A provincial government proposal to buy the troubled MaRS office tower in downtown Toronto projects the building will operate at a loss of $36 million over the next decade, a Star analysis of a secret cabinet document reveals.
The document, a 10-year financial statement prepared by bureaucrats seeking cabinet approval to purchase the new 20-storey facility, shows that overall expenses are projected to be greater than revenues through 2023-24 due, in part, to a lack of tenants.
The cost of these shortfalls would be borne by the province, according to the document obtained by the Star.
The Liberal campaign says the 10-year projections “do not show the full story” and said the building is a 40-year project.
The document projects the MaRS building will start running operating surpluses in 2018-2019. But the surpluses are outweighed by almost $50 million in operating deficits up to that point.
Confidential government reports released Thursday by the Progressive Conservatives show the province was close to a deal with MaRS and a U.S. developer to purchase the virtually empty building at the corner of College St. and University Ave.
The plan came about when MaRS, a registered charity that promotes innovation and research, was at risk of defaulting on a $234-million loan provided by the province in 2011 to finance the construction of the new building. MaRS was relying on rental income from the development to pay back the loan, but was able to lease only 31 per cent of the building.
The Star revealed that the proposal would cost Ontario taxpayers nearly half a billion dollars. The $477-million price tag includes $317 million for the building and land, $106 million for renovations, as well as other costs.
The plan was set to go to the Treasury Board for approval earlier this month, but was postponed due to the election call.
The office tower is dubbed “Phase 2” of the MaRS Discovery District innovation complex kitty-corner to Queen’s Park. MaRS, announced in 2002 by then Progressive Conservative premier Ernie Eves, receives most of its funding from the province.
Part of the proposal includes relocating civil servants from other buildings into the new facility.
Campaigning in Burlington on Friday, Liberal Leader Kathleen Wynne proposed the purchase of the tower as a “responsible thing to do” and a good investment of public dollars.
“This is an arrangement where we would be consolidating government functions that are now in other buildings not owned by the government, to consolidate them into one building owned by the government,” Wynne said.
“It’s also part of the expansion of MaRS, and MaRS is a world-renowned centre of research and the commercialization of innovation and technology.”
Wynne accused the Progressive Conservatives of leaking the confidential cabinet documents to distract the public from growing criticism of their Million Jobs Plan, and the flawed math behind it.
But the Progressive Conservatives continued to pressure the Liberals for more details on the proposal.
Campaigning in Toronto, PC Leader Tim Hudak said he was “disappointed” in Wynne for entertaining the deal, but declined to say whether he would reject it should he form government.
“I’ll make a decision based on the evidence in front of me,” Hudak said. “But my abiding principle in making these types of decisions is what’s in the best interest of the taxpayer, not what’s in the best interest of the Liberal party.”
In a meeting with the Toronto Star’s editorial board Friday, NDP Leader Andrea Horwath said the proposed MaRS deal “sounds like another boondoggle” by the Liberals.
On Friday, the MaRS board of directors issued a statement on the organization’s website that stressed they are not in a position to comment on any ongoing negotiations and that the confidential documents should have remained confidential.
“Over the past year, we have been working with our partners to bridge short-term financial needs and bring additional capital into the Phase 2 project . . . The fact that these documents have been made public may, in fact, be harmful to the ultimate completion of the real estate transaction that is underway,” the statement said.
- With files from Robert Benzie