The wagons at City Hall are being circled in an all-out effort to stop sharp arrows of scandal from penetrating some exceedingly thin skin over the redevelopment of Union Station.Strategists under the direction of senior bureaucrats and the mayor's office have been quietly preparing a defence for an administration recommendation to award the contract to a consortium known corporately as Union Pearson Group Inc.
This recommendation -- signed by corporate services commissioner Joan Anderton and treasurer Joseph Pennachetti -- came as no surprise when it was dropped in front of council's administration committee last week.
The buzz has been going around for some time that UP Group would end up getting the nod for the Union Station job. And the chief reason for this was that Kilmer Van Nostrand Co. Ltd. is one of the founding shareholders in the corporation, which was established expressly to go after this particular project.
O&Y Properties, PCL Constructors and OMERS Realty Corp. are in there, too. But KVN was the key, insiders said, because construction and sports entrepreneur Larry Tanenbaum just happens to be the company's CEO.
Through KVN, Tanenbaum also has a 25 per cent interest in Maple Leaf Sports and Entertainment Ltd. (MLS&E) -- the corporation that owns the Toronto Maple Leafs hockey team, the Toronto Raptors NBA franchise and the Air Canada Centre where both squads play.
It's no big secret that Tanenbaum and Mayor Mel Lastman are well acquainted. But it was the sports magnate's relationship with the chief magistrate's lawyer son, Dale, that sparked most of the speculation inside the concrete bunker at the back of Nathan Phillips Square.
The Lastman with the law degree was instrumental in the negotiations that brought the Maple Leafs and the Raptors under one corporate roof in 1998. His contribution to the merger was recognized with an appointment to MLS&E's board of directors. And it was Larry Tanenbaum who, in May 2000, nominated his "long-time trusted adviser" Dale Lastman to represent KVN on the board.
It didn't take long for someone to cry foul when the city administration gave UP Group the inside track for refurbishment of the rail terminal. The first person to fire a shot at the selection process was one Art McIlwain, president of the Urquhart Group, which placed third behind Chicago-based consortium LP Heritage in the current bidding battle.
McIlwain made it pretty clear that a renovation project worth a few million dollars wasn't the real prize in the contract. What the developers really want are the air rights above the tracks behind the train station. That prime space -- once described as the most valuable vacant property in the entire country -- is ripe for construction of commercial and residential towers.
McIlwain figures the air rights could be worth as much as $200 million in the downtown real estate market. And, he said, the company that gets the station redevelopment contract would have a tremendous advantage in acquiring them without their ever being put out for tender.
McIlwain happens to be something of an authority on the subject of Union Station and its diesel-scented atmospheric properties. Back in 1997, the old, pre-amalgamation city of Toronto hired the respected real estate expert to negotiate a fair price for the terminal's air rights with another company that wanted access to them. That company was Maple Leaf Gardens Ltd., and one of its key reps sitting across the table from McIlwain was Larry Tanenbaum. He and his hockey partners wanted to build a new Maple Leaf Gardens behind the station and use its historic hall as a grand entrance to the $300-million ice rink. They also had a vision of two office towers on the site.
But a deal couldn't be worked out for the much-coveted real estate. The city wanted $124 million and MLG offered $34 million. The city came down to $50 million plus a 50-per-cent share of future revenues on the office towers, and the hockey honchos told council to stuff it.
But it seems Tanenbaum's interest in the air rights didn't go away. "They're the key factor in this latest redevelopment proposal," says councillor Michael Walker. "All the rest of it is window dressing."
Unfortunately, the process that was used to select UP Group for the project has been so shrouded in secrecy that no one's sure what's really at stake when the contract comes up for council's approval next week. And the report presented to the administration committee was so devoid of financial details, it was rendered almost useless.
"It's terrible," Walker said. "We're in an autocracy here. You've got the mayor and his minions, plus his staff and some senior bureaucrats, who know what's going on. But nobody else. And you're not allowed to ask, because it's confidential and it might jeopardize the deal. But I say, if it can't withstand public scrutiny it's a bad deal."
Walker has concerns about Dale Lastman's close relationship with Tanenbaum and KVM. "If they (Tanenbaum and KVM) have been involved from the beginning, I would think the mayor should have obtained legal advice,' the councillor said. "The question will have to be asked: Does the mayor have a conflict of interest?'
Other councillors privately concur.
"If you've got a conflict, your staff shouldn't be walking around talking up a project," said one ward rep very familiar with the Union Station issue. "The mayor's staff has been in on the closed-door meetings."
Added another politician: "This is exactly the kind of thing that Mel always declares a conflict in when his son has a potential financial interest in something that comes before council.'
Lastman was unavailable for comment on the matter when NOW contacted his office earlier this week.
In the meantime, the damage control campaign is going full bore. Backgrounders have been drafted to explain to councillors everything from the Union Station redevelopment concept and the RFP (request for proposals) process to additional density (air rights) considerations and McIlwain's "allegation of irregularities."
According to one brief, "The city recognized that because of its location, there would be interest in the creation of additional development at the station" and invited the bidders to submit "additional density concepts." But, the report added, "air rights do not exist at this time and so cannot be included as part of the development proposal."
It's highly unlikely that statement is going to quiet the critics who insist the Union Station renovation is simply a foot-in-the-door project.
Councillor Brian Ashton, an administration committee member, suggests the city should take air rights completely off the table before inviting both UP Group and LP Heritage to make a public presentation of their plans to council. Only then should a final choice of developer be made.
"We don't have to rush into this," Ashton maintains. "It's taken us this long to get to the stage we're at now, and we should make sure the next steps are as open as possible and represent the best deal for the city."
Unfortunately, a very similar suggestion by councillor Rob Ford was shot down by a 4-3 vote of the administration committee. "I do not want to go down the road of uncertainty, of people thinking there's something fishy going on," Ford said then. "Right now, I'm very uneasy."
Can't say as I blame him.