The Budget Committee recommends to the Executive Committee that:

1.         City Council authorize that Toronto Water's approved 2013 Capital Budget and 2014-2022 Capital Plan be amended to provide funding for sanitary servicing and Stormwater  infrastructure, necessary for servicing waterfront lands associated with the development of the East Bayfront Precinct, by adding the following  capital projects:

a.         Waterfront Stormwater Infrastructure Project at an estimated cost of $17.50 million, funded from the Stormwater Management Development Charge Reserve Fund (XR2113) in the amount of $5.40 million and the Wastewater Capital Reserve Fund (XR6004) in the amount of $12.10 million, with 2013 to 2015 cash flows as outlined in Table 1 of the report (May 29, 2013) from the Deputy City Manager and Chief Financial Officer and the General Manager, Toronto Water; and

b.         Waterfront Sanitary Servicing Infrastructure Project at an estimated cost of $17.80 million funded from the Sanitary Sewer Development Charge Reserve Fund (XR2026) in the amount of $11.64 million and the Wastewater Capital Reserve Fund (XR6004) in the amount of $6.16 million, with 2013 to 2014 cash flows as outlined in Table 1 of the report (May 29, 2013) from the Deputy City Manager and Chief Financial Officer and the General Manager, Toronto Water.

2.         City Council authorize the General Manager, Toronto Water, in consultation with the Acting Director, Waterfront Secretariat, to negotiate and execute on behalf of the City a project delivery agreement pursuant to which Waterfront Toronto will as delivery agent for the City provide engineering, procurement and construction management services and under which Waterfront Toronto will contribute $11.6 million and the City will pay the balance of the estimated construction costs up to a maximum estimated amount of $35.3 million for the construction of the Waterfront Stormwater Infrastructure Project and the Waterfront Sanitary Servicing Infrastructure Project on terms and conditions satisfactory to the General Manager, Toronto Water and in a form satisfactory to the City Solicitor.

3.         City Council authorize the Deputy City Manager and Chief Financial Officer, in consultation with the Acting Director, Waterfront Secretariat, to negotiate and execute on behalf of the City a contribution agreement with Waterfront Toronto as project lead for waterfront revitalization, whereby the City agrees to construct the Waterfront Stormwater Infrastructure Project and the Waterfront Sanitary Servicing Infrastructure Project in exchange for Waterfront Toronto agreeing to pay the City the portion of the construction costs net of Waterfront Toronto's initial $11.6 million contribution and amounts not recovered through development charges estimated to be $18.26 million over ten years; on terms and conditions which are satisfactory to the Deputy City Manager and Chief Financial Officer and in a form satisfactory to the City Solicitor.

4.         City Council direct that contributions received from Waterfront Toronto pursuant the foregoing contribution agreement are to be credited to the Wastewater Capital Reserve Fund (XR6004).

5.         City Council consent to Waterfront Toronto acting as the City’s agent to sign any infrastructure and servicing permits, licenses, applications and agreements required for the design, engineering and construction of the facilities funded by this report and any other facilities to be funded by the City, provided that Waterfront Toronto agrees to assume all obligations including costs and liabilities under such documentation and subject to such other terms required by and the GM to and the Deputy City Manager and Chief Financial Officer and the General Manager, Toronto Water, and in a form satisfactory to the City Solicitor.

6.         City Council consent to City staff pursuing with Waterfront Toronto additional avenues to recover from benefitting landowners a portion of the developer portion of the cost borne by Waterfront Toronto of the sanitary servicing and stormwater infrastructure, necessary for servicing.

7.         City Council authorize The General Manager, Toronto Water, in consultation with the Acting Director, Waterfront Secretariat, to negotiate and execute on behalf of the City from time to time as necessary, project delivery agreements pursuant to which Waterfront Toronto will as delivery agent for the City provide engineering, procurement and construction management services  paid for by the City for the construction of stormwater and sanitary servicing infrastructure required in connection with the revitalization of the waterfront by Waterfront Toronto.

8.         City Council authorize the General Manager, Toronto Water to amend Purchase Order No. 6026913 with Associated Engineering (ON) Ltd. for engineering services related to the construction phase of the Scott Street Sewage Pumping Station Rehabilitation by an additional amount of $672,230.00 net of all taxes ($684,061.25 net of HST recoveries) revising the current contract value from $330,065.00 to $1,002,295.00 net of all taxes ($1,019,935.40 net of HST recoveries).

9.         City Council authorize the Deputy City Manager and Chief Financial Officer in consultation with the General Manager, Toronto Water, to execute and deliver all agreements, consents, authorizations, authorized by the foregoing recommendations on terms and conditions satisfactory to the Deputy City Manager and Chief Financial Officer and the General Manager and in a form satisfactory to the City Solicitor.

The revitalization of the East Bayfront Precinct is underway and the servicing of development within the Precinct requires new stormwater management facilities in accordance with the City's Wet Weather Flow Master Plan, and upgrades to the existing sanitary sewer system. In particular, the approval of the Bayside Subdivision contained within the East Bayfront Precinct requires servicing, which is ultimately the responsibility of Waterfront Toronto under the subdivision agreement.

Waterfront Toronto receives and manages direct government funding through a Long Term Funding Plan approved annually by all three orders of government. Waterfront Toronto does not have sufficient funding for the preferred servicing strategy for this development. This report recommends an arrangement whereby the City will pay for constructing the servicing needs required for this development and other Waterfront Toronto and private development needs across the East Bayfront and North Keating Precincts and Waterfront Toronto will contribute over time, in its role as project lead for waterfront revitalization, a portion of those costs.

This recommended funding and servicing plan have several advantages in that it:

a.         provides the necessary sanitary servicing to permit the development of all lands across the two precincts;

b.         reduces overall servicing costs as it eliminates the need for the interim sanitary servicing solution for the Bayside Phase I development; and

c.         provides for a more cost-effective and timely construction of a stormwater treatment facility to service the East Bayfront Precinct and ultimately the future North Keating Precinct.

The total infrastructure cost for this servicing has been estimated at $46.9 million. Waterfront Toronto, through the government funded Long Term Funding Plan, only has $11.6 million in currently available funding.

This report proposes that the required  $46.9 million will be funded by Waterfront Toronto ($11.6 million) and the balance by the City from Toronto Water's Stormwater Management and Sanitary Sewer Development Charges Reserve Funds ($17.04 million) for a portion of the growth related share and Toronto Water's Capital Reserve Funds ($18.26 million) for the remainder.

City will enter into a project delivery agreement pursuant to which Waterfront Toronto will contribute $ 11.6 million and the City will pay the balance of the estimated construction costs up to a maximum estimated amount of $35.3 million for the construction of the Waterfront Stormwater Infrastructure Project and the Waterfront Sanitary Servicing Infrastructure Project.

A contribution agreement will be entered into with Waterfront Toronto to pay the construction costs initially funded by Toronto Water's Capital Financing Reserve estimated to be $18.26 million in exchange for the City constructing these works.  Waterfront Toronto anticipates that the payment would occur when certain properties from the second phase of the Bayside subdivision are developed, in approximately ten years.  Waterfront Toronto may also negotiate contributions by the benefitting property owners for their fair share of this cost.  The benefitting lands for the new Stormwater infrastructure are shown in Appendix B.  The benefitting lands for the new sanitary facilities are shown on Appendix C.

The $17.04 million advanced from the Development Charges Reserve will be recovered as development charges.

Further, the sanitary servicing of the East Bayfront Precinct, west of Sherbourne Street, requires an upgrade to the City's Scott Street Sanitary Pumping Station and therefore authority is being requested to amend Purchase Order 6026913 issued to Associated Engineering Ltd., for engineering services for the construction administration phase related to the upgrading of the Scott Street Sewage Pumping Station. This related work will increase the pumping station’s efficiency and capacity to service its surrounding catchment area including portions of the waterfront.

The construction of sanitary servicing and stormwater infrastructure to service the revitalization of East Bayfront Precinct requires approximately $46.9 million. Waterfront Toronto currently only has $11.6 million, through its Long Term Funding Plan, to support the construction of this infrastructure at this time. The result is an estimated shortfall of $35.3 million. The funding strategy, proposed in this Report, addresses the shortfall through a combination of contributions from the Stormwater Management and Sanitary Sewer Development Charge Reserve Funds ($17.04 million) for a portion of the growth related costs, and Toronto Water's Capital Financing Reserve Funds ($18.26 million) for the non-development charges recoverable and local services (i.e. developer responsibility) portions, as per Table 1 below.

Table 1: Capital Expenditure and Sources of City Funding

Council authority is required to amend Toronto Water's approved 2013 Capital Budget and 2014-2022 Capital Plan, which currently has no provision for the East Bayfront revitalization servicing priorities, by adding two new capital projects: a) Waterfront Stormwater Infrastructure Project at an estimated cost to the City of $17.5 million; and b) Waterfront Sanitary Servicing Infrastructure Project at an estimated cost to the City of $17.8 million, for a total of $35.3 million.  These projects will be cash-flowed over a three year period, from 2013 to 2015, and fully funded from Development Charges and Toronto Water Capital Financing Reserve, with no debt impact to the City. Table 1 outlines recommended budget adjustments.

City will enter into a project delivery agreement pursuant to which Waterfront Toronto will contribute $ 11.6 million and the City will pay the balance of the estimated construction costs up to a maximum estimated amount of $35.3 million for the construction of the Waterfront Stormwater Infrastructure Project and the Waterfront Sanitary Servicing Infrastructure Project.

Waterfront Toronto will enter into a contribution agreement with the City to pay the City the estimated cost of $18.26 million from proceeds of the East Bay Front Precinct development or from any other lands benefitted by the sanitary servicing and stormwater infrastructure.  The amount of $17.04 million will be recovered through development charges, for a total amount of $35.3 million.

It is recognized that the amount and availability of future Waterfront Toronto revenues to honour its contribution obligations is subject to uncertainty, largely related to the timing and feasibility of the Bayside Phase 2 project, which is expected to be the primary source of funds for the contribution.  

Waterfront Toronto will be relying primarily upon the use of sale proceeds and rents generated by the development of Phase 2.  These lands are environmentally contaminated and are expected to require extensive measures to make them developable. Furthermore, Waterfront Toronto is not obligated to develop Phase 2 if the environmental costs for remediation and risk assessment are commercially unreasonable.  Therefore there is no certainty that contributions will be made by WT and that the City's reserves will be replenished as planned.

The purchase order amendment for an additional of $672,230.00 net of all taxes ($684,061.25 net of HST recoveries) will increase the current contract value from $330,065 net of all taxes  to $1,002,295.00 net of all taxes ($1,019,935.40 net of HST recoveries). Funding for the purchase order amendment is included in Toronto Water's approved 2013 Capital Budget and 2014-2022 Capital Plan within the Engineering Consulting Fees Project (CWW470-02).

The Deputy City Manager and Chief Financial Officer has reviewed this report and agrees with the financial impact information.