A guide to the Waterfront Toronto scandal

We answer six important questions about the latest controversy to hit City Hall, including: what happened, and should you be angry about it?

As Christmas approaches, City Hall is ringing with the festive sound of a big old-fashioned spending controversy.

At the centre of it is Waterfront Toronto, the agency created jointly by the city, province, and federal government in 2001 to oversee the redevelopment of the shorefront.

Mayor John Tory is saying the city needs to have a “discussion” about whether to continue funding the organization, after it was revealed that it exceeded its budget for the Queens Quay revitalization project by nearly 40 per cent. The project was originally estimated to cost $93.2 million, but at a closed-door meeting in February, Waterfront TO’s board quietly approved a hefty increase of $35.7-million, or 38.3 per cent. The agency only made the decision public last week.

While Tory and Deputy Mayor Denzil Minnan-Wong argue the agency isn’t accountable enough, many others believe Waterfront TO has done a good job so far revitalizing Toronto’s moribund lakeshore. 

The outcome of this debate could have serious consequences for the lakefront, one of the city’s most valuable public assets. So here are the answers to six important questions about the controversy:

What is the Queens Quay project?

Waterfront TO’s stated goal is to turn Queens Quay into “one of the world’s most beautiful waterfront boulevards.” The project began in June 2012 and by its completion (scheduled for June 2015), the street will include two lanes of traffic, a dedicated streetcar route, wide tree-lined pedestrian walkways and a multi-use recreational trail.

Why did it go over budget? 

Waterfront TO has broken down the increase as follows:

  • $5.9 million for having to work around underground utilities and other structures that weren’t reflected in city drawings of the site.
  • $3.3 million for a complicated staging process that was caused by a delay in Toronto Hydro getting approval to work on the project.
  • $7 million for a more complex traffic management plan.
  • $4.4 million for higher-than-expected granite costs, caused in part by a decision the agency made in conjunction with the city to expand the project’s western edge.
  • $11 million for third party work. This is the biggest increase (31 per cent of the total) and it is not directly attributable to Waterfront TO, which was asked to do work on behalf of other agencies like the TTC and Toronto Water that wasn’t included in the original project budget. This work included rebuilding the Spadina streetcar loop and erecting transit shelters. 
  • $4.1 million for additional design and engineering work necessitated by all of the above

Is the city on the hook for the extra costs? 

No. Waterfront TO is not asking for more money from the city, or from the other two levels of government. It will cover some of the overrun through the sale of waterfront lands made more valuable by the revitalization. The TTC and other agencies Waterfront TO did work for will also pay their share.

Why didn’t Waterfront TO tell the public that it had blown the budget until many months later? 

Waterfront TO says that it was “not appropriate” to publicly disclose the budget increase when the board approved it in February because the agency was in the process of negotiating claims with several contractors who wanted to be paid more due to the additional, unforeseen work.

The board argues that if it had publicized the budget increase, the contractors would have known there was a bigger pot of money available and that would have compromised Waterfront TO’s ability to negotiate lower settlements. The agency says the decision saved $4 million.

Is that unusual?

Yes and no. Although it’s routine for the city or its agencies to keep the details of contract negotiations secret until a deal is reached, in this case Waterfront TO decided to delay disclosure of the entire $35.7 million increase, even though $15.2 million of it was unrelated to unresolved claims.

In October, 2013 the agency’s CEO did warn that the approved budget would not be enough to cover the project, but that important information was thrown into a report cluttered with mundane details about construction progress. No one reading it would have known the cost might rise by almost 40 per cent.

Should I be angry about this?

The public has a right to know how its money is spent, and it’s troubling that the agency didn’t disclose at least some of the cost increases earlier than it did. Waterfront should take steps to be more transparent.

But it’s important to keep some perspective here. The agency is doing vital work to improve Toronto’s waterfront, which will ultimately result in hundreds of millions of dollars in new tax revenue to the city. It has overseen several other successful projects like Sugar Beach and Sherbourne Common, and doesn’t have a record of going over budget. Moreover, the inflated cost of Queens Quay will not come out of the city budget, and won’t take away from our ability to fund other important projects or deliver services.

There is more than a whiff of politics going on here. At a press conference Thursday to announce plans to fast-track construction on the Gardiner Expressway, Mayor John Tory criticized how much Waterfront TO spent on granite for Queens Quay, likening the agency to a homeowner who buys a granite countertop even though she can’t afford it.

But, by the mayor’s own standards, was Waterfront TO really that wasteful? Tory’s Gardiner decision will cost the city $2 million, and mean that work on the highway might finish a mere two months ahead of schedule. The excess cost for granite for Queens Quay was about twice that, $4.4 million, but the revitalization project will create a public asset that will be enjoyed for decades.

bens@nowtoronto.com | @BenSpurr

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