CITY OF ORILLIA

TO: FROM: DATE: REPORT NO: SUBJECT: Council December 9, 2013 Staff Working Group November 26, 2013 SWG-2013-2 Tribal Partners Development Proposal

Recommendation Motion THAT this report be received as information; AND THAT Tribal Partners be forwarded a copy of the report. Executive Summary On November 19, 2013, Tribal Partners (Tribal) made a deputation to Council, regarding their development proposal for 174 West Street South. Council passed the following resolutions: 1. THAT the deputation by Tribal Partners regarding their development presentation for 174 West Street South, be received and forwarded to staff and the City Solicitor for review and comment and to report back to the December 9, 2013 Council meeting. 2. THAT Council direct staff and the City's architects and engineers to be cooperative, on a timely basis, in providing Tribal Partners Inc. with available information on request, except that which is confidential in accordance with the Municipal Act, to allow Tribal Partners Inc. to develop plans for a comparable recreation facility as a component of the redevelopment of 174 West Street South and that all costs associated be borne by Tribal Partners Inc.; AND THAT Council convene a Special Council meeting in late January or early February at a time convenient to the City and Tribal Partners Inc. to consider a detailed business case for the re-development of 174 West Street South. A staff working group was established to develop this report. The team is comprised of: Roman Martiuk, CAO Gayle Jackson, Deputy CAO/City Clerk Bob Ripley, CFO Ian Sugden, Director of Development Services Ray Merkley, Director of Parks, Recreation and Culture Kent Guptill, Director of Facilities and Special Projects Lori Koughan, Manager of Special Projects George Bowa, Director of Public Works Andrew Schell, Director of Environmental Services
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As Council is interested in entertaining the business case that will be presented in January 2014, staff have focused their comments as follows: Identify key issues/implications Identify options Identify key questions that Tribal should address in their business case

The purpose of this report is not to examine the economic development, job creation or other benefits of the proposal. These aspects are expected to be outlined in the business case. This report focuses on the process, risks and protection of the City. The report contains the following components: 1. 2. 3. 4. 5. 6. 7. 8. 9. Timeline (Section 1.0) Page 3 Sole Sourcing (Section 2.0) Page 6 P3 Best Practice (Section 3.0) Page 10 Risk (Section 4.0) Page 15 Environmental (Section 5.0) Page 18 Consulting Support (Section 6.0) Page 19 Development & Public Works Matters (Section 7.0) Page 20 Council Process (Section 8.0) Page 21 Financial Impact (Section 9.0) Page 22

Key questions that Tribal will need to address in their business case are listed at the end of each section. A summary of key questions and key issues are also contained in Schedules C and D respectively. The schedules contain supporting material:

Schedule A P3 vs Conventional Projects Page 25 Schedule B Development & Public Works Matters Page 27 Schedule C Summary of Key Questions Page 33 Schedule D Summary of Key Issues Page 37

Prepared by and Key Contact:

Roman Martiuk

Digitally signed by Roman Martiuk DN: cn=Roman Martiuk, o=City of Orillia, ou=CAO, email=rmartiuk@orillia.ca, c=CA Date: 2013.12.04 09:08:56 -05'00'

_____________________________ Roman Martiuk, Chief Administrative Officer on behalf of the Staff Working Group.

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1.0

Timeline

Key Facts The proposed vendor timeline suggests construction to commence in May 2014. In order to meet that timeline a number of activities/events would need to have happened as follows: Event/Activity Council approval and finalization of a contract(s)/legal agreement(s) Issue The proposal assumes a very quick decision making and contract(s)/agreement(s) preparation period. Given the large size of the expenditure, external review and detailed contract preparation/negotiation is required. Implications Based on our research, the City may need to curtail normal due diligence or accept a later start date.

Award of Design Build construction contract

The proposed timeline does not include an interval to develop a design build specification and then take that specification to the market place. Such a process would take months to complete prior to beginning design.

The proposal requires significant sole sourcing as described in the sole sourcing section of this report (Section 2.0).

Award of senior level government funding

In part, the proposal is based on attracting senior levels of government funding. At the present time staff are unaware of any brownfield funding. PPP Canada has an application intake scheduled for June 2014 followed by a review period of typically of 23 months and 9-12 months to develop a business case. Senior government programs seldom provide funding to projects that have already commenced.

Given the time required to secure this funding, it is unlikely firm funding will be in place for Council consideration of the business case. The business case should speak to the financial obligations of the parties should the funding not materialize.

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Environmental

Tribal have indicated that they will do whatever is required to deal with environmental matters. The Citys Real Estate Policies require environmental investigation prior to the purchase of lands. Long term leases carry similar risks. As a result an investigation should occur even if the deal is structured as a lease.

If remediation of the site is required, the appropriate time to conduct an environmental investigation is during and following clean-up. This step may require some time to complete. The acceptability of the site may not be known at the time of proposal.

Geotechnical Suitability

255 West Street South has poor geotechnical properties. In order to construct foundations, surcharging the lands was required. This process required many months to complete. Will this adjacent site have the same geotechnical issues? The Citys Real Estate Policy requires an independent verification of geotechnical suitability prior to purchase.

The business case should verify the structural suitability of the site and its impact on cost and timing.

Options and Analysis Based on the foregoing, the timeline proposed by Tribal appears to be optimistic. The proponent has clearly indicated that they will match the timing of the 228/230 James Street East project. Council should put its mind to the importance of hitting this deadline. The Tribal proposal is complex and has only been actively pursued for a short period of time. Should Council believe the project has merit, it is recommended that Council entertain schedules that allow due process to be undertaken. Council should note the lame duck provisions of the Municipal Act become effective on nomination day. This year nomination day is September 12, 2014. After nomination day, Council may be precluded from entering into contracts exceeding $50,000. Key Issue:

Timeline

Council should put its mind to the timetable. Is a longer timetable that would allow due diligence acceptable?

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Key Questions: Construction, process and timing questions that Tribal will need to address: 1) The design and construction schedule states that the design build preliminary design, cost estimating and value engineering began November 11, 2013. Is this correct? Will Council approve all value engineering options, the design and costing? What value engineering has taken place so far? Tribals schedule indicates that design is currently proceeding without a legal agreement with the City. Is this correct? Will the design, estimating and value engineering work proceed without an agreement with the City? Will construction begin without an agreement with the City? Has the geotechnical suitability of the site been established? When will this occur? What is the anticipated timing and triggers for future phases to proceed? Will the proposal include time to comply with the site plan and other regulatory requirements? Have Ministry of Environment approvals been incorporated within the timeline? The proponent has indicated that the environmental condition of the site will be addressed. Should remediation be required, when is that expected to occur? Will the City be asked to enter into an agreement before the site is remediated? Who will be responsible for expenditures should the cost to clean up be higher than expected or the site proves unsuitable for this project? Will Tribal indemnify the City? The proposed parking area is to be constructed on an old landfill. How will this old landfill be cleaned up or is the waste to remain in place and how will this affect the timeline? Has the proponent verified that the project is eligible for proposed senior government funding with final approvals expected prior to the start of construction or has the funder agreed to fund a project where construction has commenced?

2)

3)

4) 5)

6) 7)

8)

9)

10) Will the schedule allow consultation with user groups? 11) Will the timeline provide Council or a committee of Council to have oversight of the project? Will key decisions be brought to Council for approval? On the following page is the status of the 228/230 James Street East project, compared with Tribals proposal.

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City of Orillia Facilities Department November 26 2013 Tribal Orillia Proposal Review Task Geotechnical Report Traffic Study Service Verification Program Verification Mechanical Brief Electrical Brief User Group input and review of Floor Plans Operational Review Room by Room Working Group input and review of Schematic Design Working Group Review of Design Development Schematic Design Budget Review (Two separate reviews) Council review and approval of Schematic Design Report Council review and approval of Design Development Report Floor Plans- Basement, Ground and Second Exterior Material Review Interior Material Selection Review Room by Room Operational Review 228/230 James Street East Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Complete Tribal Orillia Proposal TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD TBD

2.0

Sole Sourcing

Key Facts Numerous purchasing policies for organizations are available on the internet outlining when sole sourcing is appropriate. These policies are consistent with the Government of Canadas approach. The Standing Committee on Public Accounts Report of 1998 outlines the issue: INTRODUCTION As Canadas largest corporate entity, the federal government spends significant amounts of money on contracts for professional services from outside suppliers. In 1995, for example, the government spent approximately $4.4 billion for this purpose. The government pays for these services from public funds and the contracts contribute to the overall mix of goods and services that the government provides to Canadians. Seen from this perspective, it is essential that the government obtain the best services at the best cost. For potential suppliers of services, government contracts represent an important source of income as well as an opportunity to demonstrate and improve their capabilities. There are additional benefits as well that flow to the communities in which suppliers are located. Viewed from this perspective, the importance of making sure that all potential suppliers have fair and open access to government contracts becomes plainly evident. The needs of the various parties to contracts are recognized in the governments policies that clearly specify that all contracts must be --- except in certain tightly defined circumstances --- open to competitive bidding. Through reliance on competition among suppliers government satisfies two indispensable principles -- that of best value and open access OBSERVATIONS AND RECOMMENDATIONS Government policy regarding the letting of sole-source contracts is a clear indication that the principles of best value and open access are paramount and that this form of contracting must be the exception rather than the rule. This policy is expressed in the Government Contract Regulations and in the Treasury Board Secretariats Contracting Policy, which establish the four exceptions under which competitive bidding can be set aside in favour of sole sourcing. Thus, according to regulation, departments can only sole source a contract when: 1. 2. 3. 4. there is a pressing emergency; the contract is valued at less than $25,000; it is not in the public interest to solicit bids; or only one person (firm) is capable of performing the work.

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These four circumstances provide the only exceptions under which contracts may be sole-sourced. When these exceptions prompt a decision to sole-source, policy requires that there be a full justification. In previous reviews, both the Auditor General and the House of Commons Standing Committee on Government Operations reached the conclusion that these exceptions and the other regulations surrounding contracting are sound The Parliamentary Committees report sums up the issues at stake with sole sourcing. The next section examines the Tribal presentation from the sole sourcing perspective. Options and Analysis Sole sourcing of municipal, provincial or federal contracts is a matter for which all levels of governments are criticized. Although Council has the power to sole source, it is done as an exception. The lack of competition removes a fundamental check and balance from the system. Without competition, the City is not assured best value. Members of Council and senior staff have a fiduciary responsibility to ensure value for money. As a result decisions to sole source should not be taken lightly. There are two areas of sole sourcing contained within the proposal, namely: 1) Development Company/Project Management Tribal advanced Dallas Omni Hotel as an example of their work. In reviewing the Dallas contract, it is clear the business relationship in Dallas was a fee for service. Although many companies could provide this service for Orillia, the proposal assigns this project to Tribal Partners without competition. In Dallas, the fee was 2.58 percent of the project. It should be noted that the Dallas contract was entered into following a competitive process. It would be difficult to structure a competitive process on the 174 West Street South site. The lands are not owned by the City and are subject to an agreement of purchase and sale with the proponent. Should Council not wish to return to square one on this project, Council should recognise that the proposed path could result in a sole sourced development contract with fees that could be in the $1 million range based on the Dallas example. Given the lack of competition, it may be difficult to drive a hard bargain or assure ourselves the fee is appropriate. However, there is some rational to deal with this firm exclusively as they have rights to the property of interest to the City. Should the fee be payable on the private sector portions of the property, the fee could be significantly larger. 2) Design Build Contract In order to meet the timelines the proponent is advocating a design build method. A proper design build procurement involves developing a detailed specification and then having a number of design build teams compete to provide the best value for the price. Although the proposal indicates Tribal will start a competitive process to select a general contractor this process would occur in the absence of a design build specification or price and hence, is simply the selection of a contractor that would eventually receive a sole sourced contract. Once the scope

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of work/specification is established, the City would then be asked to enter into a contract without competition. The primary driver appears to be timing. In order to shorten the timeline, the process does not include a proper design build competitive process. Should Council wish to proceed with the Tribal proposal, the City should not be considering sole sourcing the $28-$30 million construction contract just to match a timeline. With respect to the fire station project, there were significant differences in the proposals and by going through the proposal process there was assurance that the City was receiving value for money. In addition, a contract now exists that spells out in detail what is being provided for at what cost. Even though it will delay the project, the City should insist that the construction contract be subject to competition. The fire station project budget was $6 million and took 3 months to develop a specification and 6 months to administer the selection process. Although the work of MJM Architects can be used to develop the design build specification, it is unlikely a competitive process could be completed in time for a May 2014 construction start. In order to problem solve this issue the following options are considered: Issue Conduct a fully competitive process on 174 West Street South or some other site Discussion If the guidelines of the federal P3 program were followed the process would take on average 16 months to enter into a contract with a P3 proponent. The City could seek to acquire 174 West Street South or another parcel for a competitive P3 project. This would involve entering into an agreement as proposed except that the construction contract would not be sole sourced. Although the development agreement would be a large untendered contract it would be far smaller than an untendered $35 million project. Implications This would delay the project to the next term of Council. If this were the desired route, it would be appropriate to delay the project and let the next Council determine if this route is of interest.

Sole source the development agreement. Require the construction contract be subject to competition

There would be some delay to the project to undertake a competitive design build RFP.

Based on the foregoing, sole sourcing is not recommended. Although the recreation file is long overdue and Council may feel some urgency to proceed, it does not meet the test of an emergency.

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Key Issue:

Sole Sourcing

Does the Tribal proposal include a design build process where a specification is developed and competitively bid?

Key Questions: 1) Will the proposal include a competitive bid design build construction contract? 2) How will Tribal earn its return? How will the City satisfy itself the fees paid to Tribal are fair? 3) The relocation of the Citys recreational facility to 174 West Street South provides a major benefit to the developer. How will the developer compensate the City? How will the City determine the compensation is sufficient?

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3.0

P3 Best Practices

The proposal includes the following statement: Tribal Partners believes this proposal, utilizing a public, private, partnership structure, is the most cost efficient and effective solution for simultaneously addressing, a significant number of outstanding recreation and economic development needs in the city. This section discusses public private partnerships. Key Facts What is a P3?

PublicPrivate Partnerships (P3s) are a long-term performance based approach to procuring public infrastructure. The private sector assumes a major share of the risks in terms of financing and construction and ensuring effective performance of the infrastructure, from design and planning, to long-term maintenance. A P3 works like renting-to-own, rather than paying cash up front. At the end of the day, governments pay more due to the transfer of risk, but if something goes wrong with the asset, someone else is responsible.

In practical terms, this means that: Governments do not pay for the asset until it is built; A substantial portion of the cost is paid over the life of the asset - only if it is properly maintained and performs according to specifications; The costs are known upfront and span the life-cycle of the asset, meaning that taxpayers are not on the financial hook for cost overruns, delays or any performance issues over the assets life.

There are various P3 models. But in most cases, teams typically made up of a contractor, an architect, a lender and sometimes an operator bid on a project. The winning group puts up the money, takes on the construction risks and then gets repaid when the project is done. Sometimes, the consortium also operates a facility under a long-term contract, getting repaid in instalments over several years. A P3 can be as simple as a design (D) build (B) project. More complex P3s will add financing (F), and perhaps long term operating (O) and maintenance (M). Common recreational P3s are typically where the private sector designs, builds, finances, operates and maintains the asset (DBFOM). These P3s tend to be a much larger scale than the Citys project.

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Financial Reporting Historically one of the reasons to pursue a P3 was to move debt off the books by way of private sector financing. Municipal debt is amongst the highest quality and typically commands borrowing rates far lower than what the private sector can offer. Even though debt is incurred by others, the City would still be ultimately responsible for this debt through lease payments. Since 2009 municipalities in Ontario have been required to record tangible capital assets on their financial statements. Long-term leases of tangible capital assets must be recorded as if the municipality had made a purchase. Because the asset is recorded, so too must the offsetting liability, recorded as debt. According to Grant Thornton, the asset and the liability get recorded at the present value of future minimum lease payments. The value recorded is the fair market value of the asset. The conclusion is that lease financing does not remove the debt from the Citys books.

How Do P3s Work? According to the PPP Canada website: P3s are a long-term performance-based approach for procuring public infrastructure. The private sector assumes a major share of the responsibility in terms of risk and financing for the delivery and the performance of the infrastructure, from design structural planning to long term maintenance. The objective of PPP Canada is to promote the delivery of municipal infrastructure via the private sector. This is done by engaging the private sector in a procurement process that transfers risk and responsibility to the private sector. PPP Canada describes effective P3s as arrangements where most of the risk is transferred to the private sector. In a Guide for Municipalities, PPP Canada indicates: In a properly structured PPP, private sector capital is at risk. A project must not transfer the ultimate responsibility for risk back to the municipal government - financing must not be non- or partial recourse. Staff contacted PPP Canada, an agency of the federal government that promotes, supports and provides 2 5 % funding to eligible projects to facilitate P3 projects within Canada. PPP Canada indicates: 1) Sole sourcing is not allowed under the program.

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2) Although recreation projects were entertained in the past, the current focus is hard infrastructure projects. 3) PPP Canada does not do office towers unless it is a public building like a City Hall. 4) PPP Canada does not entertain medical related projects as they are a provincial responsibility. 5) P3s have some significant fixed cost, such that a minimum $100 million is a good rule of thumb. 6) 2009 to 2011: Average project size was $556 million. Given the lack of competition in the proposal, it is not compliant with the approach outlined by PPP Canada and is not be eligible for funding. The Director of Project Development for PPP Canada indicated the following with respect to timing: I would suggest the following: 1. Project Planning - 2 to 4 months 2. P3 Business Case - 9 to 12 months 3. Procurement Doc Prep - 6 months 4. Procurement 9 to 12 months to Financial Close. The process can go quicker but this is what I usually witness.

Based on PPP Canadas advice, undertaking a proper P3 procurement takes a

considerable amount of time. This advice is consistent with advice previously provided Council by Grant Thornton and Ellis Don. For a comparison of P3 vs Conventional Projects, please see Schedule A. Why do P3s take so long to set up? In order to ensure the City gets value for this expenditure, a very clear picture is needed to ensure both sides understand what is being provided for the dollars paid. Given the proposed developments will occur in phases, the agreements should clearly outline what happens should some of the proposal not be implemented. As a result the drafting of partnership agreements can be a large undertaking. The competitive process contributes to the time required.

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If competition is waived the process could be expedited. However, the need to have a very detailed understanding of what is included within the deal and what is an extra need to be understood.

London Case Study PPP Canada identifies a number of successful P3s. London recently opened a new arena and sportsplex. The project is larger than Orillias and is structured as design (D) build (B) financing (F) and long term operating (O) and maintenance (M) project. The City was not able to obtain copies of the agreements as they are considered confidential. However, there are 55 agreements, leases and assignments required as well as 13 letters of opinion. KPMG May 2010 in a review of Australian PPP The average procurement time for social infrastructure of 17 months is significantly shorter than that in the UK (34 months) and only slightly longer than that in Canada (16 months). All of the foregoing examples are advanced to support the notion that drafting the required agreements may be a significant undertaking. Options and Analysis Although it is unclear at what the details of the proposal are, it appears to be a partnership to provide recreational facilities, a wellness center and an OPP detachment. Under a P3, a municipality would define its requirements and then seek proposals to deliver on those requirements via a competitive process. Although an office tower and its jobs would be welcome, it is not municipal infrastructure. While the City might welcome revenue sharing in exchange for locating on this site, proposals that require the City to partner, guarantee or backstop the private sector elements of this proposal adds to the Citys risks and adds greatly to the complexity of the deal. Council should put its mind to the appropriate role of government and whether it should be expanded. In order to problem solve this issue, the following option is considered: Issue Complexity Discussion Untangle the proposal by seeking the transfer of land. The City would then construct on that land. Under this scenario the developer would donate, sell or swap the City 10 or more acres of clean land. The City is able to evaluate the transaction and proceed to construct the facility. Implications The project would still serve as a catalyst for the development. The project would be delayed to accommodate real estate due diligence and competitive construction contract tendering. Although the City could transfer some of the 228/230 James Street East design, redesign would be required.

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Key Issues: Form of Proposal Complexity Would Council be agreeable to a donation, purchase or swap of lands rather than a more complex public private partnership? A public private partnership adds complexity to the agreements. Although revenue sharing could be part of the proposal to entice the City to locate at the site, will Tribal entertain proposals where Tribal acts as developer and the City is not required to finance, guarantee or otherwise take on the risks associated with the non-recreational elements of the project? Should the City become a partner in land development? Should the City enter into a partnership to provide office space in competition with the private sector?

Role of the City

Key Questions: A proposal that brings the City in as a partner in land development has a number of policy challenges: 1) Should the City become a partner in land development? 2) Rather than transferring risk to the private sector, the proposal may be transferring private sector risk to the City. Should the office tower portion of the project run into difficulties the private sector may have limited liability while the City through its ability to tax has virtually unlimited liability. Should the City take on any private sector risk? 3) Would the City as partner developer be viewed as competing unfairly with existing business in the provision of office space? 4) Depending on the nature of the arrangement would the City be viewed as operating contrary to the Municipal Acts bonusing provisions through its participation or financial guarantees?

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4.0

Risk

The proposal may expose the City to significant risk. It is important to understand the associated risks and how the parties would take responsibility should portions of the business plan not come to fruition. Risk Experience Discussion City staff have limited experience in negotiating agreements of this type. As a result, risk exists that the agreements may not fully protect the City. Mitigation Methods Hire external consultants and lawyers to support review, evaluation and agreement preparation. Agreements can become very Work to simplify the complicated and lengthy. London proposal as much Ontarios Downtown Entertainment and as possible. Sports Complex has 55 agreements, leases and assignments as well and 13 letters of opinion. The more complex the project is the more likely that matters will be missed. Every project has the potential for Undertake default. Although municipalities have comprehensive the strength of their tax base evaluation of the financial guaranteeing their actions, care must capacity and track record be taken to ensure the private sector of the proponents. What partners have financial capacity, equity, performance capability, experience, resources and bonds, letters of credit or track record to deliver on their other financial obligations. instruments will the proponents provide to guarantee performance? The proposal envisions revenue sharing and new tax assessment. Should it not be realized, who bears the loss? Careful analysis of the business plan is required to identify risks and rewards and distinguish between matters that are guaranteed by the parties and matters that are speculative. Careful analysis of the business plan is required to identify these costs, financing sources and liability for overrun.

Complexity

Default

Development Risk

Environmental Risk

Tribal has indicated they will do whatever it takes to deal with environmental matters. How is this guarantee actually paid for?

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Asset Longevity

Under the design build method the design build team has an incentive to specify solutions with the lowest initial costs. These solutions may result in more frequent asset replacement and/or higher maintenance and operating costs. The proposal may provide the City with more assets than originally contemplated. A 50 metre pool instead of a 25 metre for example. A more aggressive building program can create significantly larger operating costs. While the business case may predict even higher revenues, the risk exists that these revenues will not be achieved. The 255 West Street South project saw community members litigate to prevent construction on that site. Members of the public may choose the same course with this site.

A detailed design build specification allows the City to clearly define requirements.

Operational Risk

The business case will need to be critically analyzed to ensure the revenue and costs projection are reasonable.

Public Intervention

The City should deal with the environmental issues in an open and transparent fashion.

Construction Risk Anytime the City enters into a construction contract, the City can be drawn into disputes between the contractor and subcontractors.

Detailed agreements would mitigate this risk.

Environmental Liability

As an owner the City could share in or be required to defend claims that the 174 West Street South property has impacted neighboring properties.

An environmental review will allow the City to quantify this risk.

Based on the foregoing, hiring appropriate experts, developing detailed agreements and reducing the complexity of the proposal is recommended. Key Issue: Risk The proposal carries risk. The City should ensure steps are taken to mitigate these risks.

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Key Questions: 1) How will the proposal assign risk? a. Remediation costs? b. Construction costs? c. Other matters not contemplated? d. Office tower and OPP Detachment: i. Tenant/vacancy risk? Who bears this risk? ii. Construction risk? Who bears this risk? 2) If the Citys portion is constructed first, how does the City ensure that future phases will occur? a. Will the business case factor in benefits from future phases? How will the risk of future phases not proceeding be factored in to the business case? Who bears that risk? b. Should future phases not proceed, who would be liable for any development or clean-up costs that would have been shared? 3) Does the proposal meet PPP Canadas objective in transferring risk to the private sector? 4) How does the proposal guarantee performance of the vendor? What equity, performance bonds, letters of credit or other financial instruments will the proponents provide to guarantee performance? 5) Has Tribal demonstrated that they have financial capacity, capability, experience, resources and track record to deliver on their obligations? a. Do the Principals of Tribal (who have appeared before Council advocating this project): i. Have experience with this type of project? ii. Have experience building pools and gymnasiums? b. Do their partners: i. Have experience with this type of project? ii. Have experience building pools and gymnasiums? 6) Will Tribal indemnify the City for environmental risk?

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5.0

Environmental

The City is bound by a confidentiality agreement with FLSmidth with respect to the environmental condition of 174 West Street South, arising from investigations related to a proposed 2011 real estate transaction (note: the City is able to discuss environmental matters already in the public domain). The City has requested a Release from FLSmidth. FLSmidth has not provided a Release. Consequently, the City is not able to fully discuss the environmental condition of this site in open session. A separate confidential report has been prepared in conjunction with this report. In order to be able to discuss the site with the proponent and the community, the Release of this undertaking should be a precondition of looking at the business case. Key Issue: Environmental Disclosure Is Council prepared to entertain a proposal where it is unable to fully discuss publically the environmental condition of the site due to a confidentiality undertaking?

Key Questions: Environmental questions that Tribal will need to address: 1. Will they be relying upon the current Records of Site Conditions filed for the property for the development? If so, has confirmation been received from the MOE that they will agree to the change in land use based on the current Records of Site Condition? Does Tribal intend to do their own environmental due diligence or is the intent to rely upon the current Records of Site Condition for the property? Based on the wells that exceed MOE standards both north and south of 174 West Street South, will Tribal be testing the property for VOC contamination at depth? How will Tribal address the potential for horizontal migration of methane gas from the former landfill area if that area is capped with a hard paved surface? What measures will Tribal undertake to ensure the appropriate environmental measures are put in place to ensure protection to the public and site users in the future? What testing will Tribal do to confirm the geotechnical soil condition and how it will be addressed?

2.

3.

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6.0

Consultant Support

In order to deal with the proposal, the following consultants are recommended: P3 Experts PPP Canada recommends the following through one or more firms: Cost consultant Risk adviser Design consultant Technical adviser Financial adviser Legal adviser Fairness monitor The Municipal Act requires a 3rd party review of lease agreements. The City solicitor advises his firm does not have the expertise to undertake the review and negotiation of P3 agreements. The City will wish to satisfy itself that the proposed environmental works sufficiently address the site. Should the proposal transfer lands to the City an appraisal is required. Although design build is being suggested, the City should retain experts to review the work of the design build team and ensure the project meets specifications. It may be appropriate to examine the Orillia rental market and determine the impact of the proposed development.

Financial Consultant

Legal Team

Environmental Consultants

Real Estate Appraiser

Architect/Design team

Market Analyst

Key Issue: Consulting Support In order to comprehensively evaluate the proposal, significant expenditures for outside professionals will be required. Council should consider authorizing the procurement process to proceed at an early date.

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7.0

Development & Public Works Matters

There are a number of development and public works matters that will need to be addressed with respect to Tribals proposal, including: Lot Fabric Issue Official Plan Conformity Official Plan Policy/Zoning Compliance - Proposed Building Height Issue Official Plan Policies Urban Design Issues Official Plan Policy Complete Application Issue Zoning Compliance - Parking Issue Environmental Issues Downtown Tomorrow Plan Issues Public Works Department Issues Traffic Impact Transit Routing Impact

These potential issues are explored in detail in Schedule B. Key Issue: Zoning By-law Regulations Despite any City or senior level of government involvement in the proposed public private partnership development project as put forward by Tribal, the project would be required to comply with all applicable Zoning By-law regulations in order to allow for Building Permit issuance. In the event that a Zoning By-law Amendment is required to obtain relief from any regulation, the project would need to conform to all applicable Official Plan policies.

Key Question: 1) What Community Benefits will Tribal provide to satisfy the density bonusing policies of the Official Plan, in order to obtain the additional building height suggested in their proposal?

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8.0

Council Process

Moving forward with respect to the Tribal proposal, Council will have to consider decisions already made to date and the implications of altering those decisions Key Facts: Council has passed a series of motions with respect to the recreation file Through these motions Council has approved 228/230 James Street East as the site for the Aquatics/Gymnasium Centre Staff are actively working at implementing Councils decisions. The City has entered into a legal agreement with MJM Architects Cancelling this contract will have a financial impact.

Key Issue: Reconsideration If Council is wishing to proceed with the Tribal Proposal, Council will need to turn its mind to the Citys Procedure By-law, specifically the reconsideration section of the by-law. Council should be mindful of the fact that, as per Roberts Rules of Order, any motions passed by Council which are contradictory to motions already passed could be deemed null and void.

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9.0

Financial Impact

The Citys Major Capital Facility Plan currently carries $35 million for this project. The project is budgeted as follows: Budget (millions) 228/230 James St. site Land Acquisition Demolition Prior Expenditures Budget Spent to date

$1.1 $0.1

Design and other soft costs Design Other

$2.0 $1.6

$0.4 $0.1

Construction

$28.1

$0

Contingency

$3.3

$0

Total

$1.2

$35.0

$0.5

The following outlines the previous approvals: Category Acquisition Project # 09628 Approval Budget date 2009 $1,124,000 mid-year Actual spent $1,123,591 Reserve Notes funding Land Mid-year Acquisition approval no formal budget was set Land Acquisition Major Capital Facilities

Demolition Design (to date)

07181 07180

2013 2012 mid-year

$347,000 $500,000

$144,589 $359,367

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At the present time, the City has expended $359,000 on architect fees, not including work performed that has yet to be billed. As the architect is in the design process, the City is incurring approximately $50,000 per week. By April 2014 design costs are expected to exceed $1.2 million. The City has a contract with the MJM Architects. The City is able to cancel the contract subject to penalty. The current penalty would be in the $200,000 range.

Key Questions: 1) What payments are expected by the City? 2) When are payments required? 3) How are cost overruns handled? 4) What occurs if grants, fundraising and sponsorships are not received? 5) Will the developer pay all fees or is there an expectation that the City will waive fees?

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Conclusion The purpose of this report is to: Identify key issues/implications Identify options Identify key questions that Tribal should address in their business case This report raises numerous questions that may be of assistance to Tribal Partners in developing their business case.

Schedule A P3 vs Conventional Projects Page 25 Schedule B Development & Public Works Matters Page 27 Schedule C Summary of Key Questions Page 33 Schedule D Summary of Key Issues Page 37

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Schedule A P3 vs Conventional Projects Source: PPP Canada P3 projects Integration of two or more phases of a project from design and build through to a concession period, which can include providing the facilities maintenance services or even the core services that rely on the use of the newly built facility. This feature means that P3 contracts are usually long-term contracts covering a large part of the economic useful life of the asset, which may exceed 30 years. Conventional projects Each phase procured separately through a succession of separate contracts. Facility design is completed before tendering of the construction phase, which is often accomplished through multiple contracts awarded to multiple contractors for separate pieces of work. This conventional approach is also known as design-bidbuild. Once the new facility has been built, facilities maintenance services and other aspects of operations are delivered through contracts that are separate from the design and build contracts. Conventional construction contracts usually take the form of stipulated price contracts,3 or construction management contracts, where an engineering firm is hired to manage the successive contract phases, including the procurement for each phase. Input-based contracts, in which the public sector owner specifies the exact inputs required for the facility. In some cases, input-based contract provisions may be appropriate either because it is not possible to specify outputs that capture the contractors performance in a satisfactory manner, or because the potential benefits from specifying such outputs may not justify the effort required to develop, monitor, and enforce them.

Output-based contracts, in which the deliverables are specified in terms of the outputs required, leaving the private sector partner to put forward the best solution for meeting the output specifications. Outputbased specifications are particularly important for the operational phase of the contracts (i.e., after the facility opens for public use), but they are also used for the design and construction phases, where the public sector owner specifies the functional requirements for the facilities to be procured. Payment upon delivery, whereby the private firm is paid only for defined assets or services once construction has been completed. 1 When this feature is combined with output-based specifications, the result is a performance-based contract.

Monthly payments to contractors based on the percentage of the contract work completed. Up to 90 per cent of the stipulated contract price may be paid in monthly payments. Note: Payment on a percentage completion basis is not the same as payment initiated upon final delivery of the project.

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Private financing, in which a substantial share of the project is financed through project-specific equity and debt. The private financing is usually provided on a non-recourse basis2, with the equity provided by the consortium partners making up less than 20 per cent of the project financing. Third-party debt, bank loans, and contributions from governments provide the remaining finance requirements. In other words, private working capital is not enough to qualify a project as privately financed; it must have project-specific equity and debt. This kind of private financing is usually available only to projects that are at least $40 million in size, and often much larger. Private sector project stewardship, whereby overall control of project execution is transferred to the private sector partner. The completion of milestones is determined by an independent certifier and overseen by the private sector partner. The public sector owner must step back and allow the P3 consortium and its contractors the freedom to manage each phase of the project in a way that best meets the contractual obligations. However, the public sector owner ultimately retains ownership of the asset, including the right to make changes to the requirements or even to terminate the P3 agreement.

Private financing limited to relatively modest levels of working capital. Because conventional contracts involve regular payments to the contractors, private financing is limited to a modest amount of working capital.

Project stewardship by the public sector or a contract management firm. Overall control of project execution rests with the public sector owner (or a contract management firm acting on behalf of the public sector owner). The public sector owner (or its contract management firm) would typically have engineers on site to supervise and direct the project and to inspect and approve the work at key completion milestones.

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Schedule B Development & Public Works Matters Development Services Department (Planning Division) Issues: Lot Fabric Issue: The property commonly referred to as 174 West Street South (the FLSmidth site) is actually comprised of 4 separately conveyable parcels that were created by Consent (severance) in 1998. As a result of the Consent lot creation, the 4 parcels cannot be developed as a single entity without first voiding the 1998 Consents. The Consents can be voided by altering the lot lines in a manner that makes them different than those that were created in 1998. The proponent can void the Consents by granting road widenings on each of the parcels, or by donating land to the municipality that includes land from each of the four parcels.

Official Plan Conformity: The types of land uses included in Tribal Partners general development concept plan generally conform to the intent of the Official Plan (i.e. the former/existing industrial land uses in the Downtown Area Central Core Intensification Area should eventually cease to exist, and those sites should be the focus of a large portion of the Citys growth through infill and intensification.)

Official Plan Policy / Zoning Compliance - Proposed Building Height Issue: The proponent is proposing a 6 storey Wellness Centre. The existing M3-4 Zone permits a maximum building height of 15 metres (approximately 5 stories). A Building Permit could not be issued for a building that exceeds the maximum height of the existing Zone. Relief from the maximum building height regulation would be required. A Zoning Amendment would be required. Official Plan Policy 3.2.7.4(a)(iii) permits a maximum height of 4 stories (as-ofright), but allows for site-specific exceptions in accordance with the provisions of the Section 37 of the Planning Act (density bonusing), and the satisfactory provision of community benefits.

Section 37 of the Planning Act excerpt:

Increased density, etc., provision by-law 37. (1) The council of a local municipality may, in a by-law passed under section 34, authorize increases in the height and density of development otherwise permitted by the by-law that will be permitted in return for the provision of such facilities, services or matters as are set out in the by-law.

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Condition (2) A by-law shall not contain the provisions mentioned in subsection (1) unless there is an official plan in effect in the local municipality that contains provisions relating to the authorization of increases in height and density of development. Agreements (3) Where an owner of land elects to provide facilities, services or matters in return for an increase in the height or density of development, the municipality may require the owner to enter into one or more agreements with the municipality dealing with the facilities, services or matters. Registration of agreement (4) Any agreement entered into under subsection (3) may be registered against the land to which it applies and the municipality is entitled to enforce the provisions thereof against the owner and, subject to the provisions of the Registry Act and the Land Titles Act, any and all subsequent owners of the land. R.S.O. 1990, c. P.13, s. 37.
Policy 3.2.7.4(a)(iii): iii) Within the area designated 'Central Core Intensification Area' that generally is south of King Street and north of Cochrane Street, and is identified as the 2-4-12 area, as shown on Schedule 'B', the minimum building height, with the exception of smallscale development within or attached to existing buildings, shall be two (2) storeys or equivalent. The maximum building height shall be four (4) storeys. Within this area, a height bonus up to twelve (12) storeys may be considered by the City in exchange for community benefits, subject to the application of the policies of Section 37 of the Planning Act, and the following angular plane provisions: where a new development is abutting a property line within the 'Stable Neighbourhood' designation, angular planes shall be implemented to establish an appropriate interface with abutting lower built forms as a result of stepping back upper floors of the building. Property lines that abut a public road allowance are not subject to the angular plane provisions; and, where a site abuts any property line within the 'Stable Neighbourhood' designation, a 45 degree angular plane shall be established at a point 7.5 metres directly above the abutting property line. Official Plan definition of Community Benefits:
COMMUNITY BENEFITS a) Community Benefits are defined as capital facilities and/or cash contributions toward specific capital facilities provided to the City in exchange for an increase in height and/or density, as permitted by Section 37 of the Planning Act. Community Benefits may include, but are not limited to the following:

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29 i) ii) iii) iv) conservation of heritage resources; provision of child care facilities; provision of public art; provision of other institutional facilities; non-profit arts, cultural, community or

v)

provision of enhanced parkland dedication and/or parkland improvements; provision of streetscape improvements beyond the site; provision of affordable housing; provision of land for municipal and/or community purposes; and, provision of other local improvements identified through Community Improvement Plans, Secondary Plans, Heritage Conservation District Plans.

vi) vii) viii) vix)

Official Plan Policies Urban Design Issues: Based on a review of the Tribal Partners general development concept plan, it appears that there may be components of the overall site design that do not conform with the urban design policies of the Citys Official Plan. Redesign may be required to achieve conformity with Official Plan policies. An Official Plan Amendment may be required if conformity cannot be achieved through redesign.

Official Plan Policy Complete Application Issue: Official Plan Policy 7.1.8 identifies a range of studies that the City may require in support of a complete application (i.e. Zoning Amendment, Official Plan Amendment, Site Plan Approval, Draft Plan of Subdivision/Condominium etc.) Based on the Tribal Partners general development concept plan, it would appear that the following studies may be required: Land Use Planning Report; Master Plan; Context Plan; Phase 1 and 2 Environmental Site Assessment; Stormwater Management Plan; Functional Servicing Plans (Sewer and Water); Traffic Impact Study; Lighting Plan/Photometric Analysis; Flood Impact Study; D4 Assessment Study;

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Comprehensive Development Plan; Geotechnical Soils Study; Fiscal Impact Assessment. Zoning Compliance - Parking Issue: Based on a review of the general development concept plan contained in the Tribal Partners proposal, the proposed recreation centre, wellness centre and O.P.P. Orillia Detachment, would require between 1145 parking spaces, and 1273 parking spaces. Without allowing for aisle spaces, driveways, snow storage areas, and intraparking area landscaping, 1145 parking spaces would require a minimum of 199,666 square feet (18,549 square metres) of asphalt surface (4.58 acres). Without allowing for aisle spaces, driveways, snow storage areas, and intraparking area landscaping, 1273 parking spaces would require a minimum of 221,987 square feet (20,622.60 square metres) of asphalt surface (5.09 acres). Aisle spaces, driveways, snow storage areas, and intra-parking area landscaping typically increase the consumption of land by approximately 35-45% above that which is required for the actual parking spaces. Based on the stated information shown on the Tribal Partners general development concept plan, it is estimated that a parking lot (including all required driveways, aisle spaces, snow storage areas, and intra-parking landscaping) of between 6.2 acres and 7.1 acres in area would be required to provide the necessary number of parking spaces. For illustrative/comparison purposes only, the Orillia Smart Centres site (Walmart, Michaels, Staples, etc.) is 26.32 acres in area, and there are proposed to be a total of 1,687 parking spaces (approximately 1,243 exist today). That parking lot is proposed to be approximately 16 acres in area. The general development concept plan does not show enough detail to ensure compliance with the minimum parking ratio regulations for the proposed uses.

Environmental Issues: The FLSmidth property has a long history of heavy industrial use, and is identified in Ministry of Environment Records as a former waste disposal site (Site No. 4109). The M.O.E. records indicate that Site No. 4109 was used by the City of Orillia as a domestic solid waste diposal site in the 1930s and 1940s, and was closed in the mid 1940s. A review of historic aerial photography shows that the site has been filled over many years. The existing M3-4 Zone includes the following Caution notation:

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Caution It is to be noted that the subject land may be contaminated and that any change in land use or any new building, structure, or building addition may require Environmental Investigation and Remediation. The Environmental Investigation shall be undertaken by a Consulting Engineer qualified to undertake such work, before the change in land use, new building, structure, or building addition takes place. An agreement with the City may be required, in order to ensure that the remediation is completed in an appropriate manner. In order to change the use(s) on the site from the existing industrial use to the proposed community use (recreation facility) and office use, the proponent would need to file a Record of Site Condition with the Ministry of the Environment that is directly relevant to the proposed land uses, and is compliant with the current M.O.E. standards (i.e. post July 2011). In order to pursue the required Zoning Amendment and/or Site Plan Agreement, the proponent would also need to complete an Assessment in accordance with the provisions of the M.O.E.s D-4 Guidelines (as also required by Policy 4.3(e) of the Citys Official Plan).

Downtown Tomorrow Plan Issues: The types of land uses included in Tribal Partners general development concept plan are consistent with the broader goals and objectives of the Downtown Tomorrow Plan (i.e. the proposed recreation facilities and the proposed wellness centre would help to achieve the goal to reinforce the downtown as a civic and institutional hub). The Tribal Partners proposed general development concept plan appears to contribute towards the Plans goal of improving connectivity, insofar as it includes linkages to the Citys recreational trail(s) (thereby satisfying part of Strategic Initiative No. 22 Identify the Downtown Bicycle Network) Tribal Partners proposed general development concept plan does not address Strategic Initiative No. 27 (Establish the Queen Street Greenway) of the Plan.

Public Works Department Issues: Traffic Impact A Traffic Impact Assessment will be required to establish the projected traffic volumes associated with the development proposal. This would address whether the entrances to the site would operate at acceptable levels of service as well as the intersections of West St. and Queen St., West St. and Cochrane St. and West St. and Barrie Rd. Possible improvements such as a need for additional signalization along West St. or additional dedicated turning lanes would be identified. Transit Routing Impact Currently the South Route bus travels along West St. in one direction coming in from the south and travelling to the downtown terminal. From the terminal it proceeds to Front St. and continues southward by way of Gill Street and James Street.
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It is not likely that there will be a need to change this route. Depending on usage and the final site plan, there should be determination of the best location for maintaining a stop directly on West. St.

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Schedule C Summary of Key Questions

1.0

Timeline

Construction, process and timing questions that Tribal will need to address: 1) The design and construction schedule states that the design build preliminary design, cost estimating and value engineering began November 11, 2013. Is this correct? Will Council approve all value engineering options, the design and costing? What value engineering has taken place so far? Tribals schedule indicates that design is currently proceeding without a legal agreement with the City. Is this correct? Will the design, estimating and value engineering work proceed without an agreement with the City? Will construction begin without an agreement with the City? Has the geotechnical suitability of the site been established? When will this occur? What is the anticipated timing and triggers for future phases to proceed? Will the proposal include time to comply with the site plan and other regulatory requirements? Have Ministry of Environment approvals been incorporated within the timeline? The proponent has indicated that the environmental condition of the site will be addressed. Should remediation be required, when is that expected to occur? Will the City be asked to enter into an agreement before the site is remediated? Who will be responsible for expenditures should the cost to clean up be higher than expected or the site proves unsuitable for this project? Will Tribal indemnify the City? The proposed parking area is to be constructed on an old landfill. How will this old landfill be cleaned up or is the waste to remain in place and how will this affect the timeline? Has the proponent verified that the project is eligible for proposed senior government funding with final approvals expected prior to the start of construction or has the funder agreed to fund a project where construction has commenced?

2)

3)

4) 5)

6) 7)

8)

9)

10) Will the schedule allow consultation with user groups? 11) Will the timeline provide Council or a committee of Council to have oversight of the project? Will key decisions be brought to Council for approval?

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2.0

Sole Sourcing 1) Will the proposal include a competitive bid design build construction contract? 2) How will Tribal earn its return? How will the City satisfy itself the fees paid to Tribal are fair? 3) The relocation of the Citys recreational facility to 174 West Street South provides a major benefit to the developer. How will the developer compensate the City? How will the City determine the compensation is sufficient?

3.0

P3 Best Practice

A proposal that brings the City in as a partner in land development has a number of policy challenges: 1) Should the City become a partner in land development? 2) Rather than transferring risk to the private sector, the proposal may be transferring private sector risk to the City. Should the office tower portion of the project run into difficulties the private sector may have limited liability while the City through its ability to tax has virtually unlimited liability. Should the City take on any private sector risk? 3) Would the City as partner developer be viewed as competing unfairly with existing business in the provision of office space? 4) Depending on the nature of the arrangement would the City be viewed as operating contrary to the Municipal Acts bonusing provisions through its participation or financial guarantees? 4.0 Risk 1) How will the proposal assign risk? a. Remediation costs? b. Construction costs? c. Other matters not contemplated? d. Office tower and OPP Detachment: i. Tenant/vacancy risk? Who bears this risk? ii. Construction risk? Who bears this risk? 2) If the Citys portion is constructed first, how does the City ensure that future phases will occur? a. Will the business case factor in benefits from future phases? How will the risk of future phases not proceeding be factored in to the business case? Who bears that risk? b. Should future phases not proceed, who would be liable for any development or clean-up costs that would have been shared?

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3) Does the proposal meet PPP Canadas objective in transferring risk to the private sector? 4) How does the proposal guarantee performance of the vendor? What equity, performance bonds, letters of credit or other financial instruments will the proponents provide to guarantee performance? 5) Has Tribal demonstrated that they have financial capacity, capability, experience, resources and track record to deliver on their obligations? a. Do the Principals of Tribal (who have appeared before Council advocating this project): i. Have experience with this type of project? ii. Have experience building pools and gymnasiums? b. Do their partners: i. Have experience with this type of project? ii. Have experience building pools and gymnasiums? 6) Will Tribal indemnify the City for environmental risk?

5.0

Environmental

Environmental questions that Tribal will need to address: 1) Will they be relying upon the current Records of Site Conditions filed for the property for the development? If so, has confirmation been received from the MOE that they will agree to the change in land use based on the current Records of Site Condition? 2) Does Tribal intend to do their own environmental due diligence or is the intent to rely upon the current Records of Site Condition for the property? 3) Based on the wells that exceed MOE standards both north and south of 174 West Street South, will Tribal be testing the property for VOC contamination at depth? 4) How will Tribal address the potential for horizontal migration of methane gas from the former landfill area if that area is capped with a hard paved surface? 5) What measures will Tribal undertake to ensure the appropriate environmental measures are put in place to ensure protection to the public and site users in the future? 6) What testing will Tribal do to confirm the geotechnical soil condition and how it will be addressed?

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6.0 N/A 7.0

Consulting Support

Development & Public Works Matters 1) What Community Benefits will Tribal provide to satisfy the density bonusing policies of the Official Plan, in order to obtain the additional building height suggested in their proposal?

8.0 N/A 9.0

Council Process

Financial 1) What payments are expected by the City? 2) When are payments required? 3) How are cost overruns handled? 4) What occurs if grants, fundraising and sponsorships are not received? 5) Will the developer pay all fees or is there an expectation that the City will waive fees?

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Schedule D Summary of Key Issues

228/230 James Street East Project At a Special Council meeting held on November 19, 2012, Council adopted the following resolution: THAT, further to the report dated October 31, 2012 from the Director of Parks, Recreation and Culture and the Manager of Special Projects regarding a proposed site for the new recreation facility, the following site be chosen for a new recreation facility: 228 James Street subject to satisfactory environmental and geotechnical assessments. James Street Leisure Centre Project is underway. The Schematic Design Phase of the James Street Leisure Centre Project was completed in October 2013. The Design Development Phase of the James Street Leisure Centre Project was completed in November 2013. $359,000 on architect fees has been spent to date, not including work performed that has yet to be billed. As the architect is in the design process, the City is incurring approximately $50,000 per week Staff are working on the Construction Documents Phase of the project, which involves the preparation of detailed construction drawings and tender documentation. At the end of the Construction Documents Phase, the project can be put out for tender to the pre-qualified contractors that are eligible to bid. The architects will also be proceeding with the site plan approval process, building permit reviews and prequalification of contractors. This phase is scheduled for completion by March, 2014, Anticipated date for tendering the James Street Leisure Centre Project is May 2014, with construction starting June 2014.

174 West Street South Proposal On November 19, 2013, Tribal Partners (Tribal) made a deputation to Council, regarding their development proposal for 174 West Street South. Council passed the following resolutions: 1. THAT the deputation by Tribal Partners regarding their development presentation for 174 West Street South, be received and forwarded to staff and the City Solicitor for review and comment and to report back to the December 9, 2013 Council meeting.

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2. THAT Council direct staff and the City's architects and engineers to be cooperative, on a timely basis, in providing Tribal Partners Inc. with available information on request, except that which is confidential in accordance with the Municipal Act, to allow Tribal Partners Inc. to develop plans for a comparable recreation facility as a component of the redevelopment of 174 West Street South and that all costs associated be borne by Tribal Partners Inc.; AND THAT Council convene a Special Council meeting in late January or early February at a time convenient to the City and Tribal Partners Inc. to consider a detailed business case for the re-development of 174 West Street South. Next steps: Tribal Partners will present their business case for redevelopment of 174 West Street South at a Special Council meeting in January 2014.

Key Issues: In their report back to Council, City staff have identified the following key issues that should be addressed in Tribal Partners business case presented in January 2014 and considered by Council: Timeline o Council should put its mind to the timetable. Is a longer timetable that would allow due diligence acceptable? Sole Sourcing o Does the Tribal proposal include a design build process where a specification is developed and competitively bid? P3 Best Practices o Form of Proposal: Would Council be agreeable to a donation, purchase or swap of lands rather than a more complex public private partnership? o Complexity: A public private partnership adds complexity to the agreements. Although revenue sharing could be part of the proposal to entice the City to locate at the site, will Tribal entertain proposals where Tribal acts as developer and the City is not required to finance, guarantee or otherwise take on the risks associated with the non-recreational elements of the project? o Role of the City: Should the City become a partner in land development? Should the City enter into a partnership to provide office space in competition with the private sector?

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Risk o The proposal carries risk. The City should ensure steps are taken to mitigate these risks. Environmental Disclosure o Is Council prepared to entertain a proposal where it is unable to fully discuss publically the environmental condition of the site due to a confidentiality undertaking? Consulting Support o In order to comprehensively evaluate the proposal, significant expenditures for outside professionals will be required. Council should consider authorizing the procurement process to proceed at an early date. Zoning By-law Regulations: o Despite any City or senior level of government involvement in the proposed public private partnership development project as put forward by Tribal, the project would be required to comply with all applicable Zoning By-law regulations in order to allow for Building Permit issuance. In the event that a Zoning By-law Amendment is required to obtain relief from any regulation, the project would need to conform to all applicable Official Plan policies. Council Process o Reconsideration: If Council is wishing to proceed with the Tribal Proposal, Council will need to turn its mind to the City Procedure By-law, specifically the reconsideration section of the by-law. Council should be mindful of the fact that, as per Roberts Rules of Order, any motions passed by Council which are contradictory to motions already passed could be deemed null and void.

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