June 28, 1999

To:Planning and Transportation Committee

From:Commissioner of Works and Emergency Services and Commissioner of Urban Planning and Development Services

Subject:Proposal to Bury the F.G. Gardiner Expressway Below Grade Between Dufferin Street and the Don River (Trinity-Niagara, Downtown, Don River)

Purpose:

The purpose of this report is to provide additional information on a private sector initiative to replace the elevated section of the F.G. Gardiner Expressway with a new, below grade, toll highway, and to respond to questions raised by the Urban Environment and Development Committee at its meeting of February 8, 1999.

Funding Sources, Financial Implications and Impact Statement:

There are no funding impacts as a result of the recommendations of this report.

Recommendations:

It is recommended that:

1. The issue of the long term disposition of the F.G. Gardiner Expressway be dealt with as part of the development of the City's Strategic Plan and Official Plan and that no further work be undertaken on the proposal by the Canadian Highways International Corporation (CHIC) until the adoption of the Strategic Plan and Official Plan by City Council; and

2. City staff explore the feasibility of tolling as a way of funding road infrastructure improvements, such as the Front Street Extension, and report back on this issue.

Background:

At its February 8, 1999 meeting, the Urban Environment and Development Committee considered a joint report (January 25, 1999) from the Commissioners of Works and Emergency Services and Urban Planning and Development Services that provided preliminary staff comments on a private sector proposal to replace the existing elevated section of the F.G. Gardiner Expressway between Dufferin Street and the Don River with a new, below grade, toll highway. The Committee deferred consideration of the report to its May 17, 1999 meeting (subsequently deferred to the July 12, 1999 meeting of the Planning and Transportation Committee) and requested that staff report on:

(1) the following motions which were placed at the Committee:

"(a) that Council be requested to approve, in principle, the proposal to bury the Gardiner Expressway subject to positive findings of the proposal;

(b) that in order to accomplish a significant modal shift toward public transit, further investigation include full integration of transit improvements and integrated road and transit fee structures;

(c) that the Commissioner of Urban Planning and Development and the Commissioner of Works and Emergency Services continue to discuss the CHIC proposal with the proponents so long as:

(i) the proposal is, in the opinion of the Commissioners, likely to contribute to an improved ability for the public to access and use the waterfront area;

(ii) the proposal, in the opinion of the Commissioners, is unlikely to result in unmanageable level of disruption to the traffic flow in the City;

(iii) the proposal, in the opinion of the Commissioners, contributes to the stated transportation goals of the City of Toronto in areas including air quality, transit usage and pedestrian friendly environments; and

(iv) the proposed toll policy, in the opinion of the Commissioners, works to promote the City's objectives and is subject to adequate controls to ensure that it continues to promote City objectives;

(d) the Commissioners begin a process to determine if the community is prepared to accept tolls to travel downtown;

(e) the Commissioners explore the possibility and costs of an electronic toll system on the centre core lane of the Queen Elizabeth Way;

(f) the Commissioners consider the possibility of introducing a modest toll from the 427 to the Humber on the centre core lane and that funds raised be utilized in a central transportation fund and for improvements along the lakeshore corridor";

(2) suggestions and comments expressed by the public with respect to this matter;

(3) the infrastructure west of Dufferin Street and what actions need to be started in order to upgrade it in an urban friendly manner;

(4) a detailed proposal and cost analysis for the retention of the expertise necessary to address the technical feasibility of redeveloping the Gardiner Expressway and the expertise necessary to assist staff in drafting a Request for Proposals for the re-development of the Gardiner Expressway;

(5) the economic impact of redeveloping the Gardiner, such report to also be forwarded to the Economic Development Committee;

(6) a list of objectives to meet the City's transportation, transit, environmental, economic and cultural needs along the waterfront and the City in general;

(7) an analysis of the economic costs involved in the construction exercise of burying the Gardiner; and

(8) a breakdown of the $1 million costs estimated to formulate the proposal call.

Discussion:

The requests from the Committee to report can be summarized into four distinct areas:

1. The costs and process involved in developing a plan for the redevelopment of the F.G. Gardiner Expressway (FGG);

2. The costs and process involved in embarking on a public sector-private sector partnership, with specific information on resources required to undertake a request for qualifications/ request for proposals for the redevelopment of the FGG;

3. An economic analysis of the costs and benefits of burying the FGG; and

4. A process to determine if the community is prepared to accept tolls to travel downtown.

To assist City staff in determining the costs and processes involved in engaging in a Public-Private Partnership (PPP), the City engaged the firm of KPMG. The firm's response to our questions is provided in Appendix A, attached to this report.

What is a Public-Private Partnership?

The KPMG report describes the PPP approach as "essentially a business relationship where the public and private sectors share the risks, rewards, and responsibilities for the success of the project."

While in many cases government is the obvious vehicle to provide certain types of infrastructure, there are merits in considering a PPP approach, including:

• To provide an opportunity to share significant risks;
• To provide an opportunity for efficient maintenance of current service levels or improvement to service levels;
• To reduce costs;
• To provide access to new sources of capital;
• To promote economic development opportunities for local firms; and
• To provide access to skills not resident and not optimally provided in-house.

From the municipality's perspective, the potential risks of using a PPP approach include:

• Loss of control;
• Loss of accountability for service quality;
• Risks from an inappropriate proposal call process;
• Problematic transfer of assets; and
• Development of an inappropriate risk strategy.

KPMG identifies three elements to replacing the FGG using a PPP approach:

A. The Planning Phase;

B. The Execution Phase; and

C. The Monitoring Phase.

A. A Plan for the F.G. Gardiner Expressway - The Planning Phase

A critical step in the discussion of any public-private partnership is the determination of what exactly the public sector wants the private sector to ultimately bid on. If the public sector does not or cannot specify what the 'project' is, it is then left to the private sector to determine what it is they will bid on. As a result, the private sectors' 'plans' may or may not be what the public is actually looking for or willing to accept.

The City's plan must include not only the physical and operational elements, but it also has to include what the City intends to achieve in a financial sense by partnering with the private sector. Any lack of specificity in developing what the private sector will bid on can create legal problems for the public sector, such as legal challenges on the evaluation of alternative bids. Also, it can lead to increased costs for the private sector, which has to take on the risks of having their 'plan' approved by both the public sector owner and the public sector approving agencies.

KPMG states: "Devoting appropriate attention to the planning phase of a PPP project is crucial to the project's success. In our experience, many PPP projects which do not succeed fail because the planning phase was inadequate."

The lack of a plan (both physical/operational and financial) for the FGG and its environs creates significant problems for the City in any discussion of a public sector-private sector partnership. Therefore, the first phase in any further consideration of such proposals must be the development and approval of both a physical/operational plan and a financial plan. The higher the degree of specificity in these plans, the greater the degree of control the City will have on the process and, as a result, the lower the overall risk there will be to the City.

The development of a plan for the FGG has to be within the context of the City's overall Strategic Plan and its new Official Plan. The recently inaugurated processes for the development of these important documents will allow for the public to provide significant input on the strategic direction the City should pursue with respect to the FGG. Further development of the more detailed physical/operational and financial plans for the Lake Shore corridor should await the outputs from the Strategic and Official Plans.

Once the City has decided on the strategic direction for the Lake Shore corridor, the development of the physical/operational and financial plans will still require considerable staff and outside resources. Staff estimate that to consult with the public, develop and approve a physical/operational plan for the FGG and develop and finalize financial goals will take from 12 to 18 months at a cost of approximately $1.0 to $1.5 million. Staff do not recommend that the City proceed further on the PPP concept without undertaking this planning phase.

B. Request for Qualifications/Request for Proposals - The Execution Phase

The details of the Execution Phase are provided in Appendix A. This phase involves four stages:

1. Mobilization;

2. Administering the Request for Qualifications;

3. Administering the Request for Proposals; and

4. Negotiation of Agreements.

The Execution phase generally does not begin until completion of the Planning phase, with a decision by City Council on what the project is.

It is important to note that the Execution phase is a competitive bidding process and, as such, "A key aspect in designing the reporting structure is to ensure that information is treated confidentially. The general principle is that information is provided to individuals only on a 'need to know' basis. The maintenance of appropriate confidentiality in the process is a key to success, and therefore the City should ensure that 'internal spectators' do not have access to important project information."

KPMG estimates that, based on the complexity of an FGG project, a two-stage request for qualifications/request for proposals process would be required. They estimate that the Execution phase would take up to 12 months to complete at a cost to the City of from $5 million to $7 million.

C. During Construction and Operation - The Monitoring Phase

The Monitoring phase involves:

• Monitoring compliance with the agreements during the construction phase; and
• Monitoring compliance with the agreements during the operational phase.

KPMG notes that governments generally are good at monitoring compliance during the construction phase, but less attentive to monitoring compliance during the operational phase. If the City decides to proceed with the PPP approach, sufficient resources must be made available to ensure compliance during both the construction phase and the ongoing operational phase of the agreement.

Discussion of Economic Impacts

Transportation infrastructure is critical to maintaining and improving the City's competitive economic position. The regional transportation network serving the downtown core, such as the facilities in the Lake Shore corridor which connect many of the most highly urbanized areas in the Golden Horseshoe, have always been important to sustaining and developing Toronto's economy. Prior to considering any specific proposal for the future of the FGG, it is important that Council clearly articulate the City's overall economic, environmental and social objectives. The achievement of those objectives should guide the subsequent preparation of physical/operational and financial plans for facilities in the Lake Shore corridor.

In addition to the impact on residents and commuters, planning for this corridor must include an assessment of both the short and long term impacts, benefits and costs of any proposed change on businesses operating within the City. The FGG is a major access route for commercial vehicles transporting people and goods in and out of the downtown core. The existing level of traffic congestion in this corridor is already a concern to many businesses. The tourism industry, for example, relies heavily on visitors coming to Toronto by bus and private automobile.

The City should ensure that its investment strategy seeks to improve its overall competitive position (i.e. investment by the City should attract private sector investment and economic growth). To date, there has been considerable discussion about some of the potential environmental and social benefits of burying the FGG (reconnecting the City to its waterfront, eliminating a visual barrier) and the financial aspects related to project funding, but relatively little analysis about how changes to the Lake Shore corridor could contribute to the economy of the City. Planning for this corridor should address ways to increase the capacity of the transportation system serving this vital area of the City.

Discussion of Public Attitudes

The Urban Environment and Development Committee (UEDC) requested that staff begin the process of determining the public attitude toward charging tolls on the FGG. The issue of charging a user fee for the use of existing City infrastructure is much broader than simply whether or not to toll the FGG. This broader discussion should be made in the wider context of the development of the City's Strategic Plan.

Timing

One of the opportunities that was identified by CHIC in its proposal concept was the ability for the City to undertake the burial of the FGG in time for the 2008 Olympic games. Given the scale, cost and logistics of moving the equipment, materials and labour in the tight timeframes to undertake these works, the level of local disruption and the risk to the success of both projects of attempting to bury the FGG and construct the required Olympic facilities at the same time and in the same corridor are unacceptable. The timeframes identified in this report for proper planning and requesting/evaluating/negotiating proposals would appear to preclude the possibility of burying the FGG before the Olympics. Committee and Council should be aware that the City's bid for the 2008 Olympic games would be significantly enhanced if it could assure that required new competition facilities can be in place for pre-games testing by 2007. Conversely, decisions that could result in delays to the construction schedule will negatively affect the bid.

The complexity of the process required to undertake such a massive reconfiguration of City infrastructure, combined with the lack of a plan of what the reconfiguration should look like, puts into question the advisability of trying to advance the construction activities so that the project is finished in time for the Olympics.

Protecting Options for the Future

During the period that City Council is developing the Strategic and Official Plans, staff will continue to review activities in the Lake Shore corridor to protect potential opportunities for reconfiguring the corridor.

The Front Street Extension and the Introduction of Tolls

The Front Street Extension has been widely recognized as an important first step in any possible reconfiguration of the Lake Shore corridor. The CHIC proposal included the Front Street Extension as the first component of its plan to bury the FGG. The Front Street Extension has been approved by both the former City of Toronto and the former Metropolitan Toronto Councils and has Environmental Assessment approvals in place. If the City wished to expedite the process for the future reconfiguration of the FGG, a good place to begin would be the implementation of this important link to the downtown.

Implementation of the Front Street Extension has been slowed because of the ongoing lack of funding for major transportation infrastructure improvements in the City. The private sector's proposal to pay for new transportation infrastructure through the introduction of highway tolls could be tested through the Front Street Extension project.

Summary:

The UEDC requested staff to respond to a number of issues. It is clear from the work undertaken to date that the City is not in a position at this time to make a firm decision on whether or not to proceed with the detailed planning required to develop a request for proposals for the possible burial of the FGG. Staff estimate that to develop the necessary plans and then to undertake a proposal call for a public-private partnership would take up to 2 to 2 1/2 years at an estimated cost of between $6.0 million to $8.5 million.

Given the magnitude of the resources required to undertake the planning and development of a public-private partnership for the possible burial of the FGG, staff recommend that the recently initiated Strategic Plan and Official Plan processes be used to develop the strategic context for the future of the FGG. The planning process should include an assessment of the fiscal impact on the City, and the economic benefits and costs to businesses and other stakeholders within the City that could be realized/incurred through improvements to transportation facilities in the Lake Shore corridor. Only when this strategic context has been finalized should Council consider embarking on the more detailed and costly process of developing the detailed plans for the FGG and the Request for Proposals process for a public-private partnership.

Contact Name:

T. W. Mulligan, Director

Transportation Programming and Policy

Tel:(416) 392-8329

Fax:(416) 392-4426

David C. KaufmanBarry H. Gutteridge

General ManagerCommissioner

Transportation Services Division Works and Emergency Services

Paul J. BedfordVirginia M. West

Executive Director and Chief PlannerCommissioner

City Planning DivisionUrban Planning and Development Services

TWM/gg

Attach.