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Evaluation of the Federal Government's Participation in the Toronto Waterfront Revitalization Initiative

July 2008

Report Clearance Steps

Planning phase completed - September 2007
Report sent for management response - March 2008
Management response received - May 2008
Report completed - May 2008
Report approved by Departmental Audit and Evaluation Committee - July 2008

Acronyms used in the report

ACOA - Atlantic Canada Opportunities Agency
CA - Contribution Agreement
CATI - Computer Assisted Telephone Interview
CEAA - Canadian Environmental Assessment Act
CIC - Citizenship and Immigration Canada
CSIF - Canada Strategic Infrastructure Fund
EA - Environmental Assessment
FSA - Forward Sortation Area
G&C - Grants and Contributions
GDP - Gross Domestic Product
HRSDC - Human Resources and Skills Development Canada
IGSC - Intergovernmental Steering Committee
LEED - Leadership in Energy and Environmental Design
LRT - Light Rail Transit
O&M - Operations and Management
OEAA - Ontario Environmental Assessment Act
PIR - Public Infrastructure Renewal
RBAF - Risk-Based Audit Framework
RMAF - Results-based Management and Accountability Framework
TBS - Treasury Board Secretariat
TEDCO - Toronto Economic Development Corporation
TRCA - Toronto and Region Conservation Authority
TTC - Toronto Transit Commission
TWRC - Toronto Waterfront Revitalization Corporation
TWRI - Toronto Waterfront Revitalization Initiative
UK - United Kingdom
WED - Western Economic Diversification Canada

Acknowledgments

The Evaluation Project Team of Alexandre Lafrance and Tom Golem under the direction of Francine Bélanger, Director of the federal Toronto Waterfront Revitalization Initiative Secretariat, and Karine Kisilenko, Shelley Tice and William Blois under the direction of the Director of Evaluation, Shelley Borys, would like to thank those individuals who contributed to this project and particularly all interviewees who provided insights and comments crucial to this evaluation.

This evaluation report was prepared by R.A. Malatest & Associates Ltd. for Environment Canada.

Contents

EXECUTIVE SUMMARY

1.0 INTRODUCTION

2.0 BACKGROUND

3.0 EVALUATION DESIGN

4.0 FINDINGS

5.0 CONCLUSIONS

6.0 RECOMMENDATIONS

7.0 MANAGEMENT RESPONSE

Annex 1: Evaluation Issues and Questions
Annex 2: List of Documents Consulted
Annex 3: List of Interviewees
Annex 4: Map of Toronto Waterfront Forward Sortation Areas
Annex 5: Comparison Site Descriptions
Annex 6: TWRI Project Descriptions

EXECUTIVE SUMMARY

This report presents the results of the evaluation on behalf of Environment Canada, of the federal participation in the Toronto Waterfront Revitalization Initiative (TWRI). The evaluation assessed the relevance, design, delivery, cost-effectiveness/alternatives, and success of the federal component of the TWRI since its commencement in 2000-2001.

The findings for the evaluation are based on the following lines of evidence:

  • a review of project files, and a document and literature review;
  • telephone and in-person interviews with internal TWRI Secretariat staff and external stakeholders and members of the TWRI (n = 26);
  • a survey of businesses that operate in the Toronto waterfront area (n = 297); and
  • focus groups with residents of the waterfront area (n = 2) and community organizations (n = 1).

Program Profile

The Toronto Waterfront Revitalization Initiative (TWRI) is an infrastructure and urban renewal initiative designed to contribute to the sustainable urban development of Toronto's waterfront area. The TWRI was launched in October 2000 as a partnership of the Government of Canada, the Province of Ontario and the City of Toronto. Each of the three orders of government announced a funding commitment of $500 million, for a total of $1.5 billion. While the taskforce and the funding announcement supported Toronto's bid for the 2008 Olympic and Paralympic Games, the commitments of all three orders of government remained in place despite the failure of the Olympic bid.

Federal investment in the TWRI is delivered through a contribution program with the Toronto Waterfront Revitalization Corporation (TWRC), also known as Waterfront Toronto, a not-for-profit corporation established to oversee the revitalization of the waterfront. Waterfront revitalization projects are funded through unilateral, bilateral, or trilateral contribution agreements between one or more of the three governments and the TWRC.

Initially, the federal investment in the TWRI was allocated over seven years, from 2000-2001 to 2007-2008. The provincial and municipal funds are allocated over a longer period, from 2000-2001 to 2014-2015. In May 2007, due to unforeseen delays in expending the allocated funding, federal funding commitment to the TWRI was extended to 2010-2011.

Of the $500 million federal contribution, $410 million is being managed by the federal Toronto Waterfront Revitalization Initiative Secretariat (TWRIS) and is allocated to contribution funding and operations and maintenance (O&M) expenses. The remaining $90 million was allocated to two projects through separate terms and conditions with Transport Canada ($25 million for the air-rail link) and Infrastructure Canada ($65 million for GO Transit improvements).

Relevance

The revitalization of the Toronto waterfront is consistent with federal priorities. Federal participation in the TWRI is consistent with a long history of federal participation in similar infrastructure and urban renewal initiatives in Canada, and with federal support for large-scale waterfront initiatives in other countries. Furthermore, federal participation in the TWRI is aligned with current Government of Canada priorities in the areas of economic leadership and environmental improvement.

There is a demonstrated need for federal participation in the TWRI. Thanks to federal participation in the TWRI, along with that of the City of Toronto and the Province of Ontario, revitalization efforts have benefited from enhanced coordination in planning and development. Further, the evaluation suggests that without the participation of the federal government, large-scale revitalization of the Toronto waterfront area would have faced considerable constraints or challenges.

The TWRI has lacked a consistent and relevant department home for its federal Secretariat. Responsibility for federal participation in the TWRI rests with the federal Minister responsible for Toronto and/or Ontario, and so the federal TWRI has been housed in five different departments since 2000. This has frequently led to misalignment between the Secretariat's objectives and those of its sponsor department. While the current home of the Secretariat within the Department of Environment Canada is a better "fit" than past departmental homes because of the environmental objectives of the TWRI, federal infrastructure projects since 2002 have been concentrated in the department of Infrastructure Canada.

Design, Delivery and Cost-effectiveness

The expenditure of federal TWRI funds has been slower than expected.
To date, the federal TWRI Secretariat has expended approximately $124 million of its planned $410 million federal investment in the Initiative. While work has been undertaken on various TWRI projects, revitalization activities have not progressed at the anticipated pace, which has slowed the expenditure of federal TWRI funding.

The TWRC and all three orders of government have tried to improve the timeliness of revitalization through improved project management processes and higher levels of staffing at the TWRC, strategic allocation of government funding for projects, and other measures.

The three orders of government have also approved a multi-year funding plan that has fully allocated each government's investment in waterfront revitalization until its sunset date. However, given that less than one-third of the $410 million in federal TWRI Secretariat's funds have been spent by the federal government to date, the federal government faces a challenge to expend all project funding before the end of 2010-2011.

Development of a corporation to implement revitalization activities is an effective vehicle for meeting TWRI objectives, but TWRC activities have not met expectations around timelines. The TWRC was developed to oversee and lead waterfront revitalization. The use of a stand-alone corporation to guide waterfront revitalization activities is a method used in jurisdictions inside and outside of Canada. However, research undertaken for this report suggests that the TWRC has faced difficulties in undertaking revitalization activities at a pace sufficient to meet federal timelines for TWRI funding. This has resulted in extensions to the federal TWRI sunset dates, as well as delays in the TWRC expending its contribution funding from the federal government.

The federal TWRI Secretariat appears to demonstrate value-for-money. The federal TWRI Secretariat is unique in that it directly manages a contribution program delivering federal infrastructure funding within the department of Environment Canada. The federal TWRI Secretariat appears to demonstrate value-for-money, as its ratio of O&M costs to contribution expenditures compares favourably with that of the department of Infrastructure Canada.

The Intergovernmental Steering Committee (IGSC) was not generally seen as an effective governance body, but TWRI activities were felt to have been well coordinated through an Operations Working Group. Government oversight of the TWRI is provided through the Intergovernmental Steering Committee (IGSC). Evaluation findings suggest that it has not been an effective body because meetings have been held infrequently and federal government members have changed often, owing to changes in senior federal management when the Secretariat moves to a new departmental home. An Operations Working Group has also been established to manage TWRI contribution agreements across governments, and it was generally credited with being an effective venue for communication and coordination.

While the use of a contribution program to deliver TWRI funding has provided federal oversight of its funding, the contribution program has been perceived as administratively challenging. The use of a contribution program has ensured that federal funding is being spent according to its terms and conditions. Since many contribution agreements with the TWRC have involved more than one government, this process has been complex. As a result, many stakeholders at the TWRC have found that using a contribution program to deliver TWRI funding has involved excessive and time-consuming administration and reporting requirements.

The additional tri-governmental indemnification requirements for TWRI projects were perceived to have had a negative effect on the timeliness of revitalization activities. The indemnification clauses of TWRI contribution agreements with the TWRC include requirements for third-party contractors and other eligible recipients (such as suppliers completing project activities under the management of the TWRC) to assume unlimited liability for their services. This requirement has been perceived to have sometimes slowed the contracting process between the TWRC and its suppliers, and to have restricted the range of suppliers willing to provide services to the TWRC. The TWRC and the three funding governments have been in dialogue to find mutually satisfactory solutions to move forward on risk management.

Success

Contribution agreements have largely been for planning, design, environmental assessments and land restoration. The federal government has signed 32 contribution agreements with the TWRC. These agreements have involved funding for a wide range of projects, including planning, design, environmental assessments, land acquisition and land restoration. A small number of agreements have also involved the completion of construction projects. These include the construction of a watercourse facility along the waterfront, improvements to the waterfront at John Quay and York Quay, the completion of Ireland Park, and funding for the establishment of a non-for-profit organization for a summer theatre on the waterfront.

Projects have suffered from a range of challenges that have resulted in delays. Projects have not been undertaken or completed according to timelines. Multi-governmental funding agreements are inherently complex, requiring significant time to arrange and administer. A challenge for the TWRC has been addressing the requirements of its three government funders, each with its own funding management requirements. Projects have also involved extensive stakeholder and public consultations. Further, tri-governmental environmental assessments for more complex projects can take considerable time to complete. Key informants also noted other reasons for project delays, including stalled negotiations over land acquisition and other factors. The indemnity requirements for contractors working on TWRI projects were also said to have complicated the bidding process in some instances.

It is too early to measure the extent to which the TWRI has resulted in significant economic benefits. As most of the TWRI work completed to date has involved planning, design and preparation for construction, it is too early to assess the full economic impact of the TWRI. However, some initial positive economic impacts have resulted from the completion of the Western Beaches Watercourse Facility and other projects.

The federal TWRI has demonstrated sound environmental approaches to revitalization. The federal TWRI has demonstrated sound environmental approaches in revitalization, as evidenced by the consistent use of environmental assessments, and the application of principles of sustainability at the TWRC.

The TWRI has fostered greater community awareness and participation in waterfront planning and implementation. The activities of the TWRI, as implemented by the TWRC, have fostered greater community awareness and participation in waterfront planning and implementation. This has been characterized by well-attended and numerous public and stakeholder consultations organized by the TWRC and through extensive media coverage.

Some increase in the accessibility of the waterfront as a result of federal participation in the TWRI can be seen, and more projects to improve accessibility are planned or under construction. Accessibility has been enhanced through improvements to landscaping and promenades along John and York Quay, among other activities. There are also a variety of recreational and park areas that are planned for completion in 2008.

According to the precinct plans, over 12,000 residential units are planned for the waterfront area in the West Don Lands and East Bayfront. These two precincts will connect the downtown to the lakefront and the Don River corridor.

Recommendations

The following four recommendations are based on the evaluation findings and conclusions.

Recommendation 1:
Further exploration of the extent to which the federal component of the TWRI has been successful in meeting its expected outcomes should be undertaken, once the implementation phase of the program is completed.

Recommendation 2:
The federal TWRI Secretariat should continue to work with the Toronto Waterfront Revitalization Corporation to develop methods for the timely expenditure of federal TWRI funding.

Recommendation 3:
The appropriateness of the $10 million threshold for federal contribution agreements should be re-examined.

Recommendation 4:
The federal government should continue to work with the TWRC, the City of Toronto and the Province of Ontario to develop indemnification policies that best meet the needs of all parties.

Management Response

The federal Toronto Waterfront Revitalization Initiative Secretariat takes responsibility for implementing the management response. In the event that the Toronto Waterfront Revitalization Initiative moves to a new department, the federal Toronto Waterfront Revitalization Initiative Secretariat commits to continuing with the implementation of the management response and will ensure that officials from the Evaluation Branch at Environment Canada are provided with the opportunity to transition results and responsibilities associated with this evaluation to the new host department.

1. Further exploration of the extent to whichthe federal component of the TWRI has been successful in meeting its expected outcomes should be undertaken, once the implementation phase of the program is completed.

The federal TWRI Secretariat agrees with this recommendation.

As such, the federal TWRI Secretariat is committed to further exploring the programís expected outcomes. To facilitate this recommendation, the federal TWRI Secretariat has set aside funding in its O&M envelope to cover the costs associated with the work around expected outcomes.†

In May 2008, the federal TWRI Secretariat will initiate discussions with departmental evaluation and Treasury Board of Canada Secretariat officials.  The workplan will outline timelines and next steps in the process, if any. The intent of the workplan is to meet the expectations of all parties and to guide the process of further exploring the program’s expected outcomes.

2.The federal TWRI Secretariat should continue to work with the Toronto Waterfront Revitalization Corporation to develop methods for the timely expenditure of federal TWRI funding.

The federal TWRI Secretariat agrees with this recommendation.

The Treasury Board of Canada Secretariat Policy on Transfer Payment stipulates that all assistance to capital projects must be in the form of a contribution. The federal TWRI Secretariat will work with its counterparts and the Toronto Waterfront Revitalization Corporation to ensure federal funding is spent by March 31, 2011. This includes providing the Toronto Waterfront Revitalization Corporation with the governance flexibility it requires to efficiently continue the delivery of the TWRI, as intended for in the Toronto Waterfront Revitalization Corporation Act, R.S.O., 2002. Although some governance flexibilities have been granted to date, it is anticipated that throughout the life of the TWRI, a number of governance requests on the part of the Toronto Waterfront Revitalization Corporation will be presented to Treasury Board.

Under the Operations Working Group, chaired by the federal TWRI Secretariat, the federal government will engage the Toronto Waterfront Revitalization Corporation to ensure a more coordinated effort in the development of contribution agreements, emphasizing the need for funding to be expended within the prescribed timeframes. The federal TWRI Secretariat is committed to raising the issue with the other orders of government at the next Operations Working Group.

Additionally, the federal TWRI Secretariat will seek support from the Toronto Waterfront Revitalization Corporation and the other two orders of government during the negotiation of the next Tri-government Long-term Funding Plan so as to ensure federal funding is strategically allocated to projects which can be completed before the programís sunset date of March 31, 2011.

3. The appropriateness of the $10-million threshold on federal contribution agreements should be re-examined.

The federal TWRI Secretariat agrees with this recommendation.

The federal TWRI Secretariat unsuccessfully sought to to have the threshold removed in 2007.  The rationale for the decision to retain the $10 million threshold was that the program lacked audit and evaluation evidence to substantiate the removal of the threshold.  Currently, the federal TWRI Secretariat bundles similar projects together as a themed-based approach as appropriate when seeking  funding approval.

4. The federal government should continue to work with the TWRC, the City of Toronto and the Province of Ontario to develop indemnification policies that best meet the needs of all parties.

The federal TWRI Secretariat agrees with this recommendation.

The federal TWRI Secretariat is committed to leading the negotiation of a resolution with the other two levels of government on this issue. The federal TWRI Secretariat is currently working with the other two orders of governments via the Operations Working Group and respective legal representatives to ensure that the additional indemnification clauses are removed from the contribution agreement template by December†15, 2008.

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