Why Sidewalk Labs’ new Port Lands plan is just about dead on arrival

OPINION: The company has unveiled a proposal to kick-start development of Toronto’s Port Lands. There’s just one problem, writes John Michael McGrath — Doug Ford has already said no
By John Michael McGrath - Published on February 22, 2019
an artist's rendering of a wood building complex
An artist’s rendering of part of Sidewalk Labs’ development proposal for the Port Lands, on Toronto’s waterfront. (Picture Plane for Heatherwick Studio/Sidewalk Toronto)

Sidewalk Labs, the Google-backed company thinking big thoughts about the future of cities, has a problem. In October 2017, Waterfront Toronto commissioned the firm to come up with a new, internet-focused “smart city” plan for a 12-acre slice of the city’s 800-acre Port Lands. But the company and Waterfront Toronto have come up with a vision that involves the other 778 acres, too. Given the scope of the proposal, the company won’t need just Toronto’s support: the province, and only the province, can give Sidewalk what it needs to make its vision a reality.

So it matters that the Progressive Conservative government at Queen’s Park is unambiguously opposed to it.

“I’ve been disappointed in Waterfront Toronto,” says Monte McNaughton, minister of infrastructure (and point person on the Waterfront Toronto file). “As we move forward, I’m going to be guided by three principles: making sure taxpayers win in this deal, that we have strong oversight at Waterfront Toronto, and that privacy laws are followed to the letter.”

A senior government source, speaking to TVO.org on condition of anonymity, was blunter.

“The proposal put forward by Sidewalk Labs — as reported in the media — is a non-starter with Premier Doug Ford and our government. Never in a million years would we provide our approval.”

(The statement provided to TVO.org mirrors one given to the Toronto Star last week.)

Sidewalk Labs’ plan offers a solution to a straightforward-enough problem: the City of Toronto could spend the money to build the water, transit, and other infrastructure needed to spur development in the Port Lands, but it has mostly chosen not to. (The provincial and federal governments could also kick in some cash, and they’d actually see more future benefits in the form of income and sales tax revenues, but while they’ve helped fund the necessary flood-proofing, there’s no sign of broader infrastructure funding on the horizon.) Sidewalk Labs — or rather Alphabet, the parent company of both Sidewalk and Google — is proposing to pay for that infrastructure up front, in return for a share of the $6 billion it anticipates will be generated over 30 years in the form of tax and development-charge revenue.

The plan has its ferocious critics, but, love it or hate it, the immediate stumbling block is that under current law, the plan is, well, illegal.

Sidewalk Labs has proposed “tax-increment financing” for the Port Lands. Essentially, it would collect the incremental growth in tax revenues from the development that’s possible only because of the infrastructure they built. So if the property values in the Port Lands jump by a billion dollars after the infrastructure is built, taxes on that $1 billion would flow to Sidewalk Labs to repay the infrastructure costs.

The Liberal government passed a law in 2006 allowing cities to make use of tax-increment financing, but the law requires that the government publish regulations specifying how, exactly, municipalities can use this new power. The Liberals never did that, and their Tory successors haven’t done it either. Contacted by TVO.org, the ministry of finance said that any comment about the future of TIF regulations would be speculative.

So if the government does nothing to help — which seems to be its inclination — it’s back to the drawing board for Sidewalk Labs and Waterfront Toronto. And things could potentially get worse for the company: last fall, the province sacked the four members it appointed to Waterfront Toronto’s board, including the Chair, after Auditor General Bonnie Lysyk issued a report that contained multiple criticisms of the agency and highlighted concerns about how the Port Lands plan has been handled. The province is expected to make its appointments public soon, and it’s entirely possible they’ll be equally hostile to the plan.

On The Agenda With Steve Paikin this week, CEO Dan Doctoroff emphasized that the plan would offer benefits to the province; for example, Sidewalk would make extensive use of wood for building — a potential boon for forestry-dependent communities in Ontario’s north.

 

 

That kind of message could certainly hold appeal for some in the government — Finance Minister Vic Fedeli has advocated for the wider use of timber in buildings — but it may not buy Sidewalk the goodwill it’s hoping for: plenty of other companies are looking at the wider use of wood, including in the mass production of housing (California-based Katerra has raised more than $1 billion from investors in the hopes of proving it can mass-produce housing on an unprecedented scale). Neither Sidewalk Labs nor Google has a monopoly on this idea.

For its part, Sidewalk Labs says it’s open to other ideas — Toronto and other levels of government could, for instance, do what they haven’t so far and fund infrastructure in the Port Lands using conventional means. It’s far from clear that the province wants to do that. The only thing that is clear is that the Tory reaction to Sidewalk’s proposal is hostile at worst and profoundly skeptical at best.

In short, if this whole plan isn’t dead on arrival, it looks a lot like Wile E. Coyote suspended in mid-air, not yet aware that he’s about to fall. Yikes.

Correction: This article originally stated that Sidewalk was proposing to pay for infrastructure up front, in return for $6 billion over 30 years in the form of tax and development-charge revenue. In fact, it proposes to do so in return for a share — not the entirety — of that 6 billion. TVO.org regrets the error.

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