hope for a section 37 culture deal gone sideways
TRANSCRIPT
HOPE FOR A SECTION 37 CULTURE DEAL
GONE SIDEWAYS
A consultant meddles in the business of offers ideas to two past clients, who
are in a lawsuit over this, in hopes of creating a *Xanax-like effect.
Because, why not?
A PRESENTATION
*Unfortunately any anxiety relief al luded to here wil l
only be metaphorical. These are just unsolicited thoughtz (yes, with a “z”)
on how this test-run Section 37 deal for Arts and Culture
could have worked for all parties involved (and sti l l
can)!
DISCLAIMER
ABOUT THE LAWSUIT…
The Toronto Media Arts Centre (TMAC), has
launched a lawsuit against the City of Toronto (and
developer Urbancorp, a non-client)
These news outlets have covered the story (click
for the articles):
WHERE THE PUBLIC PICKED UP ON THE STORY:
By launching the lawsuit and being first to consult the
media (and social media) about it, TMAC has been the
one to position the issues, thusly:
Their community arts group has been betrayed by
the City in a deal that ended up favouring a private
developer, wasting a lot of time, public expense and
goodwill; what’s to say this couldn’t happen again?
TMAC is seeking court protection and enforcement of
their shared contract terms with the City and the
developer
(The City and developer have generally declined to
publicly comment on the case. Ward Councillor Ana
Bailao denied any wrongdoing. )
DETAILS FROM THE PAPERS:
1. The Condo and Community portions of 36 Lisgar were supposed to be registered together.
2. But the City allowed the registration of the Condo separately, which allowed the
developer to finish its contractual obligation, and to receive its sale proceeds
/ “carrot”. This also effectively ended the contract between the 3 parties.3. However, the Community portion
remains unfinished. In addition, TMAC has been cut out of the contract as the purchaser of the place, after 4 years of preparation. The City is now holding a public consultation / “RFP” for another community group to occupy the building. TMAC is suing.
SO, IF I ’M NOT MISTAKEN, TMAC CONTENDS THAT INSTEAD OF THIS
RELATIONSHIP WITH THE CITY:
“Historically, Alice, this is how you navigate the rabbit hole of dealing with profit-seeking developers .”
AND NOW THE CITY’S LIKE:
“You was my brother Charlie, you coulda looked out for me a little
bit.”
[not shown in picture: the developer]
However, these 3 parties’ 4-year history
together wasn’t so black and white.
There had to be some good between them all, and there still can be.
“Good”!? Some groups in the
community arts (and members from the City, or developers who fear
bad press) may be impatiently wondering: isn’t this 3-way deal, a
recipe for disaster?
THE CITY STARTED OUT DOING A GOOD THING
Any developer that wants to add more storeys and units to a condo (i.e. more density) could possibly bypass City Council’s permission altogether and appeal to the Province at the “OMB” to get itBut, since the City holds the ultimate sign-off to register a building, it behooves developers to play nice and deal with the City first, through a Section 37 deal (tho, many complain this constitutes a “shakedown”)
So, the fact that the City and the Ward Councillor, Ana Bailao got a “$9 million” culture space (plus a park etc.), in this case, to offer to a non-profit group in the community was a GOOD thing (as opposed to possibly nothing). To ensure it ended up being a “community benefit”, not albatross, was the problem.
SO, LET’S AT LEAST AGREE
That Section 37 deals to get Arts and Culture spaces are valuable for the City to secure (btw, this is a new thing for the City to deal with).
Update: the talk at City Hall now is to possibly scrap Section 37s for something more standardized, and clearer to deal with, than these case-by-case headaches
Opinion: scrapping Section 37s would result in tons of development in the long-term with no consideration for cultural space which would result in a cheek-and-jowl un-livable city. Having said that, a better way to process the $XX million fish for the community, is welcome.
Both TMAC and the City, by nature, want to
protect this ability for the community to “get something” out of the rampant development happening in Toronto.
As for developers: they don’t always succeed at the OMB
in getting their density increases, so they often have
to deal with the City. Also, culture space in their
buildings (as opposed to a box-store) means cache for
sales. So, they may also agree that Section 37
contributions make sense.
A. They spent a lot of time, effort and
resources these past 4 years trying to
steer the deal right
B.They wanted this community space to
be a long-term sustainable home for
non-profit arts
C.They generated excitement in the
community about the possibilities of
the new digital media arts on Queen
West
D.They are careful stewards of public
money
SECOND, CAN YOU TELL TMAC AND THE CITY
APART?
E. They wanted the developer to
finish the building properly
F. They watched that TMAC and
its member organizations were
financially sound
G. They signed a contract for the
purchase and sale of the public-
use space to take place between
TMAC and the developer, with the
City as a fallback custodian
The point is, TMAC and the City have shared a
lot of the same thinking and goals
(and probably still do).
T H E R O O T O F T H E P R O B L E M M I G H T B E T H A T T W O N O N - P R O F I T S
G O T I N A D E A L W I T H
A P R O F I T- M A X I M I Z I N G C O M PA N Y( i . e . a l l S e c t i o n 3 7 s a n d o t h e r d e a l s i n T o r o n t o , l i k e 3 P s , w h i c h h a v e
b e e n k n o w n t o e n d u p s e m i - d i s a s t r o u s l y )
IN CASE ANYONE’S CURIOUS: PROFIT-MAXIMIZATION 101
Maximize revenue potential (i.e. money coming in) by:
Buying up something fast-appreciating (i.e. land in downtown Toronto,
say, Liberty Village or West Queen West)
Increase sales potential (i.e. lobby for more density; more units to sell)
Market condos/building to buyers as being part of sexy “cultural” district
Minimize expenses (i.e. money going out) by:
Producing as cheaply as possible (minimize: time, labour, materials)—but
RISK: building deficiently and being found out, and delaying
registration (i.e. final OK)
So, obviously, a pr ivate developer would need to be
held accountable in any give-and-take deal with non-profi ts (especial ly stewards of publ ic
money!)—or else, the developer would leverage i ts greater resources and know-how to
maximize i ts profi t, necessar i ly at the expense of the non-
profi ts . That is their M.O. , af ter a l l—
we al l know i t !
Developer promises a “$X
million” facility, but isn’t
required to prove that $X was
spent; $X is complex to calculate
City allows developer to hire its
own (but approved) cost
accountant
Non-profit has to hire Project
Manager to check, but isn’t
privy to developer’s numbers
“Finished” product may be
deficient; arguing ensues
Major deficiency would be
prohibitive for any non-profit to
correct
Developer cares about
finishing & registering the
Condo portion (because that
triggers receipt of sale
proceeds), City tries to tie
completion of Community
portion to the registration, but
risks pissing off 400-600 new
mortgagees who have to pay a
wasteful “phantom rent” if
registration is delayed
AS IT IS, HERE ARE SOME *DIFFICULTIES OF HOLDING A
DEVELOPER TO ACCOUNT
*However, i t should be noted that a l l these “diff icult ies” arose due to loose contract
wording drawn up by lawyers, or to bad decis ions made by
humans—They are NOT
the Laws of the Universe. These things are highly changeable to, l i teral ly,
anything else that may make more sense!
And some things can be fi xed in retrospect by those who value
preserving cultural benefi ts and civ ic goodwil l .
THE CITY HAS THE ROLE OF A FACIL ITATOR
The role of the City is to facilitate socially-good activities to
flourish in Toronto, in a financially responsible way. The City has
been known to use its administrative tools, services, and
departments to make Council-approved things happen all the
time. • i.e. A little-known tool (p 118) is from the City Manager’s Office,
where the City can directly lend or guarantee an aggregate total of $300M to certain cultural community groups. In 2014, the City used only $55K of this facility. This tool could (have) be(en) used to ensure low borrowing rates, which frees up resources for community activities and sustainable financial operations for any cultural project with the goal of success (!)
Any community arts group entering into a deal
with a profit-driven developer and a $9-billion City
corporation needs advocacy and just treatment. This
can be enforced by mindful parties, or a contract.
Often, the non-profit goes through a major deal
just once in its organization’s lifetime; the City can
leverage its regular expertise to ensure a smooth
ride
THE CITY SHOULD GUIDE NON-PROFITS THROUGH COMPLEX DEALS
!
CITY COUNCILLORS SHOULD POOL THEIR COLLECTIVE INTELLIGENCE
Some City Councillors have more active wards than others
in terms of brokering Section 37 deals—some of which end
well
This needs to be shared / standardized as much as possible! • What do those contracts look like? • What did those developers do to be “civic-minded”? • What were the time lines of the projects?• What penalties were in place for each party? • What was expected of the community group that benefitted?
THE CITY SHOULD CLARIFY THE WARD COUNCILLOR’S ROLE IN SECTION 37
According to the City’s own commissioned study on all the Section 37
practices in the corporation, by Gladki Planning Associates, a ward
Councillor’s role in Section 37 is limited to two things:• Before a Section 37 deal, helping to identify, through public
consultations, suitable community arts non-profits in preparation for any development that may happen in the ward
• During the deal, acting as the liaison for service bureaus within the City that the public doesn’t normally have access to—like Real Estate Services, whose Director Joe Casali finalizes whether or not to register a building or extend a closing date due to deficiencies
The study found that Section 37 deals remain frustratingly case-by-case
in our huge city. (One factor has been that some Councillors, more than
others, are involved for much longer / in-depth in the deal, to the benefit
or detriment of a project.)
DEVELOPERS ARE FOR-PROFIT, IN CASE THEY FORGET
Developers deserve to get paid millions for the construction
of quality living- and community-spaces. Just like they deserve
to get penalized if these buildings are late or deficient. Section
37 deals are a way to help developers earn some more sales, if
they give some more to the community. Failing this condition,
there should be nothing more that anyone from the public
needs to sacrifice (i.e. condo buyers, community groups etc.)
for this private corporation to make its profit. Zero pressure.
DEVELOPERS CAN BECIVIC -MINDED
(SERIOUSLY! )
Developers give to charities all the time and get tax credits, tax-
deductions, good press, positive branding etc. under Corporate Social
Responsibility (CSR)
Some social developments (i.e. Section 37s) might not best be
approached as a profit-maximization opportunity—maybe it’s better to
come out supporting the community directly from which the company has
made / will make a lot of its money, FIRST, and then the trust will follow.
(How about an RFP in that order?)
For instance, Urbancorp’s ubiquity downtown west may be perceived as:• a banal attempt to cash in on the “build low-grade high rises on fast
appreciating land” formula, but has bitten off way more than it can chew (i.e. the multiple cases of delays we all know) OR
• an investment in a long-term cultivation of a cultural district and relationship with the community
(Which perception will win out?)
COMMUNITY ARTS GROUPS SHOULD WORK WITHIN THEIR L IMITS
Notwithstanding the spontaneous good nature and good
faith of the City and the developer, which may (not) happen, a
non-profit itself should foresee the limits of their participation
in a rich deal (i.e. to manage and operate a space, in
cooperation with others, that is several times beyond status
quo in scope and size AND consider a new governance model
AND raise millions as a new entity), and be prepared to call it
quits if it’s just not feasible• Indeed, several former TMAC member orgs have had to do just
that• However, those who can stick with it, more power to them
COMMUNITY GROUPS, BY NOW, SHOULD SHARE COLLECTIVE INTELLIGENCE
Every time there is a new (Section 37) deal, each community group
that benefits has to painfully reinvent the wheel with expensive
consultants. Whether positive or negative, community groups in
Toronto could educate and consult each other on their navigational
experience
Being chosen as the intended occupant of a “$XX million”
community space may seem like a fairy tale dream come true• But what were the demands on the group to occupy the space?
Finance-wise? Governance-wise? Was it fair? What would make this easier? Community groups can organize and let other sectors understand that non-profits aren’t an equal partner in development deals; that minnows swimming with sharks can be hazardous.
• They can empower their sector to improve their treatment
Back to the question:
Is a Section 37 deal, with two non-profi ts
(one of whom is small) and a profi t-
maximization company, necessarily
a recipe for disaster?
N O. I N T H E I N T E R I M , H O W E V E R , T H E R E I S A N E E D
T O R E S T O R E T R U S T A N D G O O D W I L L I N T H E C O M M U N I T Y R E G A R D I N G T H E S E D E A L S . L E F T
U N D O N E , A N I M P O R TA N T A L L I A N C E W I L L R E M A I N D A M A G E D .