Capital Funding of Metropolitan Toronto

Housing Authority Projects

The Community and Neighbourhood Services Committee recommends:

(i) the adoption of the report dated June 3, 1998, from the Commissioner of Community and Neighbourhood Services Committee, subject to Recommendation No. (4) being approved in principle pending receipt of the KPMG and Carson reports; and further that the Commissioner of Community and Neighbourhood Services consider the necessity of hiring a qualified technical consultant at that time;

(ii) that the Board of Directors of the Metropolitan Toronto Housing Authority (MTHA) be requested to desist from selling off any more scattered MTHA units; and

(iii) that a work group be established to assist the Commissioner of Community and Neighbourhood Services in negotiations with the Federal and Provincial Governments on the downloading of social housing, and that she be requested to seek the assistance of MTHA unions, tenant representatives, and interested housing coalitions in this regard.

The Community and Neighbourhood Services Committee reports, for the information of Council, having requested the Commissioner of Community and Neighbourhood Services to:

(a) send out immediately the invitation to representatives of the two local unions that represent the Metropolitan Toronto Housing Authority on-site workers, tenant representatives, and others who may be interested in addressing the Committee, as requested by the Community and Neighbourhood Services Committee at its meeting on April 23, 1998; and

(b) submit a report to the July 16, 1998, meeting of the Community and Neighbourhood Services Committee on the Department's position with respect to selling off MTHA scattered units.

The Community and Neighbourhood Services Committee submits the following report (June 3, 1998) from the Commissioner of Community and Neighbourhood Services:

Purpose:

This report comments on material presented on April 23, 1998, to the Community and Neighbourhood Services Committee by Mr. Rashmi Nathwani, Chair of the Metropolitan Toronto Housing Authority (MTHA) and Mr. Peter Schafft, Chief Executive Officer of MTHA. The Commissioner was asked to report back to the Committee on whether the capital funding details provided by MTHA in their presentation included the $200 million repairs highlighted by the Provincial Auditor in his 1997 report.

Recommendations:

It is recommended that:

(1) the Ministry of Municipal Affairs and Housing be requested to confirm the amount of capital funding which has been included for MTHA in the total costs attributed to the downloading of social housing in the City of Toronto;

(2) the Ministry of Municipal Affairs and Housing be requested to provide City staff with copies of the final reports on the condition of the MTHA portfolio that are currently underway and access to the consultants that have been retained to do the work;

(3) staff meet with the consultants currently retained by MTHA and OHC (IBI and KPMG) in order to establish a fuller understanding of the background and terms of reference for their reports and the methodology which they have used in preparing the reports;

(4) the City retain a qualified technical consultant to report on the capital needs of the MTHA portfolio. The consultant would review the material that has been provided by MTHA on the condition of their portfolio, comment on the apparent differences in the estimates of capital funding requirements in this material and conduct further audits, verifications, etc., as required. As well, the consultant would also provide an opinion to the City as to what funding options would be appropriate to financing the capital needs of the MTHA portfolio in the next five and ten-year period; and

(5) in view of the time constraints on the carrying out of a full due diligence study, the City support the principle of a cap on its exposure for capital work as recommended to the Social Housing Committee by the Public Housing Working Group, and that this cap include the OHC building functionality category, as well as the life-safety, structural integrity and legislative categories.

Background/History:

Over the past few months, the City has received a variety of material from MTHA and OHC describing the physical condition of its portfolio. Unfortunately, a clear picture does not emerge.

MTHA, in its presentation to the Committee, has stated that it requires $40 million per year in capital funding on an ongoing basis and that, with this amount, their portfolio will be kept in good repair.

As part of its presentation to the Community and Neighbourhood Services Committee, MTHA submitted a copy of a recent report by the IBI Group for OHC, titled "Analysis of Building Condition Assessments." The report analyses the results of detailed Building Condition Audits done on a sampling of Public Housing projects throughout Ontario in 1998, and similar information generated internally using CAMP/IAMS data. Included in the sampling were 18 MTHA projects which include approximately 4,200 units. Based upon the external audits and the information provided by MTHA, IBI estimated that the capital requirements for MTHA for the period from 1998-2002 is $27.5 million per year and that in the following five-year period the need would be $16.2 million per year. IBI indicated that elevator upgrading costs were not included in these estimates - this would likely amount to between $1-2 million per year.

The IBI Group has projected an annual capital expenditure amount for the next five years of approximately $29 million, whereas MTHA has projected an annual expenditure of $40 million for the same time period.

As well, in his recently published 1997 report, the Provincial Auditor stated that in 1994 the backlog of capital projects at MTHA was estimated by KPMG to be approximately $230 million; he observed that a backlog still exists (of approximately $200 million and that funding has not yet been received to clear it - December 1996).

MTHA's own current view is that there is no backlog. Recently they have retained KPMG to do a follow-up study to their original work, completed in 1994, which identified the $230 million capital backlog at MTHA. KPMG will also look at work done in the past five years and identify current and long-term funding requirements, including any capital backlog that might exist. It is anticipated that this report will be completed by the end of July 1998.

In summary, considerable information describing the condition and capital funding requirements of the MTHA portfolio has been received; however, much of this information is contradictory and the reports received to date do not identify financing options which would assist the City in funding the capital needs of MTHA.

In view of this uncertainty, it is urgent that the City act to clarify the situation and to limit its exposure. In particular, the following measures are suggested:

(1) It is understood that the Province's social housing download figures include an annual allowance for MTHA capital work of $40 million per year. However, we have no formal confirmation of this and it is suggested that MMAH be requested to confirm this figure.

(2) Recently, the Public Housing Working Group (PHWG) submitted its final report to the Social Housing Committee, an advisory committee established by the Province to assist in implementing the devolution of social housing. The PHWG report outlines options for the transfer of public housing to the municipalities and options for its future administration. The report recommends that the City's exposure for capital work expenses related to public housing should be capped at 1997 levels for the three highest priority capital categories as defined by OHC.

In view of the fact that a full "due diligence" procedure is not possible given the time constraints, capping the City's exposure for capital work as recommended by the PHWG is a reasonable alternative. However, it is important to realise that to be effective, limiting the cap to the first three OHC categories (A - life-safety, B - structural integrity and C - legislative changes) is not adequate, as these three categories represent only a very limited portion of the capital funding requirement. Category D (building functionality) items normally account for the largest category of capital expenditure (in excess of 75 percent) and includes nearly all major building envelope and mechanical and electrical work. The cap on the City's exposure should be extended to include this category.

(3) In order to develop a clearer understanding of the capital needs of the MTHA portfolio, it is recommended that the City commission a third party report on the capital requirements of MTHA based initially on a review of the material that has been received (commenting on any contradictions and inconsistencies) and incorporating any work that is currently underway. Although the consultant would use existing material he might very well need to go beyond it - for example additional audit work might be required to adjust the original sampling.

The consultant would generate estimates of the capital funding requirements of the MTHA portfolio for the next five and ten years; the report should also examine and recommend funding options that would be appropriate to finance the capital requirements of MTHA.

This study work would require OHC's co-operation, but it is recommended that it be funded by the City as a transition expense.

Conclusion:

These measures should help the City gain a clearer understanding of the capital needs of the MTHA portfolio, confirm the figures included in the Provincial downloading for MTHA, and set a cap on the City's funding exposure that includes the major expenditure categories. A review to determine whether it would be appropriate to adjust the level of this cap could be undertaken when the various studies are in hand.

Contact Name:

Bob Dryden

Director of Asset Management - MTHCL

Tel: 392-3723

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Councillor Howard Moscoe, North York Spadina, appeared before the Community and Neighbourhood Services Committee in connection with the foregoing matter.