From the Star:
City may be on the hook for lakefront project
Apr 27, 2007 04:30 AM
John Spears
CITY HALL BUREAU
Toronto taxpayers should put up a $132 million loan to finance the Project Symphony commercial development on the waterfront, says a staff report.
The seven-storey development by the city-owned Toronto Economic Development Co. (TEDCO) would be leased primarily to Corus Entertainment.
The project is supposed to create 1,300 jobs and kick-start development on the East Bayfront section of the waterfront, east of the Tate & Lyle sugar refinery.
But the staff report cautions that there are risks attached to the project, according to an analysis by Sannek Associates Inc.
"According to Sannek's assessment, the project is likely to yield a financial return that is lower than would be acceptable for a private investor, given the project's risk profile," says the staff report.
It doesn't say what that expected return would be, although there's an expectation the city will get its money back.
Because of the below-market return – and because TEDCO is legally required to borrow through the city – it will be up to taxpayers to finance $132 million of the project's $159.5 million cost, says the report. That's money the city will itself need to borrow first.
The rest of the funding will come from TEDCO's own resources and those of the Toronto Waterfront Revitalization Corp.
Income from the project should be enough to cover the city's borrowing costs, the report says. If not, "there could be a negative impact on the city's operating budget and its credit rating."
Can the city afford the risk?
Councillor Kyle Rae, who heads Toronto's economic development committee, turns the question around, saying the city "can't afford not to do it."
"This is a project that will provide a new home for Corus," said Rae, who represents Ward 27, Toronto Centre-Rosedale, and is also a director of TEDCO.
"It will be the first employment land development on the waterfront. It will serve as an excellent buffer between the sugar refinery and the rest of the East Bayfront."
The project shouldn't be viewed in isolation, Rae said, but as a catalyst for the rest of the waterfront.
"It is the first development in the East Bayfront ... That's how it's justified from a business perspective."
But the plan faces questions from other councillors.
Cliff Jenkins (Ward 25, Don Valley West) wants assurances the main tenant is committed to a long-term lease if the city is going to be on the hook for a long-term loan.
AoD