections assume that the City will provide these funds.

Subsequent to the variance submission, the Zoo has identified that a significant revenue shortfall has occurred in July and another shortfall is projected for August. While expenditure holdbacks have been implemented, the Zoo is projecting to be overbudget at year-end by $0.7 million.

(4) Urban Planning and Development Services:

The adjusted net budget variance of the Urban Planning and Development Services department is comprised of the following:

Net Expenditures Over / (Under) Budget

($ millions)

June 30, 19981998 Projected

Program Area (excluding TTC)Year-to-DateYear-End

Toronto Licensing(2.6)(0.4)

Urban Planning and Building(3.0) (5.5)

Total Department Expenditure(5.6)(5.9)

Toronto Licensing:

Year-to-date the Licensing Commission reflects a favourable net variance of $2.6 million, mostly attributable to unencumbered expenditures and revenue distributions that require adjustments. It is anticipated that these items will be corrected by the September variance report. At this time, the projected year-end position is an under-expenditure of $0.4 million.

Urban Planning and Building Program:

As of the June variance submission, the program reports a June year-to-date net under-expenditure of $3.0 million related to higher development levels than anticipated and the introduction of a new fee policy. This trend is projected to continue through year-end, resulting in a year-end adjusted net under-expenditure of $5.5 million.

(5) Corporate Services:

The net budget variance of the Corporate Services department is primarily comprised of the following:

Net Expenditures Over / (Under) Budget

($ millions)

June 30, 19981998 Projected

Program AreaYear-to-DateYear-End

Clerk's 1.80.0

Facilities and Real Estate(11.8)0.0

Fleet and Equipment3.50.1

Human Resources(0.2)0.0

Information Technology0.7(0.2)

Legal 0.30.0

Other (Audit)( .1) 0.0

Total Department Expenditures(5.8) (0.1)

Clerk's:

As submitted, a year-to-date net over-expenditure of $1.8 million primarily relates to a delay in collection of bingo license fee revenue, as fees are received on a six-month renewal cycle. This situation will self-correct by year-end, with the program projected to be on budget.

Fleet and Equipment, Facilities and Real Estate:

Significant year-to-date variances are attributable to budget distributions and account postings. These items will be corrected by year-end.

Human Resources:

For June year-to-date, the program is under-expended by a net $0.2 million. By year-end, the program is expected to be within approved estimates.

Information Technology:

Per the submitted variance, a year-to-date net over-expenditure of $0.7 million, is the result a $1.4 million over-expenditure related to the one-time mainframe conversion cost at the former City of Toronto partially offset by underspending in all service areas. The program projects that the unfavourable variance will self correct during the year, resulting in a net under-expenditure of $0.2 million.

Legal:

With a $0.3 million net over-expenditure reported year-to-date and an on-budget position projected for year-end, it should be noted that the program is currently assessing outside counsel liabilities for work already outsourced and the validity of revenue assumptions. The approved budget included increased revenues from various initiatives, such as planning fees and reduced overall expenditures by over a million dollars. The program will be in a better position to assess both of these former items for the September variance process.

(6)Public Transit:

Net Expenditures Over / (Under) Budget

($ millions)

July 4, 19981998 Projected

Program AreaYear-to-DateYear-End

Public Transit(0.3)2.6

The Toronto Transit Commissions (TTC) variance submission is for the period ended July 4, 1998.

In summary, while the year-to-date variance is slightly under budget, the projected year-end position shows deterioration resulting in a net over-expenditure of $2.6 million. The TTCs projected year-end variance consists of:

$ Millions

Unfavourable variances:

Ridership Revenue7.0

Surface Operations2.8

Other0.5

10.3

Favourable variances:

Marketing Launches(1.7)

Traction Power(2.3)

Accident Claims & Insurance(1.3)

Subway Operations(0.8)

Cost Recoveries(1.6)

(7.7)

Total Year-End Net Over-expenditure 2.6

Budgeted annual ridership for 1998 is 392 million rides, however, through July 4, 1998, ridership is 2.4 percent below budget but 1.9 percent higher when compared with a year ago. Per the TTC, the actual ridership growth through the first quarter 1998 has been less than budgeted due to the decline in the City's jobs, extended holidays to the United States and a severe flu season. If the current trends continue, the 1998 year-end ridership could be in the range of 385-388 million rides, with revenues projected to be $7.0 million under budget. The year-end projected variance will be updated for the next corporate variance report.

A graph of the budgeted and actual TTC ridership figures for the years 1996-1997, along with year-to-date actuals and projections for 1998 follows:

The following graph highlights the current year's budgeted and year-to-date TTC passenger revenues, along with projections for the remainder of the year.

Further, over-expenditures of $2.8 million are anticipated in surface operations, relating to: the unbudgeted Queensway Rail replacement program, slippage in the ATOS project (partially offset by expected savings from the cancellation of surface service improvements, higher bus maintenance costs and workforce shortages).

Offsetting under-expenditures totalling $7.7 million are anticipated in and attributable to:

(a)$1.7 million reduction in the planned expenditure for product marketing launches, unbudgeted workforce reduction and gapping;

(b)$2.3 million under-expenditure for traction power due to a reduced consumption rate related to the milder winter, combined with a hydro rate freeze and the cancellation of planned 1998 service improvements;

(c)$1.3 million under-expenditure for accident claims based upon the year-to-date actual claim settlements and the latest actuarial forecast ($1.0 million) and reduced insurance premiums ($0.3 million);

(d)$0.8 million in subway operations related to cancellation of the planned subway service improvements for the fall of 1998 (due to lower budgeted ridership levels), reduction in station and building improvement programs, lower heating billings due to a mild winter, workforce shortages, and a greater than anticipated value for the transfer of previously expensed inventory; and

(e)$1.6 million attributable to cost recoveries associated with rent recoveries for 1835 Yonge Street and lower than anticipated short-term bus lease expenses.

It should be noted that $0.6 million additional operating funding was approved by the Toronto Transit Commission for Wheel Trans at its meeting on June 17, 1998. On July 24, 1998, the Strategic Policy and Priorities Committee adopted the Budget Committee recommendation that the TTC maintain its unaccommodated rate at 2 to 3 percent and report back to the Budget Committee meeting scheduled for November 10, 1998 on a source of funding to cover the increased costs resulting from a higher demand for Wheel-Trans Service.

The unaccommodated rate for Wheel-Trans through July 4, 1998 was 3.5 percent, significantly over the budgeted rate of 2.0 percent. This reflects both an increased number of registrants and a sustained demand above budgeted levels. Staff will continue to analyze demand trends, to determine projected year-end impact and to maximize the number of passenger trips carried within the approved budget.

(7) Toronto Police:

Net Expenditures Over / (Under) Budget

($ millions)

June 30, 19981998 Projected

Program Area Year-to-DateYear-End

Toronto Police 0.8 1.1

The Toronto Police Services budget was approved by City Council at $520.7 million gross and $511.2 million net. This included an expenditure reduction of $8.6 million dollars. Due to operational difficulties or insufficient lead-time, the Police Services was unable to implement all of Council's recommended budget reductions. As a result, the Service has restructured its budget to achieve the same net Council approved funding level; $1.9 million of the expenditure reductions have been deferred and the Service has increased their revenue estimate by the same amount.

Based on the Council approved gross and net expenditures, the Police Service is anticipating a projected year-end over-expenditure of $1.7 million on a gross basis and $1.1 million on a net basis. This net overexpenditure compared to the approved budget is due to the shortfall in the new revenue estimates referred to above.

Subsequent to the variance submission, salary settlements were finalized with a 1998 impact of $7.7 million ($12.7 million for 1999). In a report submitted to the Police Services Board on August 28, 1998, and to be forwarded to Budget Committee, the Police Services Board recommended that the $7.7 million wage settlement be funded through using part of the corporate budgeted OMERS holiday savings ($3.5 million) and the OMERS Type 3 Police agreement ($4.2 million).

(8)Corporate Accounts:

Non-Program Expenditures:

A projected year-end favourable variance of $19.2 million is primarily related to projected underspending in the Corporate Contingency account.

The status of the Corporate Contingency Account is summarized as follows:

$ Thousands

Contingency Provision per approved budget 29,945.0

Draws approved to date (Council date):

Task Force on Community Access and Equity, (06/03/98)20.0

Millennium Celebration Task Force, (14/05/98) 50.0

Year 2000 Project B Office (7/31/98)1,500.0

Year 2000 Project B Systems (7/31/98)3,596.0

Total of Contingency Draws5,166.0

Balance after approved draws 24,779.0

Within the budgeted non-program expenditures, a corporate item has been included for the 2 percent OMERS contribution reduction approved effective January 1, 1998 amounting to $14.5 million year-to-date and $29.0 million annualized. The savings arising from this reduction are presently captured in the program areas year-to-date adjusted actual with an offsetting entry made to the OMERS surplus account.

Negative net variances related to the 2 percent OMERS reduction, of $1.2 million year-to-date and $2.4 million projected year-end, are due to original estimates being based upon maximum insurable earnings for the entire approved salary budgets. In some instances, the maximum insurable earnings may not be appropriate and significant portions of the salary budgets may be for non-permanent staff who are not eligible under the OMERS plan.

As noted earlier, tax deficiencies have been reduced by $13.5 million to take into account the final assessment loss which has increased from 1 percent to 1.5 percent, or from $27 million to $40.5 million. Tax deficiencies will be managed to achieve this adjusted budget.

Non-Program Revenues:

A $31.9 million shortfall is currently projected in the corporate revenues, consisting of:

(a)$18. 4 million from lower supplementary taxes, due to the move to Current Value Assessment (CVA) and delays in the processing of supplementary taxes by the assessment office;

(b)$10.0 million related to lower interest and investment earnings, associated with the delay in final tax bill issuance adversely impacting funds available for investment;

(c)$7.2 million reduction in tax penalties due to the two and half month delay in the second billing and changes to the assessment; and an offsetting; and

(d)$3.7 million increase in revenue associated with finalization by the former municipalities of the 1997 year-end surplus.

Staff are currently in active discussions with Ministry of Finance officials to recoup 100 percent of interest and investment earnings, as well as penalties and supplemental tax revenues (ie. (b) and (c) above).

Water and Water Pollution Control:

On a year-to-date basis for this program, net expenditures are $5.0 million under budget, due to $7.4 million in under-expenditures related to differences between the monthly budget allocation used for this report and the actual spending pattern and a $2.3 million revenue shortfall because of lower water consumption levels within the City of Toronto. These items are expected to self-correct by year-end, resulting in the program coming in on budget.

OMERS Holiday Savings:

The full OMERS contribution holiday effective August 1, 1998 will provide an additional $20.0 million in savings, after accounting for $3.5 million to offset the Police Services salary settlement. The $20.0 million in savings will flow into the Employee Benefit Reserve.

Other Items:

Given variation in the former cities' treatment of year-end surplus funds and in-year reliance upon the corporate contingency account to fund over-expenditures, it is recommended that a surplus management and corporate contingency reduction strategies be developed for phase-in implementation over several years.

Conclusion:

At this time, a corporate year-end surplus of $22.8 million is projected, primarily resulting from a $19.1 million net surplus in the actual welfare costs below budgeted levels. The major City agencies, boards and commissions of the Toronto Zoo, TTC and Police, are reporting to be $4.5 million overspent by year-end. Given that last year's surplus was $50.0 million, any surplus below this amount results in a pressure for next year's budget. To reduce the funding pressure, all Departments, Boards and Agencies should be taking action now to ensure that their budget is not overspent.

Program factors noted at this time to monitor and report to committee as necessary with any significant changes from projected levels are: General Welfare Assistance (GWA) caseload volumes, CNE and Zoo attendance and revenue levels, materialization of development fee revenue levels, TTC ridership levels, waste tonnage and revenues, winter maintenance expenditures for the seasonal months, overall progress on total staff exits from the City, and monitoring activity recoveries, revenue levels and salary increases at the Police Services.

Contact Name and Telephone Number:

Keshwer Patel, Manager, Budget Operations and Support

Telephone: 392-8217; Fax: 392-3649; E-mail: kpatel@mta1.metrodesk.metrotor.on.ca

Shekhar Prasad, Director of Budgets; Tel: 392-8095; Fax: 392-3649

(Copies of Appendices A. B, C and D were circulated to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting of September 24, 1998, and copies thereof are on file I n the office of the City Clerk).

14

Business Case Review of the

"Works Best Practices Program"

(City Council on October 1 and 2, 1998 deferred consideration of this Clause to the next regular meeting of City Council to be held on October 28, 1998.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendations of the Budget Committee embodied in the following transmittal letter (September 16, 1998) from the City Clerk:

Recommendations:

The Budget Committee on September 15, 1998 recommended to the Strategic Policies and Priorities Committee, and Council:

(1)the adoption of the supplementary joint report (September 9, 1998) from the Chief Administrative Officer, the Chief Financial Officer and Treasurer and the Commissioner of Works and Emergency Services, wherein it recommended that:

(a)Toronto Council endorse continuance of the Works Best Practices Program, described herein, and with the additional control and reporting methodologies;

(b)funding in the amount of $1.908 million (in Water Supply Appropriation WS026) be approved from the Water Supply Capital Financing Reserve;

(c)subject to recommendation (b) above, authority be granted for an expenditure of $1.908 million after the Municipal Goods and Services Tax Rebate, to continue implementation of the Best Practices Program;

(d)the costs associated with staff downsizing and retraining, along with computer hardware and software replacement, be financed from the reduction in expenditures in the Works Best Practices Program. The annual cost avoidance will be identified separately in the Water Supply Capital Financing Stabilization Reserve and the Water Pollution Control Measures Reserve Fund; and

(e)the appropriate City officials be directed to take the necessary action to give effect thereto;

(2)that a benefits tracking program be developed and upon completion, the Commissioner of Works and Emergency Services report back to the Works and Utilities Committee as to the final form being accepted; and

(3)the Commissioner of Works and Emergency Services provide a report to the Works and Utilities Committee every six months on the benefits tracking program, and a copy be provided to the Budget Committee for information.

The Budget Committee reports having received the joint report (July 23, 1998) from the Chief Administrative Officer, the Chief Financial Officer and Treasurer and the Commissioner of Works and Emergency Services.

Background:

The Budget Committee on September 15, 1998, had before it the following:

(a)joint report (July 23, 1998) from the Chief Administrative Officer, the Chief Financial Officer and Treasurer and the Commissioner of Works and Emergency Services;

(b)communication (August 5, 1998) from Mr. Bob Toop, National Representative, Toronto Civic Employees' Union, C.U.P.E., Local 416;

(c)supplementary joint report (September 9, 1998) from the Chief Administrative Officer, the Chief Financial Officer and Treasurer and the Commissioner of Works and Emergency Services; and

(d)communication (September 11, 1998) from Ms. Anne Dubas, President, Local 79, Canadian Union of Public Employees, forwarding a brief regarding the Business Case Review of the "Works Best Practices Program", a copy of which is on file in the Clerk's Department.

The following persons appeared before the Budget Committee in connection with the foregoing matter:

-Mr. Peter Leiss, Vice-President, Toronto Civic Employees' Union, Local 416,

-Mr. John Murdock from the Water Division and the Toronto Civic Employees' Union Local 416.

-Mr. Allister Reid from the Water Pollution Control Division and the Toronto Civic Employees' Union Local 416.

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(Joint report dated July 23, 1998 addressed to the

Budget Committee from the Chief Administrative Officer,

the Chief Financial Officer and Treasurer and

the Commissioner of Works and Emergency Services)

Purpose:

To report on the review of the Business Case for the Works Best Practices Program (WBPP), currently underway in the Water and Wastewater Services Division of Works and Emergency Services, and to seek funding in the amount of $19,433,000.00 for continuation of WBPP in 1998.

Funding Sources, Financial Implications and Impact Statement:

At its meeting of April 29, 1998, Toronto Council approved the 1998-2002 Capital Works Program, which includes provision for continuing expenditure on the Works Best Practices Program (WBPP) in the Water and Wastewater Services Division of Works and Emergency Services.

The Works Best Practices Program is a four and one-half year plan, with an estimated capital cost of $101,905,000.00. The two major outcomes of this Program are the substantial replacement of obsolete and aging plant instrumentation, equipment and control systems, and the modernization of work and management practices and procedures, enabled by new information systems, in all areas of operations and maintenance. The operating cost reductions produced by WBPP implementation in Water and Wastewater Services will increase through the implementation period to $37,076,000.00 per year in 2002, the first full year following completion of the project and will continue at that level thereafter. WBPP is presently on schedule with regard to the overall planned capital expenditure and the achievement of operating cost reductions.

In approving the 1998-2002 Capital Works Program, Council withheld funding approval of expenditures pending a review of the WBPP business case by the Chief Administrator's Office. Of the planned total WBPP cost of $101,905,000.00, prior financing has been approved totalling $25,377,000.00 to complete Phase 1 activities.

Of the amount approved, the total spent and/or committed to date is $22,840,000.00 leaving an uncommitted balance of $2,537,000.00, which is, however, earmarked for remaining Phase 1 planned activities.

Additional financing in the amount of $19,433,000.00 is now required for continuation of planned implementation work in 1998, with some expenditures extending into 1999 as major contracted plant detailed design work, under Phase 2 of the Program. Details to the Costing Unit level are shown in Appendix 1.

The Treasurer has advised that funding can be made available from the Water Pollution Control Measures Reserve Fund and the Water Supply Capital Financing Reserve.

The financial impact of implementing WBPP in the former Metro Water Supply and Water Pollution Control functions was analyzed by the Finance Department in 1997. The results of that analysis indicated that the WBPP can be financed through the water rate without adverse impact to the existing rate projections. The consequences of not completing WBPP are significantly higher future water rates as a result of foregoing planned operating cost reductions estimated at $37,076,000.00 per year.

It should be noted that this program will contribute significantly to resolution of the Year 2000 (Y2K) problem in Water and Wastewater Services. The estimated twelve-to-fifteen million dollar cost of replacing aging, non-Y2K compliant SCADA (Supervisory Control and Data Acquisition) equipment and systems in the water and wastewater treatment plants and in the collection and transmission systems is already contained in the WBPP capital estimates. Further, all new information systems and technologies deployed under WBPP will be certified Y2K compliant as per corporate standards, avoiding the need to repair or replace a host of older, non-compliant systems.

Recommendations:

It is recommended that:

(1)Toronto Council endorse continuance of the Works Best Practices Program, described herein;

(2)funding in the amount of $19,433,000.00 ($3,063,000.00 in Water Supply Appropriation WS026 and $16,370,000.00 in Water Pollution Control Appropriation WPC001) be approved from the Water Supply Capital Financing Reserve and the Water Pollution Control Measures Reserve Fund;

(3)subject to recommendation No. (2) above authority be granted for an expenditure of $19,433,000.00, after the Municipal Goods and Services Tax Rebate, to continue implementation of the Best Practices Program; and

(4)the appropriate City officials be directed to take the necessary action to give effect thereto.

Council Reference/ Background/ History:

At its meeting of July 2 and 3, 1997, by adoption of Clause No. 3 of Report No. 13 of Financial Priorities, Metropolitan Council endorsed continuance of the WBPP. The program had been previously established by Metropolitan Council on September 25 and 26, 1996 through adoption of Clause No. 2 of Report No.14 of the Environmental and Public Space Committee with the objective of implementing the best practices in the utility industry in the areas of work management, technology and organization, to maximize operating effectiveness and efficiency across the Department. The WBPP arose through expanding the structure and scope of the previously existing Process Equipment Replacement and Strategic Information Systems Plan (SISP) project for the former Metro Works Water Pollution Control Division (reference Clause No. 1 of Report No. 15 of Environment and Public Space Committee, adopted by Metropolitan Council at its meeting of September 27 and 28, 1995) to encompass all business functions of the former Metro Works Department.

Comments and/or Discussion and/or Justification:

At its meeting of September 25 and 26, 1996, Metropolitan Council, by approval of Clause No. 2 of Report No. 14 of the Environment and Public Space Committee, endorsed commencement of the Works Best Practices Program in the Works Department. At its meeting of July 2-3, 1997, Council, by approval without amendment of Clause No. 3 of Report No. 13 of the Financial Priorities Committee, authorized expenditures to perform Phase 1 implementation of the Works Best Practices Program (WBPP). In each of these instances, a presentation of the business case for WBPP, in the context of the recommendations being requested at the time, was presented to the Committee. Further, the business case had been reviewed and endorsed by the Metro Chief Administrative Officer, Commissioner of Finance, and Commissioner of Corporate Services.

On May 26, 1998, the Chief Administrative Officer met with staff of the Water and Wastewater Division of Works and Emergency Services, including the Project Manager for WBPP, to review key elements of the Works Best Practices Program business case. In the light of previous business case reviews having been performed by senior Metro officials, and because this Program is both broad in scope and diverse in nature, involving substantial equipment upgrades in seven major water/wastewater operating facilities, the commissioning of a number of strategic information management systems, and the redesign of operations/maintenance work and management practices, the review focused on three key perspectives.

The first perspective is the financial component of the Program, including costs over time, operating cost savings over time, and the implication of the program on water and sewer user rates - related to this would be the impacts on overall service delivery in terms of quality and effectiveness.

The second perspective is the implication on organization and staff, both bargaining unit and management, and the relationship between WBPP and the City of Toronto Amalgamation processes.

The third perspective is the implementation methodology being used to govern the wide range of tasks and activities involved in implementing the Program.

Financial Aspects.

The fundamental objective of the Works Best Practices Program is to ensure business operations continue to be performed to degrees of efficiency and effectiveness that are consistent with modern practices and supporting technologies. One of the first steps in the initiation of the Program was the establishment of a "competitiveness assessment". This exercise utilizes an efficiency benchmarking technique which is essentially identical to those used by the multinational private operators in developing operating contract proposals for major water and wastewater utilities. It is the results of this exercise, backed up by similar conclusions produced in a totally independent, internal "simulated competition", that led to the establishment of a thirty-seven million dollar per year operating cost reduction target for the Works Best Practices Program.

The total cost of the Program, to be implemented over a four and one-half year period, is stated to be $101,905,000.00. Of the total cost figure, approximately $65,000,000.00 represents previously planned expenditures for the necessary ongoing replacement and upgrading of existing equipment and control systems in water and wastewater plants and in the collection and transmission systems (these facilities have a combined infrastructure value estimated at $7,500,000,000.00). It is in fact the remaining investment component of approximately $37,000,000.00, aimed at new and improved operations and maintenance work practice and organizational redesign, underlying technology development and process control improvements, that generates the bulk of the $37,076,000.00 in annual operating cost reductions. The $65,000,000.00 has been effectively "bundled" into the Best Practices budget in order to leverage opportunities for efficiencies through operational improvements and to ensure those investments are coordinated within the broad standards and technology development strategies of the core Best Practices initiative.

In 1997, the full WBPP costs and schedule of planned operating cost reductions were included by Metro Finance in Water Rate Model calculations and it was determined that no rate increase would be required. The Program, even including the bundled $65,000,000.00 component, is effectively self-funding in that the accumulated operating cost reductions generated exceed the capital costs within the life of the Program implementation. As the table below shows by the year 2002, the program breaks even and is producing savings of $37,076,000.00 per year. If the Program does not proceed to completion, there will be an increasing effect on water rates.

The table below summarizes the business case figures. Capital costs are year-by-year, inflated to year of expenditure and after the Municipal Goods and Services Tax Rebate. Operating savings are net, year-by-year, in constant 1997 dollars. FTE reductions are approximate, year-by-year. The Program is presently on target to deliver the planned operating cost reductions within the planned Program cost.

The effects of implementing Works Best Practices on service delivery and product quality are favourable. Present quality levels for potable water production and wastewater effluent production will be maintained, with improved flexibility and cost management relating to legislated or otherwise directed improvement strategies. Service levels will be maintained, providing for better responsiveness and better access to more relevant and timely information. Other benefits include improved asset management and long-range performance, increased facility/infrastructure lifetime, and opportunities for improved receiving water quality.

As a result of delay in proceeding with implementation of certain works, the projected cash flow for the project has been revised from the 1998 Capital Works Program submission as noted below.

Appropriate amendments will be reflected in the 1999 Capital Works Program.

Staffing and Organization.

The findings of the competitiveness assessment, confirmed in the simulated competition, pointed to reductions in operations and maintenance labour costs as the primary source of available cost savings. The "best practices" that have been identified under this Program as most relevant to former Metro water and wastewater operations stress the following as the most significant areas of opportunity:

(i)more efficiently planned, managed and executed work practices;

(ii)"total productive operations" (TPO), which focuses on maximizing the productive time of human resources; and,

(iii)workforce flexibility, which tackles the issue of separated skills and crafts and its associated inefficiencies.

WBPP therefore emphasizes a broad transition of the workforce, including management, in terms of the jobs people do, the way people are organized, and the work practices they employ. This transition must be orchestrated in conjunction with the replacement and upgrading of process control equipment and systems and the implementation of key computer systems aimed at organizing and managing resources, automating tasks, and managing the performance of the business, its resources and assets.

Activities under WBPP to-date have identified and confirmed a clear need to reduce on a phased basis the size of the overall workforce needed to perform the work and business processes that characterize the present workload. This was evidenced by the competitiveness assessment, and by work done under the Program to-date, particularly in business re-engineering exercises. This should not be surprising, given the rapid pace of change in the industry over the past decade at the global level and the lesser degree of organizational change that has taken place in North America. At the same time, change of this magnitude, regardless of the underlying business and financial logic, cannot be instituted without consideration for its impact on staff at all levels. Included under Works Best Practices are a range of work redesign components, affecting the jobs, responsibilities and skills of front-line staff in operations, maintenance, and general labour areas, as well as the change management skills at the supervisory level. Within that process, some job descriptions need to be revised, and new ones created. WBPP incorporates costs to support staff transition. This includes funds to finance voluntary exit packages and staff training, including training for staff needing new skills to perform new types of work and training for staff who wish to leave, but who require certain skills to assist them in finding new jobs. Both these funding mechanisms are financed out of accruing savings during the implementation period, and have already been netted out of the planned cost reductions.

Senior staff in the areas of Finance, Human Resources and Corporate Services are to be involved in this process to assist in policy areas and to ensure that developed policies are followed. In the area of Labour Relations specifically, senior staff have been involved in this Program from the outset, and continue to play an active role in the process.

At this stage, C.U.P.E. Local 79 continues to support the Works Best Practices Program, and has for the past year maintained an active role in the Program. Local 416 formally "stepped back" from active WBPP participation earlier this year. At this point, formal discussions are under way at the senior level to develop an appropriate working relationship aimed primarily at addressing areas of concern relating to the impact of WBPP on its members. It is a stated goal of the Works Best Practices Program to achieve planned reductions in the workforce through attrition, voluntary exit packages, and an active process of redeployment on a City-wide basis, with layoffs to be considered only on a last-resort basis. Intensive discussions are planned to take place in August for purposes of arriving at a firm set of principles and protocols to govern the implementation of WBPP.

With regard to the relative implications of WBPP and amalgamation, it is clear that this Program is actively performing Phase 3 restructuring work, and will help provide a solid operational foundation for the emerging Works and Emergency Services management structure. Appropriate linkages between the two activities are presently under development.

Implementation Methodology.

The third area of focus is the implementation methodology of the Program - the standards and procedures and methods being applied to enable and achieve the planned results. This is a complex area, and it is evident that much expertise has been applied to the WBPP methodology. The initial design phase utilized external consultants from a wide range of disciplines. This was needed for a number of reasons: the volume of work to be done; the transitional nature of much of that work; the need to apply techniques that are very current and very specific to water and wastewater operations and management; the need for assistance in project management activities relating to several major disciplines including engineering and process control technologies and practices, information systems design and development, and "total productive operations" work practices redesign; and, importantly, the need to apply specially-skilled resources to the Program on a full-time basis through the critical design stages. As the Program moves into its second phase of work this year, new roles are planned for development in Works and Emergency Services to effect the transition of sustaining aspects of the new operation into the hands of staff. The need for consulting support will reduce substantially as key implementations are rolled out in operational work areas, in major process control systems and their networks of equipment and devices, and in underlying information technology applications.

From a project management standpoint, the methodology being applied is well suited to the Program. There is a strong Quality Control and Quality Assurance component, which is separated from the main project body to ensure objectivity. There is a review and approval process for project deliverables which brings to bear the expertise of both consultants and staff and also provides effective knowledge transfer to staff to maximize self-sufficiency in the future.

A benefits tracking program is under development, with the assistance of Finance staff, to capture and report direct WBPP benefits in the areas of energy, chemicals, parts and materials, and savings in labor costs. This system will operate until completion of the Program, and can be adapted to support continuous improvement initiatives on an ongoing basis.

The Performance Management component of WBPP is a computerized business tool which will be used for monitoring business performance, for establishing improvement targets and for tracking the achievement of those targets. This capability is in keeping with emerging corporate strategies for benchmarking and tracking of key business improvements.

Conclusion:

The Works Best Practices Program is an important strategic initiative. It emphasizes the establishment of a continuous improvement business and work environment in a climate of fiscal restraint, public accountability and openness, and global competition. The business case for WBPP is strong - the achievement of ongoing cost reductions in the range of $37,076,000.00 per year for an investment of $101,950,000.00, a large part of which is an operational necessity to maintain the operational viability of approximately $7,500,000,000.00 in infrastructure. The resulting payback ratio of 35 percent represents a solid cost-benefit. WBPP effectively pays for itself within the lifetime of the project.

While the Program will have a significant impact on both management and bargaining unit staff, funding has been built in for transition and training. Communications and staff involvement are firmly entrenched principles of the Program. Corporate labour relations/human resources staff have been involved in our ongoing discussion with the Union and are providing input with respect to transition and training initiatives. The project methodology is well-suited to the needs of this large and complex undertaking. Performance management and benefits tracking are integral to the design of technologies, practices and organization.

This review process concluded that the Works Best Practices Program Business Case is complete and appropriate. The Commissioner of Finance and the Executive Director of Information Technology for the City of Toronto have reviewed the Program and are in concurrence. It is recommended that funding for the Program be provided as set out in Appendix 1 to this report.

Contact Names and Telephone Numbers:

William G. Crowther, Director, Management and Technical Services

Toronto Works and Emergency Services Department

Phone: (416) 392-8256; Fax: (416) 392-2974

E-Mail: william_g._crowther@metrodesk.metrotor.on.ca

Jim Coe, Manager, Works Best Practices Program

Toronto Works and Emergency Services Department

Phone: (416) 392-3141; Fax: (416) 392-8817

E-Mail: jim_coe@metrodesk.metrotor.on.ca

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Business Case Review of the "Works Best Practices Program"

Appendix 1: Capital Accounts

(in $000's, including GST after Rebate)

* The cash flow indicated in this table reflects that required for new work to be initiated in 1998 and for which funding is now required. The cash flow for certain elements extends into 1999 because the contracts to be awarded in 1998 will not be completed in 1998.

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(Communication dated August 5, 1998 addressed to the

Chair, Budget Committee from the

National Representative, Toronto Civic Employees' Union, C.U.P.E. Local 416)

Please be advised that the Toronto Civic Employees' Union, Local 416 would like to make a presentation to the Budget Committee meeting which I understand is scheduled for September 15th, 1998.

We would like very much to be placed on the agenda in order that we may discuss the Works Best Practices program.

Should you have any questions or concerns, please do not hesitate to contact either Brian Cochrane or myself at (416) 968-7721.

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(Supplementary joint report dated September 9, 1998 addressed to the

Budget Committee from the Chief Administrative Officer,

the Chief Financial Officer and Treasurer and

the Commissioner of Works and Emergency Services)

Purpose:

To provide financial and informational updates to the report titled "Business Case Review of the Works Best Practices Program", consideration of which was deferred by the Budget Committee at its meeting of July 28, 1998 (Item No. 14) to its meeting of September 15, 1998. Recommendations contained in that report are reproduced in this report in their updated form.

Funding Sources, Financial Implications and Impact Statement:

Refer to the accompanying report, "Business Case Review of the Works Best Practices Program", to which this report is an addendum. This section contains updates to that report.

Funding is sought herein in the revised amount of $1.908 million for continuation of Works Best Practices Program (WBPP) in 1998, this has been reduced from $19.433 million in the original report due primarily to the revised scheduling of planned expenditures as a result of delays. Funding already approved for 1998 plus this proposed amount will cover planned work to the end of 1998. Future funding requests will be covered as part of the 1999 capital budget process.

Financing in the amount of $1.908 million is required for continuation of planned implementation work in the Water Supply area to the end of 1998. One expenditure extends into 1999 as a contracted activity commencing in 1998 and finishing during 1999. Details to the Costing Unit level are shown in Appendix1. The revised cash flow analysis is contained in this report.

Recommendations:

Refer to the accompanying report, "Business Case Review of the Works Best Practices Program", to which this report is an addendum. This section restates and revises the "Recommendations" contained in that report.

It is recommended that:

(1)Toronto Council endorse continuance of the Works Best Practices Program, described herein, and with the additional control and reporting methodologies;

(2)funding in the amount of $1.908 million (in Water Supply Appropriation WS026) be approved from the Water Supply Capital Financing Reserve;

(3)subject to recommendation no. (2) above, authority be granted for an expenditure of $1.908 million after the Municipal Goods and Services Tax Rebate, to continue implementation of the Best Practices Program;

(4)the costs associated with staff downsizing and retraining, along with computer hardware and software replacement, be financed from the reduction in expenditures in the Works Best Practices Program. The annual cost avoidance will be identified separately in the Water Supply Capital Financing Stabilization Reserve and the Water Pollution Control Measures Reserve Fund; and

(5)the appropriate City officials be directed to take the necessary action to give effect thereto.

Council Reference/ Background/ History:

Refer to the accompanying report, "Business Case Review of the Works Best Practices Program", to which this report is an addendum.

Comments and/or Discussion and/or Justification:

Refer to the accompanying report, "Business Case Review of the Works Best Practices Program", to which this report is an addendum. This section contains updates to that report.

Revised Financial Aspects of Works Best Practices Program (WBPP)

Phase 1 of WBPP, now near completion, has included a wide range of activities which have set the foundation for full-scale implementation of modernized process control systems and equipment, plus management practices designed to enable long-term continuous improvement. This Phase 1 work has in some areas identified better solutions than originally envisaged and in some cases higher costs than originally estimated, for example, completion of Preliminary Design for the three major wastewater treatment plants has identified a wider need for process control components than was estimated in 1991. The total increased cost to implement the whole program is $8.477 million. This increase in the budget estimates, as a result of the preliminary design and eight years of inflation, represents an increase of 8.3 percent over the original estimates.

The selection and acquisition of a comprehensive "work management system" to improve asset and human resource management across the Water and Wastewater business is designed to be compatible with the SAP systems now selected for City finance and payroll.

Full documentation of these revised capital costs will be provided in the 1999 Capital Works Program submission later this year. The revised cash flow projection is contained in this report. In order to address the year 2000 problem, we are currently assessing the need to advance the installation of some process control equipment into 1999. Unless this advancement is required to address Y2K then the revised cash flow is valid to the end of the project.

General Manager's Review of the Program

The WBPP is a 4½ year project that has a revised total program cost of $110.382 million. The program started in 1997 and has received funding approval of $25.377 million to date. Based on the expenditures to date in 1998 we can only anticipate spending, or committing, a further $1.908 million in the balance of 1998. The cash flow projections for the remaining years in the program have been revisited and we do not anticipate revising them at this time unless to address Y2K issues.

Contained within the total program costs are expenditures of $65 million that were identified in the previous Metro Capital Programs as ongoing replacement of existing equipment and control systems in the water and wastewater plants plus in the collection and transmission system. In effect these normal replacement costs have been bundled into the WBPP capital appropriation. Assuming these expenditures would have taken place regardless of the WBPP, then the remaining $45 million more appropriately represents the investment of new money to achieve the savings identified. These savings would be more accurately described as future cost avoidance and therefore enable Council to maintain, or even lower, the water rate which has historically risen gradually due to the normal inflation factors.

The projected reduction in annual operating costs upon full implementation of the WBPP is $36 million per year for the Water and Wastewater Division. This would indicate that the program would pay for itself within the lifetime of the project. The water rate charge per cubic metre could be expected to start declining in the year 2000, hit 3 percent reduction in 2003 and keep falling at 3 percent for the next 3 years. Alternatively, the rate could remain constant and allow Council to invest the additional revenue in new or enhanced programs. This clearly demonstrates that the WBPP is worth investing in.

To date 20 percent of the total program expenditures have been spent, which are predominately associated with process control preliminary design, integration technologies and implementation of the work management system. In order to control future expenditures and track the benefits of the complete program, we are proposing a staff secondment from the corporation for at least the next three years and possibly to the end of the project. This position will report directly to the General Manager and be responsible for implementing cost control measures and reporting mechanisms. We are currently seeking applications for this secondment and will be looking for someone with a background in financial planning and cost control technology.

Staffing and Organization

Refer to the accompanying report, "Business Case Review of the Works Best Practices Program", to which this report is an addendum. This section contains updates to that report.

To date, a series of meetings have taken place between representatives of C.U.P.E. Local 416 and management of the Works and Emergency Services Department. Corporate Human Resources and Labour Relations have actively participated in these meetings and in the preparations leading up to them.

Management had placed on hold all new implementation activities relating to the roll out of WBPP work areas in the operating facilities since June to allow these discussions to take place without the hindrance of ongoing implementation issues.

In addition to discussing matters of an immediate nature, formal proposals from both parties have been presented for consideration as a "framework" for joint administration of the Works Best Practices Program plus the broader context of all Continuous Improvement initiatives in the Department. It is the stated intention of management that, while the targets for operating cost reductions and associated reductions in the overall workforce, including both management and unionized staff in approximately equal proportions, must be preserved as a commitment to the citizens and ratepayers of the City of Toronto, every reasonable effort is to be made to ensure that the transition of the workforce is implemented in a fair and equitable manner.

To this point, the position of Local 416 has been that job security is a mandatory component in any process they would agree to participate in. In effect, there must be a "no layoff" clause in any agreement that they are party to. Management has indicated its inability to guarantee there will be no layoffs because of inherent uncertainties around the degree of response to offered early exit packages and the extent of employment available elsewhere in the City to surplus staff. Layoffs is the stated "last resort".

C.U.P.E. Local 79 continues to actively support and participate in the process.

The use of specifically reserved funds for voluntary separation packages and training programs, as well as the exploration of any opportunity for redeployment in the City, not solely within Works and Emergency Services, is part of the proposal under WBPP. Within the program we have estimated $5.5 million for staff buy-outs, plus $1.5 million for training/retraining. There is a need to clarify the fact that exit incentives under the WBPP are not part of the corporate amalgamation budget but have been incorporated as part of the Division's total WBPP program costs. A new recommendation dealing with this issue has been included as no. 4 in the revised recommendations.

Timing of the Project

The project is approximately four months behind schedule, due primarily to the delays associated with discussions around staff impacts with Local 416. This delay was largely accommodated into the WBPP work plan. However, the capacity to absorb further delays without seriously jeopardizing the Program schedule has, for all intents and purposes, been exhausted. Further delay will be translated into late achievement of promised operating cost reductions.

The table below provides a revised summary of the business case taking into account the delays so far. Capital costs are year-by-year, inflated to year of expenditure and after the Municipal Goods and Services Tax Rebate. Operating savings are net, year-by-year, in constant 1997 dollars. FTE reductions are approximate, year-by-year, and occur by year end.

(* in $000's)

As a result of delays in proceeding with implementation of certain works, the projected cash flow for the project has been revised from the 1998 Capital Works Program submission as noted below.

(*in $000's)

Appropriate amendments will be reflected in the 1999 Capital Works Program to be submitted later this year.

Conclusion:

The Works Best Practices Program is an important strategic initiative. It emphasizes the establishment of a continuous improvement of business and work environment in a climate of fiscal restraint, public accountability, openness and global competition.

The business case for WBPP is strong. While the current program has bundled normal ongoing upgrades and maintenance costs of $65 million into the overall costs, the achievement of ongoing cost reductions in the range of $36 million per year for an investment of $45 million of new money represents a solid cost-benefit.

The earlier report substantiated the need for the WBPP to continue and the new General Manager's review supports this position and went on to address the cash flow and funding requirements. This supplemental report has now reduced the funding approvals required in 1998 from $19.433 million to $1.908 million. Further, it is proposed that a senior financial staff person be seconded to the General Manager's office to provide control and reporting functions.

While the Program will have a significant impact on both management and bargaining unit staff, funding has been built in for transition and training. Communications and staff involvement are firmly entrenched principles of the Department.

Contact Names and Telephone Numbers:

Jim Coe

Manager, Works Best Practices Program

Toronto Works and Emergency Services Department

Phone: (416) 392-3141

Fax: (416) 392-8817

E-Mail: jim_coe@metrodesk.metrotor.on.ca

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Business Case Review of the "Works Best Practices Program"

APPENDIX 1: Capital Accounts

(in $000's, including GST after Rebate)

* The cash flow indicated in this table reflects that required for new work to be initiated in 1998 and for which funding is now required. The cash flow for one element extends into 1999 because the contract to be awarded in 1998 will not be completed in 1998.

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(Communication dated September 11, 1998, addressed to the

Chair and Members of the Budget Committee from the

President, Canadian Union of Public Employees, Local 79)

This report reviews the Business Case for the Works Best Practices Program and seeks funding for its continuation in 1998.

Through this project, the operation of the Water and Waste Water Services Division will be redesigned. The goal is to continue to provide public sector environmental services to taxpayers, while becoming more cost-effective.

CUPE Local 79 representatives have participated in the Best Practices Program because we are committed to ensuring that Works and Emergency Services continues to offer the best possible services to the public and remains a public sector utility.

The report identifies plans to reduce overall staffing levels during the period from 1996 to 2002. CUPE Local 79 representatives have been working to develop a fair and achievable program for the staff transition which is in keeping with our Collective Agreements and City policies. Retraining and educational opportunities must be provided so that staff can develop the skills needed to succeed. It is important to ensure that sufficient funding has been included in the budget for transition and training. Improved retirement packages and exit incentive programs should be made available to all employees on a voluntary basis. There may be opportunities to contract-in work from other areas outside of the new City.

CUPE Local 79 is opposed to the privatization of our water and waste water and solid waste assets. In 1996, a public attitude survey was carried out with industry and the public--it found that two-thirds of those polled unequivocally wanted water and waste water services to remain in the public sector.

Our resources are too valuable for us to give up. We urge the Budget Committee to support programs which ensure that these assets remain in the public domain, delivered by public sector employees who are accountable to publicly elected officials.

(City Council on October 1 and 2, 1998, had before it, during consideration of the foregoing Clause, a communication (October 1, 1998) from Mr. B. Toop, National Representative, Toronto Civic Employees' Union, CUPE Local 416, Toronto.)

15

Basement Flooding Problems in the York Community

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendation of the Budget Committee embodied in the following transmittal letter (September 16, 1998) from the City Clerk:

Recommendation:

The Budget Committee on September 15, 1998 recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the report (September 14, 1998) from the Commissioner of Works and Emergency Services.

The Budget Committee reports having requested:

(a)the Commissioner of Works and Emergency Services to report back on a city-wide program in the 1999 - 2003 Capital Budget;

(b)the Chief Financial Officer and Treasurer to report back to the Budget Committee on a no fault grant program for sewer backups that can be created for the new City; and

(c)the City Solicitor to meet with staff of the Planning Division to review the reverse slope policy and its impact on basement flooding problems for a report to the Urban Environment and Development Committee.

Background:

The Budget Committee on September 15, 1998, had before it a report (September 14, 1998) from the Commissioner of Works and Emergency Services.

Councillor Holyday, Markland-Centennial, appeared before the Budget Committee in connection with the foregoing matter.

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(Report dated September 14, 1998, addressed to the

Budget Committee from the

Commissioner of Works and Emergency Services)

Purpose:

This report identifies the need to transfer funds to a new 1998 capital project that will address some of the basement flooding problems in the York Community. The work can be constructed in 1998 if approval is granted at the next Council meeting. The funding has been found from within a capital project in the York Community that was approved in 1998 plus an allocation from the Water Reserve Account.

Funding Sources, Financial Implications and Impact Statement:

A new capital project is proposed for 1998 in the York Community to start addressing the basement flooding that was experienced again this summer. Detention facilities are proposed on the combined sewers on both Commodore and Bowie Avenues. The estimated project funding is $300,000.00 and the design work has already been carried out in-house.

In the Council approved 1998-2002 Capital Works Program, funding in the amount of $200,000.00 is still available in the York Community Watermain Relining Project. The remainder of the funding in the amount of $100,000.00 is available in Water Reserve Account No. 901-542. The Watermain relining is funded from the water rate.

Recommendations:

It is recommended that:

(1)funding in the amount of $300,000.00 be approved for construction of detention facilities on Commodore and Bowie Avenues in the York Community, and

(2)funds be transferred from an approved 1998 Capital Project in the York Community plus the Water Reserve, as follows:-

$200,000.00 from Capital Project - Watermain Relining, and

$100,000.00 from Water Reserve Account No. 901-542.

History:

Basement flooding has been a frequent occurrence in many municipalities. Various programs were instituted by the previous area Councils to address flooding as a result of combined sewers or separate sewers backing up. The rate of expenditure on these relief programs varied among the municipalities so that differing degrees of flood protection exist across the City .

Comments:

During the summer storms this year there were many reports of basement flooding in the York Community and some suspect that not all homeowners reported their flooding situation. In fact several properties experienced repeated floodings and, on Commodore Avenue, one owner reported his fourth flooding on September 6, and further, his insurance company will no longer cover his home.

During the heaviest storm event 134 flooding reports were received and covered streets served by both combined and separate systems. The previous York Council had embarked on a program of flood relief using detention facilities to store sewage as well as limit the entry of storm water into the sewer system. There are two areas that need detention facilities on combined sewers and staff have identified the work necessary to complete the installation this year on the two streets in question, Commodore and Bowie Avenues.

Further work is required in future years and this will be detailed in the 1999 Capital Works program. In the mean time it is proposed that work start as soon as possible on these two streets. In order to limit the impact of this funding impact, staff from the York community have identified an approved 1998 capital project in York from which some funds can be transferred.

The work under the watermain relining has been completed and the $200,000.00 represents the surplus due to lower than expected rates.

Conclusion:

Recognizing the impact of repeated floodings in certain areas of the York Community, we are proposing that work commence immediately on the construction of detention facilities on Commodore and Bowie Avenues. The work had been previously identified by York staff and a solution prepared. The funding has been found within work planned to be constructed from approved capital funds in the York Community, plus the Water Reserve Account.

Contact Name and Telephone Number:

Chi H. Ng, Director, Professional Services, Operations Services - York District,

Phone: (416) 394-2648, Fax: (416) 394-2888.

16

Implementation of a 100 Percent Biosolids Beneficial

Use Program at the Main Treatment Plant

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the recommendation of the Budget Committee embodied in the following transmittal letter (September 16, 1998) from the City Clerk:

Recommendation:

The Budget Committee on September 15, 1998 recommended to the Strategic Policies and Priorities Committee, and Council, the adoption of the report (September 14, 1998) from the Commissioner of Works and Emergency Services.

Background:

The Budget Committee on September 15, 1998, had before it a report (September 14, 1998) from the Commissioner of Works and Emergency Services.

--------

(Report dated September 14, 1998 addressed to the

Budget Committee from the

Commissioner of Works and Emergency Services)

Purpose:

To identify additional funding sources in the 1998-2002 Capital Works Program to accommodate the increased 1998 expenditures related to the Implementation of a 100 Percent Biosolids Beneficial Use Program at the Main Treatment Plant.

Recommendations:

It is recommended that:

(1)authorization be granted to transfer an additional $300 thousand in funding within the 1998-2002 Approved Capital Works Program from the Biosolids Odour Control and the Biosolids Loading Facility within the Main Treatment Plant project to the Biosolids Beneficial Use Project, as set out in this report;

(2)subject to Recommendation (1), Council endorse the engagement of the firm of R. V. Anderson Associates Limited in the amount of $845 thousand net after Goods and Services Tax municipal rebate to assist in the preparation and evaluation of the EOIs and RFPs for the establishment of the beneficial biosolids re-use facilities and for the design-build construction of the biosolids loading facilities, odour control facilities and heat generation facilities; and

(3)subject to Recommendations (1) and (2), previous Council Authority limiting 1998 Expenditures to $450 thousand for the Biosolids technical consultants/project manager be rescinded.

Funding Sources, Financial Implications and Impact Statements:

There are no additional financial implications arising from this report.

Council Reference:

At its meeting held on July 8, 1998, City of Toronto Council adopted Clause No. 2 of Report No. 6 of the Works & Utilities Committee, titled Implementation of a 100 Percent Biosolids Beneficial Use Program. The report authorized the commencement of the 100 Percent Biosolids Beneficial Use Program. The report identified an estimated 1998 expenditure of $715 thousand for the purposes of:

(1)establishing a Technical Advisory and Biosolids Multi-Stakeholder Committee;

(2)retention of consultants;

(3)public support and consultation; and

(4)reimbursement to proponents for development of comprehensive proposal to support the beneficial use of the biosolids from the Main Treatment Plant.

On July 24, 1998, a report was submitted and approved by the Budget Committee to transfer this amount from the 1998 Estimate for the Ultra Violet Trials Project.

Comments:

Since authorization of these reports, we now estimate the revised total cost for the project to be $1,535 thousand over a three year period. Approximately $820 thousand is estimated to be spent in 1998 of which approximately $650 thousand is for consultants. Most of this increase is related to the expenditure for the technical consultant. Due to the complexity of the project and the aggressive timeline for completion, the cost of the overall project has increased from the original estimate due to a higher than anticipated costs to support the Independent Review Committee (IRC) and the Biosolids Multi-Stakeholders Committee (BMSC) as well as for the EOI/RFP advertising, and other related costs.

The multi-disciplinary technical/environmental engineering and consulting firms of R.V. Anderson Associates Limited affiliated with the US Firm of Brown and Caldwell have been engaged to assist the City of Toronto in managing the implementation of the 100 percent Biosolids Beneficial Use Program.

In order to select a consultant to assist in the work, a selection process was carried out generally in accordance with current consultant selection policy as follows.

(a)a consultant selection committee was struck including representatives from City Council, Water Pollution Control and Technical Services staff, external stakeholders having experience in beneficial use of biosolids, and members of the Biosolids Multi-Stakeholder Committee (BMSC);

(b)14 firms were selected from the Departments' roster list in affiliation with US firms having direct and combined experience in beneficial use of biosolids and requested to submit "Expressions of Interest" (EOI) in providing the necessary consulting services for a biosolids beneficial use program;

(c)13 responses were received and reviewed by the BMSC from which 6 were short listed;

(d)detailed written proposals which included estimated engineering fees were requested and received from three of the six short-listed proponents;

(e)all 3 technical submissions were reviewed first independently, then jointly by members of the consultant selection committee;

(f)all 3 proponents were invited to make a presentation and subsequently interviewed in order to clarify and finalize the specific scope of the worked required with the accompanying engineering fees as presented in their proposals;

(g)upon completion of all of the above, the selection committee concluded that the proposal submitted by R.V. Anderson Associates Limited best satisfied the overall project requirements for an appropriate level of effort to properly address the critical timeline elements of the work;

(h)R.V. Anderson's estimated fees for the work are $861,617.00 including GST and disbursements and we recommend inclusion of a contingency allowance of $16,000.00

Accordingly, we request that in addition to funding in the amount of $715 thousand obtained from the Ultra Violet Trials, the full 1998 Approved Estimate of $150 thousand for the Biosolids Odour Control, Account No. C-WP160-S20513 and the full 1998 Approved Estimate of $150 thousand for the Biosolids Loading Facility, Account No. C-WP160-S20514, be transferred to Account No. C-WP160-S20515, Biosolids Beneficial Use Program. The work originally anticipated in these projects will be consolidated and form part of the Biosolids Beneficial Use Program. This will result in a revised total funding approval of $1,015 thousand for this project. Although the total dollar value of projects which will be deferred to accommodate the 1998 Expenditures for this project exceeds the 1998 expenditure requirement, the higher level of funding is required in order to accommodate the contractual commitment to the consultants, which extends over a three year period. Full funding for the Gross Estimated Cost (GEC) will be requested in the 1999-2003 Preliminary Capital Works Submission.

Conclusions:

It is recommended that an additional $300 thousand be transferred from the Biosolids Odour Control and the Biosolids Loading Facility Project to the Biosolids Use Program Project.

Contact Name:

Mr. R. M. Pickett, Director, Water Pollution Control

Telephone: 392-8230; Fax: (416) 397-0908

E-Mail bob_pickett@metrodesk.metrotor.on.ca.

(A copy of the chart titled, "Biosolids Reuse Program", referred to in the report, was circulated to all Members of Council with the agenda of the Strategic Policies and Priorities Committee for its meeting of September 24, 1998, and a copy thereof is on file in the office of the City Clerk.)

17

Toronto District Heating Corporation

(City Council on October 1 and 2, 1998, amended this Clause by adding thereto the following:

"It is further recommended that:

(1)City Council advise the Toronto District Heating Corporation (TDHC) that it will be required to pay not only cash in-lieu of taxes, but rent for use of City road allowances consistent with, but not limited to, the principles enunciated in the Federation of Canadian Municipalities (FCM) model agreement;

(2)the TDHC be requested to enter into a Municipal Access Agreement with the City of Toronto for the purpose of district cooling and district heating distribution pipes, and the legislative amendments and any shareholders' agreements so stipulate; and

(3)the City of Toronto's appointees to the Board of Directors of TDHC be required to submit a report to the Works and Utilities Committee, for approval by City Council, prior to their voting for any proposed restructuring, including the sale or issuance of shares.")

The Strategic Policies and Priorities Committee recommends the adoption of the following report (September 18, 1998) from the Chief Administrative Officer:

Purpose:

The Toronto District Heating Corporation (TDHC) is proposing that it become a corporation regulated by the Ontario Business Corporations Act (OBCA). TDHC advises that the Province is prepared to include amendments to Bill 35, the proposed Energy Competition Act. A very narrow timeframe exists to take advantage of this opportunity and its potential benefits. This report recommends that Council endorse the TDHC approach to change its legal status and identifies minimum conditions under which the City is prepared to participate. Longer-term negotiations among the partners of the TDHC will be required to resolve outstanding issues and to effect any change to its legal status. Assurance will be sought from the Province that it will not proclaim the relevant legislation concerning TDHC into law at the same time as the rest of Bill 35.

Funding Sources, Financial Implications and Impact Statement:

There are no new financial implications associated with the recommendations of this report. As determined by the former City of Toronto, an independent financial assessment and valuation of City assets will be required and will form the basis of subsequent negotiations. In turn, negotiation will take place among the TDHC partners to reach a shareholder agreement subject to formal approval by each of the respective parties.

Recommendations:

It is recommended that:

(1)Council endorse the request by the Toronto District Heating Corporation that Bill 35, the proposed Energy Competition Act, include provisions which permit the Toronto District Heating Corporation to be changed to one with share capital regulated under the Business Corporations Act (Ontario);

(2)The Minister of Energy, Science and Technology and the Minister of Municipal Affairs be requested to confirm in writing to the City that the amendments to Bill 35 respecting the Toronto District Heating Corporation will not be proclaimed into law until such time in the future that an agreement among the proposed shareholders has been reached and the Province has been so notified in writing by the City;

(3)the Chief Financial Officer and Treasurer, in conjunction with the City Solicitor and the Commissioner of Works and Emergency Services, be authorized to negotiate an agreement on behalf of the City of Toronto with representatives of the other proposed stakeholders of the proposed Corporation, namely the University of Toronto, the Province of Ontario and the hospital group;

(4)the Chief Financial Officer and Treasurer, in conjunction with the City Solicitor, identify the conditions that must be addressed to the satisfaction of the City including financial valuations, impact analyses, investor interest and other factors, and submit any final proposed agreement to Council for its approval; and

(5)the appropriate City officials be authorized to take the necessary action to give effect thereto.

Council Reference and Background:

At its meeting of February 26, 1998, the Special Committee to Review the Final Report of the Toronto Transition Team requested the Chief Administrative Officer (CAO) to:

(a)obtain a valuation of the City's assets currently utilized by the TDHC;

(b)report to the Special Committee, in conjunction with the CFO and the City Solicitor, on the governance of the TDHC and potential City position on future governance and related issues; and

(c)report to the Special Committee, in conjunction with the Commissioner of Emergency Services and Works, on the City's road allowance and other City property used for the purpose of district cooling distribution pipes.

The process for which the TDHC is seeking endorsement will commence the resolution of outstanding issues with the City and is compatible with the directives to the CAO.

Comments and Discussion:

(a)Overview of the TDHC:

The current TDHC was created as a separate corporate entity by statute, the Toronto District Heating Corporation Act, in 1980. It was preceded by the Toronto Hospitals Steam Corporation Act from 1968 to 1982 and has as its objectives the construction and operation of steam plants and a steam distribution system to supply users. TDHC has, approximately, 110 commercial customers. The City does not own TDHC and the Corporation is not deemed to be a local board of the City except for the purposes of the Ontario Municipal Employees Retirement System.

As set out in the Act, a ten member Board of Directors oversees TDHC. Of the members, four are appointed by the City of Toronto, with two appointed by each of the Province, the Hospital group (five organizations) and the University of Toronto. The Chair must be elected from among the City appointees. The remuneration and expenses for the directors are recommended by the Board and are subject to approval by the City. The Board has the power to make by-laws governing its proceedings and to generally deal with the management of the affairs of the TDHC.

The Act permits TDHC to borrow money in two ways only. The first type of borrowing may be from a chartered bank or other person, must be for use with respect to current expenditures only and must be repaid within one year. In addition, the City must give its permission before any such loan can be obtained. The second type of borrowing permitted may be from the City itself. This arrangement can be made without the aforementioned restrictive conditions attached to it. As well, the City is authorized to provide funds to TDHC to permit it to carry out its objectives on such terms and conditions as the City may determine.

(b)Proposal to Incorporate under the Business Corporations Act (Ontario):

The TDHC wishes to be able to hold and issue shares, generate working capital, realize profit and expand its business associations. Under its current legislation, the Toronto District Heating Corporation is severely limited in this regard. Neither the former, or new, City of Toronto has pursued the possibility of a new legal status for the TDHC through incorporation under the OBCA. Accordingly, the viability and impact of the current TDHC proposal require assessment from a new perspective while taking into account previous directives and analyses.

(c)Conditions for City Participation:

There is an immediate need for the TDHC to take advantage of the opportunity presented to it by the Province to pursue a change in its corporate status. Endorsement by the City for the submission of amendments to Bill 35 creating OBCA status for the TDHC is recommended, but will be only the first of several decision-making stages. Rigorous negotiations and decisions will be required among all TDHC partners subject to the results of ongoing financial valuations, impact analyses, investor interest and other factors.

In order to protect its financial and other interests, the City must establish the conditions under which it is prepared to participate in negotiating a potential shareholder agreement with the other partners of TDHC. Assuming that the Province makes the amendment to Bill 35, thus setting the stage for negotiations to commence among the partners of TDHC, the following issues must be addressed to the satisfaction of the City. At this very early point, they constitute the minimum conditions for ongoing City participation:

(a)clarifying the nature, legal obligations and alternative methods of payments made by TDHC to the City;

(b)ensuring that City contributions are fully recognized and that reasonable consideration of all financial and in-kind contributions occurs;

(c)ensuring that the contributions considered take into account present value, outstanding amounts owed and/or uncompensated contributions made;

(d)clarifying the title to property and other assets of the integrated infrastructure;

(e)developing details on such matters as the respective rights of the parties and, the rights of first refusal rules for shares tendered by any individual original owner;

(f)submitting to the Province with regard to the above points, specific conditions before permitting any change to the TDHC corporate status or the TDHC Act; and

(g)requesting the Province to ensure that no change to the TDHC corporate status or the TDHC Act shall occur until formally notified of the express approval of the City of Toronto.

Conclusion:

TDHC wishes to position itself to take advantage of significant potential social, economic and operating benefits that it believes would result if it were incorporated under the Business Corporations Act (Ontario). The Province of Ontario has indicated that there is an opportunity to piggyback on Bill 35, whose third reading is imminent.

The TDHC requires endorsement from its partners of its intent to seek status under the OBCA. It also requires the partners to enter into a series of steps resulting in negotiations around independent findings pertaining to asset, value, equity, and debt, as well as governance matters. In this regard, the City of Toronto wishes to ensure the utmost protection of City and public interests, as well as to mitigate risk while taking advantage of the opportunities presented.

Staff from the Chief Administrator's Office consulted with the Finance Department, the Legal Department and the Works and Emergency Services Department in the preparation of this report. The Works and Emergency Services Department has separately prepared a report specific to its operations and outlines the benefits it perceives accruing to the City should the TDHC eventually obtain status under the Business Corporations Act.

The Strategic Policies and Priorities Committee also submits the following report (September17,1998) from the Commissioner of Works and Emergency Services:

Purpose:

The purpose of this report is to support the recommendations made in the Chief Administrative Officer's report by identifying some of the benefits of the proposal from the perspective of Works and Emergency Services.

Funding Sources, Financial Implications and Impact Statement:

There are no direct funding implications of this report.

Recommendations:

It is recommended that this report be received for information.

Council Reference/Background/History:

A proposal was received from the Toronto District Heating Corporation on September 15, 1998 addressed to the Clerk of the City of Toronto. Staff of the Works and Emergency Services Department have met with representatives of Toronto District Heating Corporation to discuss the proposal.

Comments and/or Discussion and/or Justification:

For reasons outlined below, Works and Emergency Services is supportive of the proposed changes that will enable the TDHC to become an Ontario Business Corporation in order to expedite development of the district energy potential across the new City of Toronto.

In general the changes will give TDHC the financial tools to implement significant district energy projects which will improve both the local economy and the environment. In particular, TDHC will be able to implement deep lake water cooling, a project that develops a local environmentally sustainable cold energy resource here in the City. TDHC will be in a position to focus on its core business of district energy systems. The new TDHC will have the tools to implement energy savings projects to reduce the impact of increasing air pollution from the generation of electricity using fossil fuels. TDHC will be able to move quickly to implement Deep Lake Water Cooling, which will require the least electrical energy for building cooling of any major proposal to date.

Water Supply

By implementing Deep Lake Water Cooling, TDHC will offer the City significant benefits in the Water Supply.

As indicated in a report dated August 28, 1998 to Works and Utilities Committee from the General Manager, Water and Waste Water Services, deep cold water will likely preclude taste and odour in the water supplied through the new intake at the Island Filtration Plant and thereby help to prevent future taste and odour occurrences.

A deep intake location is expected to reduce the costs of zebra mussel control.

A deep location will be less subject to variable levels of sediment and turbidity and would thereby help to optimize water treatment plant operation.

The feasibility of extending intakes of the Harris, Horgan and Clark plants will be reviewed in addition to the proposed intake at the Island Plant. The intake at the Island Plant would supply deep cold water for district cooling by TDHC.

The change in corporate status of TDHC would facilitate the funding and expeditious implementation of Deep Lake Water Cooling, which in turn would benefit the Water Supply. TDHC has offered to provide a new intake at the Island Filtration Plant at no cost to the water rate payer or the tax payer. The estimated value of that contribution would be approximately 28 million dollars. TDHC must arrange funding and is proposing the new corporate status to enable TDHC to accomplish the best possible funding arrangements.

With respect to City property, the City would retain ownership of all lake water cooling facilities that carry City Water. By retaining ownership of the water infrastructure the City would maintain control for operations and quality control purposes.

An agreement is being prepared between the City and TDHC for the delivery of cold water to the district cooling system operated by TDHC.

Carbon Dioxide Reduction and Air Quality Improvement

The first phase of Deep Lake Water Cooling would reduce carbon dioxide emissions by approximately 30,000 tonnes per annum by reducing electricity consumption for building cooling. Reducing electricity consumption will reduce fossil fuel air emissions from coal fired generating stations of Ontario Hydro. The Lakeview Generating Station just west of the City on the shore of Lake Ontario is scheduled to increase production and coal burning as a result of reduced production from nuclear powered generating stations. Lake Water Cooling will help to mitigate the increase and improve City air quality.

Depletion of the Ozone Layer

Existing air conditioners in buildings would be replaced by the deep lake water cooling source and CFC refrigerants could be taken out of service preventing further leakage to the upper atmosphere. CFC's are contributing to the thinning of the ozone layer and the increase in UVA and UVB rays reaching the earth's surface. Increased UVA and UVB are contributing to higher risk of skin cancers.

Co-generation

Co-generation is the term used to describe the production of both heat and electricity from the same generating equipment. Co-generation increases energy efficiency substantially (from 33 percent to 90 percent) and reduces emissions of carbon dioxide and other air pollutants. A number of large co-generation projects have recently been announced in Ontario and Alberta, one 525 megawatt plant being planned for a major industrial area in Sarnia, Ontario. York University here in Toronto recently installed a co-generation plant to supply both electricity and heat efficiently to its buildings. The fuel savings from co-generation enhances its cost effectiveness. Co-generation would be a natural development for downtown Toronto in connection with TDHC heat production. It would also reduce potential future major expenditures on additional transmission line capacity from more remote generating stations.

The potential waste heat available to heat buildings in the City is significant. The waste heat produced to make the electricity consumed in the City economy approximates the same magnitude as the Hybernia resource. It is recognized that past commitments by Ontario Hydro to build remote generating stations have resulted in the waste heat not being available for beneficial use. However, future expenditures on refurbishing remote stations should not be made without looking closely at the local co-generation option which brings the waste heat close to the heating market.

A report on the potential for district energy in Toronto, presented to Metro Toronto Council in 1995, identified viable district energy projects centered on clusters of high density development located across the new City. District energy is the term used to refer to both heating and cooling systems. The report was adopted as Clause No. 3 of Report No. 13 of The Environment and Public Space Committee by Metropolitan Toronto Council at its meeting held on July 5 and 6, 1995.

Conclusions:

Changing status of TDHC will expedite development of deep lake water cooling, a sustainable energy resource in the City of Toronto. It will also position TDHC to fully develop the potential of district energy in Toronto which will be supported by proposed changes under Bill 35 to allow local co-generation. The Water Supply will receive, at no cost to the City, a new intake with estimated cost of approximately $28 million according to TDHC. Air quality and energy efficiency in the City will be improved substantially. Local employment will result from the development of district energy. District Energy will benefit the local economy by circulating energy dollars locally rather than sending energy dollars out of the country.

The City of Toronto would achieve significant reductions in carbon dioxide and sulphur dioxide emissions to help achieve its CO₂ reduction target and the national target proposed under the Kyoto protocol.

Contact Name:

Kevin Loughborough, P. Eng., Works and Emergency Services

Telephone (416) 392 8845

Fax (416) 392 2974

email: kevin_t._loughborough@metrodesk.metrotor.on.ca

The Strategic Policies and Priorities Committee also submits the following communication (September15,1998) from Mr. Juri Pill, President and CEO, Toronto District Heating Corporation:

On August 28, 1998, the board of directors of the Toronto District Heating Corporation resolved to seek a change in TDHC's status of the kind the provincial government is requiring be made to Toronto Hydro on passage of Bill 35, the Energy Competition Act, 1998. The essence of the proposed change is conversion from a corporation without share capital to a corporation with share capital regulated by the Business Corporations Act (Ontario).

The Ministers of Energy, Science and Technology and Municipal Affairs have agreed to the inclusion of appropriate amendments to Bill 35 at the third reading stage, due in November, provided the stakeholders in TDHC indicate their agreement with the proposed change, preferably by September 21. Another opportunity to change TDHC's status may not arise for several years.

The purpose of this letter and attachment is to request that the City of Toronto, as one of TDHC's stakeholders, indicate its agreement with the proposed change in corporate status, and with the proposed process for adjustment of the financial and other contributions made by the proposed shareholders in respect of THDC. This process would involve a shareholders' agreement to be reached between third reading of Bill 35 and its proclamation into law. The shareholders' agreement would also address other aspects of the operation of the corporation.

Because of the time element, I would be pleased if every effort could be made to have City Council consider TDHC's request at its meeting on October 1-2. We have worked closely with City officials in the preparation of the attached material and understand that our request can be considered first by the Strategic Policies and Priorities Committee at its meeting on September 24.

TDHC requests specifically that the Committee ask City Council to adopt the three recommendations set out on Page 8 of the attached material.

I want to thank you in advance for your cooperation in processing this matter in a timely manner.

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(Attachment dated September 15, 1998, appended to

the foregoing communication, addressed to

City Council, from the Toronto District

Heating Corporation titled, "Request for endorsement

of a proposed change in TDHC's corporate status)

Purpose of this report:

The Toronto District Heating Corporation (TDHC) is a statutory corporation created in 1982 at the initiative of the former City of Toronto. It is governed by The Toronto District Heating Corporation Act, 1980. The City of Toronto has a continuing financial relationship with TDHC and owns some of the infrastructure it uses. The City appoints four members of the ten-person board of directors of TDHC.

TDHC is seeking to change the corporation's legal status from that of a corporation without share capital to that of a corporation with share capital incorporated under the Business Corporations Act (Ontario). TDHC requests that City Council endorse the proposed change.

There is an opportunity to make this change as an amendment during third reading in the Ontario Legislature of Bill 35, the proposed Energy Competition Act, 1998, due to occur in November 1998. The provincial government has indicated its agreement to such an amendment provided the organizations represented on TDHC's board of directors agree. Agreement to the change is thus also being sought from the four downtown hospitals that between them appoint two of the ten directors, and from the University of Toronto, which also appoints two directors. The remaining two directors are appointed by the provincial government itself.

In order for an amendment to Bill 35 to be accepted, agreement from TDHC's stakeholders must be secured during the next few weeks. Thus the request is that City Council provide its endorsement at its meeting of October 1-2, 1998. Another opportunity to change the status of TDHC may not arise for several years.

Most of the balance of this document provides supporting information for this request to City Council. It provides a brief account of TDHC and its history, with particular reference to the relationship between TDHC and the City of Toronto. It sets out the environmental and economic benefits of district heating and district cooling. It describes the proposed change in corporate status, the reasons for it and the benefits to TDHC, the City of Toronto, and the community-at-large that will result from the change. It also describes the role of the proposed shareholders' agreement, which will ensure fairness in the allocation of the new corporation's equity and set out how the corporation will function. A concluding section sets out the three recommendations TDHC would like City Council to adopt. Appendix A provides a brief history of TDHC. Appendix B sets out the proposed amendments to Bill 35. Appendix C summarizes investment opportunities that TDHC cannot capitalize on in its present form.

TDHC and its History

The main business of TDHC is providing steam heat to more than 100 major buildings in downtown Toronto. These include Toronto City Hall, Metro Hall, the Queen's Park complex, four hospitals, and numerous major private-sector buildings such as the Toronto-Dominion Centre and the Royal York Hotel. Steam is provided from three plants located on Walton Street (the main plant), on Pearl Street, and within the Queen's Park complex.

The plants are normally fueled by natural gas (TDHC is Toronto's largest user), but the contracts provide for interruption of supply in periods of very high demand, typically for a total of no more than twelve days each winter. Then the two largest plants are fueled by low-sulphur oil. Back-up generators provide power for the plants' control systems when the electricity supply is interrupted. The most significant feature of the operation of TDHC's district heating system is that no customer has ever experienced an unplanned interruption of steam supply.

Another significant feature of TDHC's recent history is that steam sales have risen by more than 30 per cent since 1993 (see Chart 1) even though few buildings have been completed in the downtown during this period. Increasingly, building operators are choosing to purchase steam rather than operate their own plants, especially when plant replacement is required. A large new boiler was installed at the Walton Street plant in 1996 to ensure the 25-per-cent margin of capacity over demand considered essential for totally reliable operation.

A small but rapidly growing part of TDHC's business is district cooling, which involves the production and sale of chilled water for building air conditioning. The chilled water is produced using environmentally benign, steam-driven absorption chillers at a plant located within the extension to the Metro Toronto Convention Centre and provided to the Convention Centre itself and to the Air Canada building (Raptors Stadium). The chilled water system is being extended along York Street into the downtown business district. As well, some customers distant from this system use TDHC steam to drive their own absorption chillers.

As the history in Appendix A explains, centralized heating systems in downtown Toronto long antedate the formation of TDHC in 1982. The main points to be drawn from the historical survey are these:

The City of Toronto's initiative in forming TDHC was a farsighted response to several environmental and other challenges facing downtown Toronto in the 1960s and 1970s.

Although TDHC was formed at the initiative of the former City of Toronto, the City does not own TDHC or have control over it except through its minority representation on TDHC's board of directors.

Other parties to the formation of TDHC, notably the hospitals and the provincial government, have strong stakes in the corporation and strong claims to its assets and to being participants in the control of the corporation.

In order to address many environmental problems and to remedy some land-use planning errors, the City of Toronto made a large investment during the 1970s in some of the infrastructure now used by TDHC, an investment compounded by unreasonable construction delays and high inflation. The City still owns this infrastructure.

An agreement between the City and TDHC--reached in 1984 with an amendment in 1986--sets out the financial arrangements in respect of the use of the infrastructure. The agreement acknowledged the need for TDHC to contribute towards retiring the debt incurred by the City for the infrastructure, even though the debt that had been incurred before TDHC was formed. The agreement stated that TDHC's obligation could be discharged in full by making prescribed annual payments to the City: $725,000.00 a year to 2001 and then $1,239,000.00 a year until the City's debt had been retired.

The Benefits of District Heating and Cooling

Unless waste heat or cogenerated heat is used (see below) the environmental advantages of district heating arise because a large central plant is usually much better managed than smaller plants within individual buildings. Energy is used more efficiently within a central plant, enough to offset distribution losses. As important, there is more effective control over emissions from a large plant. Emissions of nitrogen oxides, for example, which contribute to smog, have been shown to be as much as 90 per cent less from the Walton Street plant per unit of heat produced than from on-site plants.

The major environmental advantage of district heating systems, not well exploited in Toronto, is that they allow for the productive use of waste energy or other low-grade energy that might otherwise not be used. The natural companion for district heating is electricity generation, which produces large amounts of otherwise wasted heat. Electricity generation may become necessary in downtown Toronto chiefly because of Ontario Hydro's insufficient transmission capacity for the downtown, but also because of potential province-wide shortages in generating capacity. Cogeneration of electric power and steam for district heating provides for highly efficient use of energy and should be a priority for a restructured TDHC and partners such as Toronto Hydro when electric power production in Ontario is deregulated in 2000.

There are also economic advantages to district heating. The major advantage is that a properly managed system produces heat for buildings at a lower cost than building operators can produce it themselves. This reduces costs for building operators who purchase steam, and allows them to focus on their core business. By reducing energy consumption and by use of locally available waste heat or cogenerated heat, where available, a district heating system helps reduce imports of energy into a business district. Together these various factors help strengthen the economy of an area served by a district heating system.

District cooling is a relatively new phenomenon, prompted by two factors. One is the huge and growing demand for cooling within modern large buildings, caused by growth in the use of heat-producing office equipment and trends towards more intensive occupancy of buildings, i.e., more warm bodies per square foot. The other factor is growing difficulty in the provision of on-site cooling posed by current and proposed bans on the main chemicals used as refrigerants (i.e., CFCs, HCFCs, etc.). Large modern buildings in Toronto typically require heating for no more than 180 days a year; at least one building requires no additional heating at all beyond what is provided by lighting, office equipment, and human bodies. By contrast, these buildings all require at least some cooling for 365 days a year to offset heat build-up in their cores.

There are even greater potential environmental and economic benefits from district cooling, especially in Toronto. There are the same kind of efficiencies from centralized operation of district cooling as occur with district heating. There is the already noted avoidance of use of chemicals that destroy the stratospheric ozone layer (e.g., CFCs). Another advantage is avoidance of the increases in ambient temperature, humidity, and noise that occur outside buildings that have on-site chillers, largely on account of their fans and cooling towers. Areas served by district cooling have a much more agreeable outdoor climate. But the greatest environmental and economic advantage, specific to Toronto, lies in the opportunity for Deep Lake Water Cooling.

The most exciting feature of TDHC's district cooling system is the plan to make use of the huge reservoir of cold water at the bottom of Lake Ontario. The lake is more than 250 metres deep in places. Below about 70 metres, reached within five kilometres of downtown Toronto, the water is permanently at 4-5ºC. This is the result of a natural phenomenon present in all large deep bodies of water where winters are cold. Surface water sinks when it is cooled to just above the freezing point because this is when water is at its most dense. Summer warming penetrates only to about a 60-metre depth. Thus, a deep lake such as Lake Ontario has within it a very large volume of naturally cold water that is completely renewed each winter.

Deep Lake Water Cooling (DLWC) involves pumping the cold water ashore and using it to chill the water in a district cooling system. The major environmental and economic benefits of DLWC arise because pumping cold water in from the lake requires only about one tenth of the energy required to produce the same amount of very cold water using conventional chillers. The adverse environmental impacts are negligible.

Moreover, a relatively low-cost method of implementing DLWC has been devised, involving a partnership with the Water Division of the City of Toronto. TDHC will construct a new, extended intake for the Toronto Island treatment plant so that 4-5ºC water can be pumped ashore by the John Street Pumping Station. After treatment and before entering the network of municipal water mains, the very cold water will be diverted to TDHC's district cooling plant in the Metro Convention Centre. There heat exchangers will transfer the 'cold' in the municipal water to the water in the district cooling system, thus raising the municipal water to just under its normal temperature before it enters the mains. Several levels of security will ensure no possible contamination of the municipal supply, which will always remain under the complete control of the City's Water Division.

The emerging DLWC arrangement has the potential to meet more than half the annual cooling demand for the whole of Toronto's downtown, and about a fifth of the peak demand. The chilled water will cost less to produce than by conventional means, but the overwhelming advantages are environmental. For each unit of cooling replaced by DLWC, fossil fuel use will be cut by as much as 90 per cent; moreover, the use of environmentally damaging coolants will be reduced. As noted, the downtown will be quieter and less humid in summer because there will be no need for noisy chillers or vapour-producing cooling towers, which can also be a source of bacterial contamination and cause a form of pneumonia known as Legionnaires' disease.

The reduction in fossil fuel use is especially important with the recent shutdowns of nuclear generating capacity in Ontario and the consequent increase in the use of coal-fired plants by Ontario Hydro. This additional use of coal has increased the pollution from electricity generation in Ontario by as much as 50 per cent during 1998, compared with 1997.

DLWC will also help with another problem experienced in 1998: unsatisfactory taste and odour resulting from growth of otherwise harmless algae. The water at a depth of 70 metres is uncommonly pure and free from algae. Indeed, its purity is such that fewer chemicals will be required for treatment, thus reducing the City's purification costs.

The DLWC project of TDHC and the City has received environmental assessment approval from the provincial government. A recent feasibility study confirmed the continued viability of the project. Detailed engineering design work has been commissioned. What must be put in place are the funds required to implement the project. It is an attractive investment. Several potential private-sector and institutional investors have indicated an interest in investing in the project. However, existing legislation severely limits investments in TDHC. The kinds of funds needed for DLWC are not likely to be forthcoming until TDHC's corporate status is changed.

Indeed, the present restrictions on investment severely limit any expansion of TDHC's system, and thus serve to prevent progress with many activities that could be of great benefit to the City's environmental and economic health. As well as implementation of DLWC, the present legislation hinders the natural expansion of district heating and district cooling within the downtown by making it difficult for TDHC to pay its share of connections with potential customers. The limited availability of capital, if it continues, will be an obstacle to the implementation of numerous cogeneration projects that will serve to stabilize the electric power supply to the downtown and reduce energy costs. What is needed to break the impasse is a change in the corporate status of TDHC, which is discussed below.

The Proposed Changes in the Corporate Status of TDHC

The main purposes of the proposed changes are to clarify the ownership of TDHC, to facilitate private- and public-sector investment in TDHC, and to allow TDHC to act in a more entrepreneurial manner in an increasingly competitive marketplace.

To provide for these changes while leaving the basic structure of TDHC and its relationships to its stakeholders intact, what is proposed is a simple set of amendments to the Energy Competition Act, 1998 (Bill 35). A copy of the proposed amendments is attached as Appendix B. What these amendments do, in effect, is transfer TDHC's governing legislative framework from The Toronto District Heating Corporation Act to the Business Corporations Act, leaving in place some of the special protections of stakeholders afforded by the former Act. In addition, the City is given the power to hold and sell shares in TDHC.

Continuation of TDHC under the Business Corporations Act will not affect any of TDHC's existing assets, liabilities or contractual arrangements. In order to distinguish the corporation with share capital from the one without share capital, a name change is proposed: to the Toronto District Energy Corporation (TDEC).

Ownership of the shares in TDEC will be set in the proportion of the current representation of stakeholders on TDHC's board of directors, i.e., City of Toronto-40 percent; Hospitals-20 percent; University of Toronto-20 percent; Government of Ontario-20 percent. The present legislation provides that TDHC is a corporation without share capital and is thus silent on the matter of ownership.

The stakeholders have made different contributions to TDHC over the years; in particular, the City and the hospitals have contributed proportionately more than the other partners. Adjustments will have to be made to ensure that the proposed allocation of control and equity is fair in light of these contributions. The essential steps in this process are already under way. They are (i) independent valuation of the corporation, and (ii) independent assessment of the value of the contributions made by the stakeholders to the corporation. This work is being done by Kattner/FVB (engineers with much expertise in district energy systems), assisted by ScotiaMcleod on financial issues.

When the necessary information is available, the resulting adjustments, and other features of the functioning of the TDEC, will form the basis of a shareholders' agreement to be negotiated after third reading of Bill35. The Minister is being asked to undertake that the relevant sections of the Bill will not be proclaimed into law until there is a shareholders' agreement in place that is acceptable to each one of the principal stakeholders, namely the City, the four hospitals, the University of Toronto, and the provincial government.

An example of the kind of adjustment mechanism that might be discussed while negotiating the shareholders' agreement is set out in Table 1. It must be stressed that the numbers in Table 1 are hypothetical and are used here for the purpose of illustration only. The aim of the process of adjustment is to bring the stakeholders' contributions to the TDHC to the same proportions as their shares in the equity of the TDEC. In the example, this is involves a contribution by the University of Toronto of $5 million each to the City of Toronto and the hospitals. These are not necessarily the actual amounts that will change hands as a result of the adjustment process.

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Table 1 - Hypothetical example of adjustment mechanisms

A case can be made, even with the proposed provision for adjustments, that the present representation on TDHC Board is not the best basis for allocation of equity and control. The reality, however, is that every alternative is more controversial. Any variation from what is proposed here will likely be opposed by more than one stakeholder. The proposed allocation has the advantage that it is has the justification of current legislation, and it may well be the only one on which timely agreement can be secured.

Once the provisions of Bill 35 concerning TDHC are proclaimed, the shareholders will be free to sell or assign their shares to any party, subject to restrictions that may be contained in the shareholders' agreement. Thus, what is proposed here makes it possible for the City to decide, at a later date, to assign or sell all or some of its shares--to Toronto Hydro or to another interest. The City would also be able to purchase shares and thus increase its stake in TDHC.

It is noteworthy that upon Bill 35 becoming law the City of Toronto will have two years within which to transfer Toronto Hydro to a corporation incorporated under the Business Corporations Act. The City will initially be the sole shareholder. Continuing TDHC as a corporation incorporated under the Business Corporations Act meets the same legislative objective, namely to put the corporation on a commercial footing so that it is better able to compete in the new competitive energy markets in Ontario and elsewhere.

Presently, only the City of Toronto may lend money to TDHC for capital purposes. None has been lent. Instead, expansions of district heating and cooling have been financed out of current revenue, by selling accounts receivable or by capital leasing. These substitutes for regular investment all come with severe limitations: they contribute very little (current revenue) or they involve high costs. None of them is appropriate for the present scale of investment opportunities available to TDHC. Appendix C shows that as well the $83 million required for DLWC a total of $14 million is required for early improvement to the steam system that will enable the connection of additional customers, enhance efficiency overall, and reduce environmental impacts even further.

There is an urgent need for major investment. If TDHC were operating with share capital under the Business Corporations Act it would be in a position to accommodate investments from a variety of sources. TDEC would also have much greater leeway to enter into appropriate partnerships, for example with a restructured Toronto Hydro in the matter of cogeneration facilities.

Paramount in any restructuring must be protection of the City's investment and the public interest. Present arrangements provide no means for the City to recoup its investment in TDHC beyond the previously noted annual payments. The proposed changes will allow more of the earlier investment to be recovered. They will also provide a strong vehicle for the attainment of the numerous environmental and economic objectives of the City that are coincident with the advantages of district heating and district cooling set out above.

In the meantime, the City may well want to help rationalize the assessment of its contribution to TDHC by accepting a lump-sum settlement in lieu of the annual payments by TDHC provided for in the 1984-1986 agreement, as noted above. TDHC would be pleased to facilitate such a settlement in a timely manner using the services of a reputable financial organization.

Finally, it must be stressed that the matter of the shareholders' agreement will be critical under what is proposed, as will a commitment of the Minister to proclaim the sections of the Bill 35 pertaining to TDHC only when agreement among the proposed shareholders is reached. This will give the City, and each of the other stakeholders, a veto over the proposed changes. As a precaution, the City may wish to indicate that its agreement with the proposed amendments to Bill 35 is made on the understanding that the amendments will not become law until a shareholders' agreement satisfactory to the City has been reached. One of the three suggested recommendations at the end of this document provides expression of that precaution.

Expansion in and Beyond Downtown Toronto

There are extraordinary opportunities for the expansion of district energy in and near downtown Toronto, with consequent major reductions in the environmental impacts that presently result from heating and cooling buildings. These opportunities will be heightened when electric power generation is deregulated and widespread cogeneration becomes viable. The continuation of TDHC under the Business Corporations Act in the manner proposed here is a necessary condition for TDHC to be able to take advantage of these opportunities.

Several areas beyond the downtown could qualify for district energy systems, notably those that include the civic centres of the former local municipalities and other areas where there are concentrations of large buildings, whether commercial or residential or both. Where lower-cost sources of energy are available, district energy systems can be extended to lower-density areas. There are several potential low-cost sources of energy. These include the waste heat from the Pickering and Lakeshore electricity generating stations (now used mostly to warm Lake Ontario) and waste heat from industrial operations. As well, large-scale DLWC systems could be developed in conjunction with the City's three other water treatment facilities.

The proposed changes will also make it possible for TDHC, working with Toronto Hydro and other parties, to export its services and expertise to other parts of Canada and abroad. TDHC is recognized as among the most efficiently managed district energy systems in the world. Its growing expertise in the use of renewable energy for cooling will make it even more sought after.

Conclusions and Recommendations:

The progress of TDHC over the last 16 years can be a source of great pride to those in the City of Toronto who initiated it. TDHC's existence has reduced energy use and air pollution in downtown Toronto and contributed to the downtown's economic advancement. TDHC's progress and the changing realities of energy markets mean that TDHC has outgrown its original governing legislation. Changes are necessary that will make the corporation more entrepreneurial and more able to secure needed capital.

There is a very limited "window of opportunity" to secure the necessary legislative changes through a third reading amendment to Bill 35. This opportunity should be seized. For this to occur, City Council must give its assent to the proposed change on October 1-2. In particular, Council is urged to adopt the following recommendations:

(1)That agreement be given to the request by TDHC that Bill 35 (the Energy Competition Act, 1998) be amended to provide that the corporation be continued as a corporation with share capital under the Business Corporations Act (Ontario).

(2)That Council indicate to the Ministers of Municipal Affairs and Energy, Science and Technology that its agreement to the proposed amendments to Bill 35 is provided on the understanding that the sections of Bill 35 will not be proclaimed into law until agreement has been reached among all of the proposed shareholders as to a fair and equitable balancing of the contributions to and interests in the corporation, and as to such other matters as the shareholders consider to be suitable for inclusion in a shareholders' agreement.

(3)That the Chief Administrative Officer be authorized to negotiate a shareholders' agreement of the kind contemplated above.

(Copies of the Appendices A, B and C appended to the foregoing report, were circulated to all Members of Council with the agenda of the Strategic Policies and Priorities for its meeting of September 24, 1998, and copies thereof are on file in the office of the City Clerk).

(City Council on October 1 and 2, 1998, had before it, during consideration of the foregoing Clause, the following:

(i)submitted by Councillor Adams, a communication (February 26, 1998) from the City Clerk, advising of the action taken by the Special Committee to Review the Final Report of the Toronto Transition Team on February 26, 1998, with respect to a joint report (February 10, 1998) from the Chief Financial Officer and Treasurer and the City Solicitor regarding the Toronto District Heating Corporation:

(ii)copy of "Amendment to Schedule D to The Energy Competition Act, 1998", filed by Councillor Fotinos; and

(iii)submitted by Councillor Fotinos, a communication from the Executive Director, Pollution Probe (September 23, 1998) addressed to the Minister of Energy, Science and Technology, advising of their support of the amendments requested by the Toronto District Heating Corporation to The Energy Competition Act, 1998.)

18

Service Level Harmonization

(City Council on October 1 and 2, 1998 deferred consideration of this Clause to the next regular meeting of City Council to be held on October 28, 1998.)

The Strategic Policies and Priorities Committee recommends the adoption of the report (September 18, 1998) from the Chief Administrative Officer:

Purpose:

The purpose of this report is to update the Strategic Policies and Priorities Committee on the status and results of the analysis and review process for service level harmonization.

Financial Implications and Impact Statement:

Harmonization of service levels will result in financial impact for some programs; the analysis of the range of impacts is still under development by departments and will be reported separately as part of the 1999 budget process.

Recommendations:

It is recommended that:

(1)the appropriate Standing Committee review service level variations including an option of harmonization with no budgetary impact; and

(2)the input from the Standing Committees be used by departments for preparation of the 1998 budget estimates.

Council Reference:

At its meeting of June 3,4, and 5, 1998, Council approved the Chief Administrative Officer's report on the harmonization of service levels.

This report outlines the analysis and process undertaken to date by departments for service level harmonization for 1999 and future action.

Comments:

Background:

In the 1998 approved budget, the status quo was maintained in relation to service levels and user fees for the various programs and services offered to the public. As a successor municipality, the City continues to provide the services its residents have become accustomed to, while trying to rationalize and harmonize them from the perspective of the unified City. Examples of amalgamating services that need to be considered for rationalization include: parks and recreation services; garbage pickup and recycling; road cleaning and snow removal; library services; and health services.

Current Situation:

During 1998, amalgamating departments whose programs and services have been restructured are to review and assess their respective programs for the harmonization of services and user fees in some cases. This exercise will be a multi-year undertaking and priorities will have to be established for the sequencing of programs to be reviewed.

Overview of Issues:

The harmonization of services, service levels, and user fees have different aspects and a variety of processes have been initiated with departments based on the specific circumstances. These initiatives within the departments fall into the following major categories:

(a)Reviewing harmonization of user fees for recreational programs is to be carried out through a public consultation process approved by the User Fee Committee established by Council. User fees and transaction fees in all other areas (e.g., issue of birth/death/marriage certificates) will be reviewed as part of the 1999 budget process;

(b)Reviewing availability and proximity of city facilities which may result in capital spending will be addressed through the City's capital works programs in 1999 and beyond;

(c)Operational Programs: Key programs and services which have been already identified as harmonization candidates, and which may have a major financial or service impact, are the basis for this report. Harmonization of other programs and services which will not have a material financial impact will be dealt with through the normal 1999 budget process.

Programs to be Considered:

Using the guidelines provided by the Chief Administrative Officer, the Senior Management Team, has identified the following programs and services having significant variations across the City and where harmonization could have significant financial impact:

(a)Garbage Pickup: the frequency of residential garbage collection in North York is twice per week for about 100,000 residences all year round; in the former City of Toronto, garbage collection is twice per week to approximately 50,000 residences during the period June 22 to August 28; in all other parts of the City, the garbage is picked up once every week. Variations also exist in relation to pick up of commercial and industrial waste.

(b)Winter Maintenance Activities: windrow clearance service is currently provided in North York and Scarborough; similarly, all sidewalks are cleared of snow during winter in North York.

(c)Public Health Services: several of the services in this area have newly mandated standards under the Health Promotion and Protection Act. Others are discretionary or vary from area to area. For clarity the department is classifying the program in three ways. Service Rationalization Projects, such as centralization of communicable disease control notification; sexually transmitted diseases case management, site rationalization study, unified client intake system, animal services information system; Council/Board directed projects, such as animal services, dental services, grants for AIDS prevention, grants for drug abuse prevention program, harmonized ETS by-law; and responses to homelessness and environmental issues; and Disease Prevention/Health Protection Projects, such as tuberculosis control, needle exchange and food safety.

(d)Library Services: Sunday services are currently provided at 19 libraries in East York, Toronto, North York and Etobicoke. Extending Sunday services to Scarborough and York is a consideration. A strategy will also be considered for a more equitable allocation of library materials at the library's ninety-eight branches located throughout the City.

In addition to the above programs and services identified on a priority basis, other more minor variations in programs and services will be considered for harmonization as part of the 1999 budget process.

Process For Harmonization of Service Levels:

The Chief Administrative Officer provided department heads with guidelines for service level harmonization and requested departments to conduct an assessment pertaining to analysis of variations in existing service levels between former municipalities; financial analysis relating to the total cost of service; cost implications of setting service standards at the highest, median and lowest levels; opportunities for cost reduction and potential savings; and special considerations ie. legal commitments, equipment availability, and capital expenditures.

In particular, departments will address the following key questions when reporting to their respective Standing Committees:

(a)What are the existing variations in service levels and the total and unit cost of delivering the services?

(b)What are the plans for the recommended service level as a result of the consolidation of the seven jurisdictions?

(c)What unique needs and neighbourhood characteristics should be taken into consideration that may result in variations in the proposed service levels?

(d)What is the total cost for the proposed service level, the cost per unit and the net impact on the 1999 operating and capital budget?

(e)What are the key issues or challenges to be addressed?

To ensure consistency across the City for the harmonization of services, departments will also take into consideration the following key factors: compliance with legislated requirements and Council priorities; accessibility strategies; responsiveness to community needs; impact on other programs; detailed service cost analysis; analysis of demographic and geographic variables; and, potential impact on low income groups.

Approval Process:

The Chief Administrative Officer has requested the commissioners to brief the respective Standing Committees during October 1998 on the analysis and options for the harmonization of service levels. The departments will prepare the 1999 program budget submission after taking into consideration input from the Standing Committees towards the preparation of the 1999 preliminary budget. The Chief Administrative Officer will report on the financial impact of service level harmonization and the preliminary estimates to the Strategic Policies and Priorities Committee as part of the budget overview, priorities and corporate pressures.

As part of the 1999 budget process, the Budget Committee will review the proposed 1999 budgets and planned service levels in the context of corporate budget pressures, pre-set expenditure targets, and competing or emerging priorities, and make a balanced assessment of the level of funding to be recommended. The recommendations of the Budget Committee will be forwarded to Strategic Policies and Priorities Committee, and then to Council for consideration as part of the overall 1999 budget process.

In the final analysis, Council will have to assess the competing demands of different programs, historic differences among former municipalities, unique neighbourhood characteristics, special considerations, downloading of programs by the Province, mandatory programs, City wide priorities, and corporate budget pressures.

Conclusion:

This report identifies those services that have the most significant variation in service levels. It proposes that these variations be discussed at the appropriate Standing Committee and their recommendation be used as input to the departmental budget preparation.

Contact Name:

Firoz Kara, 392-8678.

19

Installation of a Temporary Pedestrian Crossover

- Walmer Road, North of Bloor Street West (Ward 23 - Midtown)

(City Council on October 1 and 2, 1998, adopted this Clause, without amendment.)

The Strategic Policies and Priorities Committee recommends the adoption of the following report (September 21, 1998) from the Commissioner of Works and Emergency Services:

Purpose:

To facilitate the safe crossing of Walmer Road by pedestrians during the construction of the Walmer Road entrance to the Spadina Subway Station.

Funding Sources, Financial Implications and Impact Statement:

Funds for this work will be provided by the Toronto Transit Commission through its Contract No. A3-4, Spadina Station, Walmer Road entrance construction.

Recommendations:

(1)That a pedestrian crossover be installed on Walmer Road at a point 120 metres north of Bloor Street West with the costs associated with this work to be paid by the Toronto Transit Commission; and

(2)That the appropriate City Officials be requested to take whatever action is necessary to give effect to the foregoing, including the introduction in Council of any Bills that are required.

Background:

The former Toronto City Council, at its meeting of May 21, 1996, in adopting Clause 27 in City Services Committee Report No. 6 entitled, "Temporary adjustment to traffic regulations in conjunction with the construction of an automated entrance for Toronto Transit Commission patrons at the Spadina Station - Walmer Road, from Bloor Street to a point 70 metres north (Ward 13)", approved the following coincident with the commencement of construction by the Toronto Transit Commission of its entrance to the Spadina Station (at that time, tentatively scheduled for August 1996):

(a) approved, for up to one year, the closure of the easterly half of the Walmer Road roadway from Bloor Street West to a point 70 metres north to accommodate the relocation of underground services (water mains, sewers, etc.) and designated the westerly portion of the roadway for one-way southbound traffic; and

(b) prohibited stopping at anytime on both sides of Walmer Road, from Bloor Street West to a point 70 metres north.

Due to scheduling and budgetary constraints, the commencement of construction of this project has been delayed until now. This report is being submitted to the Strategic Policies and Priorities Committee as by-law approval for the pedestrian crossover referred to in Recommendation No. 1, above is required as soon as practicable to allow the construction project to proceed.

Comments:

Walmer Road from Bloor Street West to Lowther Avenue operates two-way and has a pavement width of 7.32 metres. Parking is prohibited at anytime on both sides of this section of Walmer Road.

At a meeting held on September 15, 1998 and attended by Transportation Services staff, the Toronto Transit Commission advised that it is commencing construction of the Walmer Road entrance to the Spadina Subway Station as soon as practicable. This work will involve the complete excavation and subsequent closure of the northbound lane and the sidewalk on the east side of Walmer Road from approximately 60 metres to 85 metres north of Bloor Street West for approximately one year.

Recognizing that this project will disrupt the flow of pedestrians on the east side of Walmer Road, forcing them to cross the street at what is presently an uncontrolled mid-block location, a pedestrian crossover (PXO) should be installed on Walmer Road, approximately 120 metres north of Bloor Street West to enhance the safe crossing of this street by pedestrians, as noted in Recommendation No. 1 above.

The cost of installing and removing the pedestrian crossover and all operational costs will be borne by the Toronto Transit Commission in association with its Contract No. A3-4.

Staff will monitor the progress of this project and will report back to Toronto Community Council on removing the pedestrian crossover when necessary.

Contact Name and Telephone Number:

Andrew Koropeski, Director, Transportation Services District 1, 392-7711.

20

Ontario Lottery Corporation - Advance Funding Program

(City Council on October 1 and 2, 1998, amended this Clause by adding thereto the following:

"It is further recommended that the Director, Legislative Services, ensure that the Ontario Lottery Corporation Advance Funding Allocations include municipally-funded organizations which had their funding eliminated due to the closure of a charity gaming facility.")

The Strategic Policies and Priorities Committee recommends the adoption of the following report (September 23, 1998) from the City Clerk, Commissioner of Corporate Services and Commissioner of Community and Neighbourhood Services:

Purpose:

The purpose of this report is to update Council on negotiations with the Ontario Lottery Corporation regarding the City's administration of the Ontario Lottery Corporation Advance Funding Program and to recommend next steps.

Funding Sources, Financial Implications and Impact Statement:

The City is currently not resourced to administer this program. Provincial officials advise that direct cost recovery from the province is not possible and that municipalities must recover the cost of administering the program directly from charitable organizations.

Recommendations:

Given the province's position that the City may not recover the costs of administering the Advance Funding program from the Ontario Lottery Corporation, and recognizing the critical need to distribute these funds to local charities in the most economical and efficient manner possible, it is recommended that:

(1)City of Toronto's Advance Funding Allocation be distributed using Option 1: a streamlined allocation process. The Council approved roster shall include: (1) the priority group of eligible organizations who previously ran roving charity casino events; and (2) the United Way and the Toronto Community Foundation who will undertake to allocate funds to the community

(2)That a fee of $100.00 per application be charged by the City of Toronto to cover the costs of administering this process, similar to the application fee currently charged for lottery licensing.

(3)That the appropriate City officials be authorized and directed to take the necessary steps to give effect thereto.

Background:

At its meeting held on July 29, 30 and 31, Council considered a staff report on the Ontario Lottery Corporation's Advance Funding program. The program was initially set up to loan funds to charities affected by the provincial cancellation of roving charity casino events. The intent was to have these groups repay the funds from proceeds from future permanent charity casinos. With the cancellation of the permanent charity casino initiative, the province was forced to revisit the criteria for the Advance Funding program. It is now essentially a grant program which provides funds to charitable organizations who previously conducted roving charity casino events and to other charitable organizations who meet provincial AGCO (Alcohol and Gaming Commission) lottery licensing criteria. With no provincial mechanism in place to administer the fund, the Ontario Lottery Corporation delegated the responsibility of determining charity eligibility and allocations to municipalities. The provincial Advance Fund allocation for the City of Toronto is $8.8 million and the City's recommended roster of charities must be submitted to the Ontario Lottery Corporation by March 31, 1999.

When this matter was first considered, Council adopted the position that the City's participation in the program would be contingent on recovering the full costs for administration of the Advance Fund on a fee for service basis directly from the Ontario Lottery Corporation. Staff were directed to negotiate the direct cost recovery with appropriate provincial officials and report back to Council regarding the City's participation in this program.

Discussion:

City officials met with staff from the Ontario Lottery Corporation and the Gaming Secretariat to seek clarification on a number of issues related to the administration of the Advance Fund and to negotiate direct cost recovery for administering this program on behalf of the province. Provincial officials confirmed that priority for funding must be given to groups who previously held roving charity casino events, that municipalities have the authority to apply any additional criteria to assist in determining the eligibility of applicants and that municipalities may set their own internal deadlines for approval.

The province was very firm in stating that any administrative costs incurred by the municipality must be recovered directly from the charities and not from the province. With potentially thousands of applications to review, the City will require a minimum level of dedicated staffing and resources to administer the fund and meet the required deadlines. These costs are above the current budget allocations and cannot be absorbed without reduction of regular service to constituents. Given the province's firmly stated position on direct cost recovery from the Ontario Lottery Corporation, the following options are available to Council:

Option 1 - Streamlined Allocation Process:

As an alternative to a labour-intensive grants allocation process, and to significantly reduce internal administrative costs, the City could design a process around two major groups: (1) the priority group of organizations who previously ran roving charity casino events; and (2) the United Way and the Toronto Community Foundation who are experienced in the distribution of funds for the benefit of the community.

The amounts for organizations who previously held roving charity casino events would be calculated strictly on the basis of providing replacement dollars for lost charity casino proceeds. Approximately 250 groups would be eligible. Groups would be required to submit detailed financial information and lottery licensing staff would conduct an analysis and review to determine appropriate replacement amounts. Grants to these groups would account for approximately $3.3 million of the $8.8 million allocation from the Ontario Lottery Corporation. Under this process, a basic administrative fee of $100.00 per group would be applied to cover the cost of conducting the detailed review necessary to ensure compliance with provincial lottery licensing criteria. This is consistent with the current practice of charging an administrative fee for processing lottery licensing applications.

The remainder of the $8.8 million allocation could be distributed to the United Way of Greater Toronto and the Toronto Community Foundation who would assume the responsibility for further distribution to local charities. Both organizations are fund allocators with a city wide mandate. Staff will negotiate specific agreements with each of the organizations regarding the recommended allocation from the Advance Fund and the priority areas for funding. The United Way of Greater Toronto will be asked to direct funding to Winter Relief programs for homeless people, the 0-6 funding program aimed at young children, settlement services, services for assaulted women, member agencies and other human service agencies. The Toronto Community Foundation will be asked to fund environmental, arts and culture, and heritage initiatives.

Option 2 - Non-Participation:

The City could take the position that it will not administer the Advance Fund on behalf of the province. The Province would be required to find another agency to administer the program on its behalf. This would further delay the processing of funding requests and distribution of funds to the local community, and put the availability of the funding at risk.

Option 3 - Comprehensive Allocation Process:

A comprehensive process for administering the City's $8.8 million allocation from the Ontario Lottery Corporation would require a dedicated staff team for a period of 6 months and a budget of approximately $400,000.00. It is estimated that up to 4600 charities would be eligible to apply under this comprehensive process. The budget would cover the costs of an extensive mailout to applicant organizations, advertisements in three major dailies and other local dailies, an information brochure and dedicated telephone lines, and staff time. A dedicated lottery licensing team would conduct an analysis and review of financial statements submitted from the charity casino groups to recommend appropriate replacement grant amounts and would review these applications for compliance with AGCO lottery licensing criteria. The dedicated Community Grants Team would conduct a full agency review based upon municipal criteria as set out in the proposed City of Toronto grants policy. A report and proposed roster of eligible organizations would be forwarded to Council for approval before submission to the Ontario Lottery Corporation.

Given the province's position that the City cannot invoice the province directly, the City would be left with two alternatives for administering a comprehensive allocation process: (1) the City would have to absorb the $400,000.00 administrative cost; or (2) the City would have to set a fee schedule that would recover the $400,000.00 directly from the charities. If Council were to choose this option, we would also have serious concerns about the City's ability to meet the province's March 31, 1999 deadline for submission of the recommended charity roster.

Based on the options outlined above, and giving consideration to the need to administer an efficient process that will benefit local organizations, staff recommend that Council adopt Option 1 - the streamlined allocation process.

Conclusions:

This report updates Council on the outcome of negotiations with the Ontario Lottery Corporation regarding the administration of the Advance Funding Program and outlines the City's options for the administration of the program. The province's position is that the City cannot recover the costs for the administration of the Advance Fund on a fee for service basis directly from the Ontario Lottery Corporation. Given this position, the City must look at other delivery options to ensure that funds are distributed for the benefit of the local community with minimal administrative costs. Accordingly, a streamlined allocation process is recommended.

The Chief Administrative Officer has been consulted in the development of this report.

Contact Name:

Barbara McEwan, Director, Legislative Services, 392-4373.

21

Transfer Plan for Child Care Services and Adjustments

to Child Care Support for Ontario Works

(City Council on October 1 and 2, 1998, amended this Clause by:

(1)adding to Recommendation No. (3) of the Community and Neighbourhood Services Committee embodied in the transmittal letter dated September 10, 1998, addressed to the Budget Committee from the City Clerk, the words "in the existing subsidized child care system", (which recommendation will be considered by the Budget Committee at a future meeting), so that such recommendation shall now read as follows:

"(3)that the City of Toronto reconfirm its support for a high quality child care system, the policies of first come, first served, equity and informed parental choice in the existing child care system."; and

(2)adding thereto the following:

"It is further recommended that consideration be given to maximizing the use of other alternatives, such as parks and recreation programs and after-four programs, in order to meet the needs of the children of Ontario Works participants.")

The Strategic Policies and Priorities Committee recommends the adoption of the recommendation of the Budget Committee embodied in the transmittal letter (September23,1998) from the City Clerk.

The Strategic Policies and Priorities Committee submits the following transmittal letter (September23, 1998) from the City Clerk:

Recommendation:

The Budget Committee on September 23, 1998 recommended to the Strategic Policies and Priorities Committee, and Council, that the Mayor and City Council once again write to the Premier of Ontario requesting permission to use monies from its Social Services Reserve to fund child care spaces, in order to allow people who require child care services to return to work and to request the Province to cost share these 2,000 spaces with the City.

The Budget Committee reports having requested the deferral of the recommendations of the Community and Neighbourhood Services Committee to a future Budget Committee meeting.

Background:

The Budget Committee on September 23, 1998, had before it:

(a)a transmittal letter (September 10, 1998) from the City Clerk forwarding the recommendations adopted by the Community and Neighbourhood Services Committee; and

(b)a communication (September 21, 1998) from the Commissioner of Community and Neighbourhood Services requesting deferral of the above-noted item to a future meeting of the Budget Committee.

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(Transmittal letter dated September 10, 1998 addressed to the

Budget Committee from the City Clerk)

Recommendations:

The Community and Neighbourhood Services Committee on September 10, 1998, recommended to the Budget Committee, and Council:

(1)the adoption of the attached report dated September 1, 1998, from the Commissioner of Community and Neighbourhood Services, subject to:

(a)amending Recommendation No. (4) to read as follows:

"(4)the Department consult with the community concerning the most appropriate strategies for implementing the requirements of Ontario Works Child Care and report further on the outcome of this consultation recommending specific changes in response to the enhanced level of provincial funding and in response to unmet child care service demand; and further that no changes take place until completion of the community consultation and resulting report;";

and

(b)amending Recommendation No. (6) to read as follows:

"(6)the Children's Advocate, with the assistance of the Office of the Mayor and the support of the Commissioner of Community and Neighbourhood Services continue to advocate to the Province the City's need for child care subsidy expansion to meet the significant service demands of Ontario Works and other eligible clients; and

(2)that the Province of Ontario again be requested to pay its share of the subsidies of 2,000 children, as proposed by the City of Toronto; and

(3)that the City of Toronto reconfirm its support for a high quality child care system, the policies of first come, first served, equity and informed parental choice.

Background:

The Community and Neighbourhood Services Committee had before it a report (September 1, 1998) from the Commissioner of Community and Neighbourhood Services respecting the transfer plan of child care services and adjustments to child care support for Ontario Works.

The Committee also had before it a communication (September 9, 1998) from Ms. Anne Dubas, President, Canadian Union of Public Employees, Local 79, urging the Committee to commit any additional provincial funding to making high quality, licensed child care accessible to more children and their parents.

The following persons appeared before the Community and Neighbourhood Services Committee in connection with the foregoing matter:

-Ms. Cheryl MacDonald, Toronto Coalition for Better Child Care; and submitted a brief in regard thereto;

-Mr. Spyros Volonakis, Child Care Advisory Committee; and submitted a brief in regard thereto;

-Ms. Samantha Patton, Director, Parkdale Beach Child Care; and submitted a brief in regard thereto; and

-Ms. Fatima Alvis, Child Care Director, St. Stephen's Community House.

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(Report dated September 1, 1998, addressed to the

Community and Neighbourhood Services Committee from the

Commissioner of Community Services)

Purpose:

This report outlines the transfer plan for child care jointly negotiated between the City and the Ministry of Community and Social Services. It also outlines the additional provincial subsidy available to support the child care needs of Ontario Works participants and describes the associated adjustments the City is expected to make in its child care strategy for Ontario Works clients.

Funding Sources, Financial Implications and Impact Statement:

In letters dated July 3, 1998, and August 18, 1998, the Ministry of Community and Social Services advised the City that an additional $3,147,500.00 in annualized provincial subsidy was available bringing the total annualized provincial contribution for Ontario Works child care funding to $11,093,600.00. This additional provincial subsidy is conditional upon municipal cost-sharing approval and some refinement to the child care targets and strategy for Ontario Works outlined in the Business Plan originally approved in 1997. The $590,156.00 required as the 20 percent municipal contribution can be funded fiscally from the surplus user revenue in the Children's Services appropriation identified in the June 30, 1998, Corporate Variance Report. An annualized increase of $786,875.00 in the net base budget of Children's Services is required as part of the 1999 budget process to maintain the approved service levels and is recommended in this report.

On August 11, 1998, the Ministry of Community and Social Services further advised the City that $338,000.00 in 100 percent one-time funding was being approved to support the transitional technological activities outlined in the "Child Care Plan for Transfer of Responsibility for Managing Child Care Delivery".

The financial implications and recommendations contained within this report have been discussed with the Finance Department and have the concurrence of the Chief Financial Officer and Treasurer.

Recommendations:

It is recommended that:

(1)the $590,156.00 required as the 1998 municipal cost-sharing contribution to the additional $3,147,500.00 provincial subsidy offered to enhance the funding support for child care within the Ontario Works program be found from the surplus user revenue identified within the Children's Services appropriation in the June 30, 1998, Corporate Variance Report and approval be given to adjust the 1998 and 1999 Children's Services budgets accordingly;

(2)the City negotiate with the Province the fiscal use of the additional provincial funds to meet the costs associated with the current level of Ontario Works child care in 1998 and develop a strategy for implementation in 1999 that would increase the number of Ontario Works clients' children who could be supported with the annualized enhanced provincial funding;

(3) the City accept the $338,000.00 in one-time provincial transitional funding to support the technological activities identified in the child care transfer plan;

(4) the Department consult with the community concerning the most appropriate strategies for implementing the requirements of Ontario Works Child Care and report further on the outcome of this consultation recommending specific changes in response to the enhanced level of provincial funding and in response to unmet child care service demand;

(5) the jointly negotiated plan for the transfer of child care services be approved and the Department continue negotiations with the Province for adequate administrative support for the increased program responsibilities and an expeditious transfer date;

(6) the Office of the Mayor, with the assistance of the Children's Advocate and the support of the Commissioner of Community and Neighbourhood Services continue to advocate to the Province the City's need for child care subsidy expansion to meet the significant service demands of Ontario Works and other eligible clients; and

(7) the Department report back to Council on the results of the ongoing negotiations with the Province.

Council Reference/Background/History:

On June 10, 1997, a strategy to meet the child care needs of Ontario Works clients was approved as part of Toronto's Ontario Works Business Plan. At that time, an annualized budget of $9,627,900.00 (gross) was approved to support a target of 2,050 units of child care service for Ontario Works participants. As part of the 1998 budget approval process, Toronto Council also authorized the creation of a Social Services Reserve and agreed to fund up to 2,000 additional child care subsidies for Ontario Works participants from it, conditional upon provincial cost sharing approval. A provincial response to this subsidy expansion request is still outstanding.

As part of the 1998 budget process, the Children's Services base was increased by $37,439,300.00 in recognition of the additional cost-shared child care services being transferred from the Province to the City. These additional child care programs include: wage subsidy, special needs resourcing, approved corporations and family resource centres. Since January, departmental officials have been working with provincial officials to develop a detailed transfer plan for these services. Th