The Liberal government in 2010 quietly changed the rules so it could lend $224 million to MaRS to build an ill-fated downtown office tower.
Infrastructure Minister Brad Duguid confirmed Wednesday that a regulation change — at the behest of MaRS — was necessary to allow Infrastructure Ontario to lend the money in 2011 to the not-for-profit MaRS (Medical and Related Sciences).
“That was a conscious decision we made because the alternative would have been to see phase two collapse,” Duguid told reporters after explaining that commercial lenders would be loath to touch a project of this sort unless it was 70 per cent occupied.
The office tower kitty-corner to Queen’s Park is just under 70 per cent unoccupied and MaRS earlier this year reneged on the loan, leaving taxpayers holding the bag for the $224 million and another $65 million to buy out the U.S. developer.
The fact regulation changes were necessary — one for other unnamed not-for-profits and one specifically for MaRS — was first raised earlier during debate at the legislature estimate committee.
“It allowed MaRS to become an eligible corporation,” Duguid’s deputy minister, Giles Gherson, told the committee.
“There is no question this was a unique circumstance,” Duguid told the committee. He later accused reporters of conducting a “witch hunt” for asking questions about the loan deal.
The fact the government was bailing out MaRS first came to light during the spring election campaign. And since then the little-known loan has proved embarrassing for the Liberal government, which consistently brags it is open and transparent.
“They want to keep it all private and they don’t want to release any information. And even simple questions they want to stonewall,” said NDP MPP Percy Hatfield (Windsor-Tecumseh), who elicited the information on the regulation changes.
Since Infrastructure Ontario has been allowed to offer loans to charities, some 78 have received a total of $950 million, and only MaRS has failed to meet its financial obligations.
Although regulation changes were made in 2010 to accommodate charities, Infrastructure Ontario did not issue a press release until July 2011 stating that IO’s loan program had been expanded.
Confidential cabinet documents leaked to the media during the last provincial election showed the Liberals were proposing to purchase the MaRS Phase 2 tower as early as April. The documents, comprising a confidential report to the cabinet secretary and a ministerial proposal to the Treasury Board, detail how MaRS was unable to repay a $224-million loan it received from Infrastructure Ontario and that the government was considering acquiring the building.
Tory MPP Ted Arnott (Wellington-Halton Hills) said it came as a complete surprise to the opposition that the government deliberately made a regulation change so it could loan money to MaRS.
“The minister in particular has been very evasive over the course of these estimates discussions … it is going to come out eventually. He would be better to come clean,” Arnott told reporters, adding that he believed the government deliberately sat on the MaRS deal so it wouldn’t come out before the June 12 election.
The government is refusing to offer up information on the business case MaRS presented in order to get loan or mortgage details, as well as the deal with U.S. developer Alexandria Real Estate (ARE).
In the meantime, Auditor General Bonnie Lysyk’s office is investigating provincial government loans to MaRS, but has acknowledged the probe was planned before the loan became an issue. Her annual report is expected in December.