Toronto is backsliding on the upkeep of municipal facilities, with a state of good repair (SOGR) backlog that’s projected to surpass $1 billion this year and then continue accumulating to nearly $1.47 billion over the next decade. The proposed 10-year capital plan for the City’s diverse and extensive real estate portfolio — released last week, ahead of Council’s upcoming 2024 budget deliberations — also highlights more than $2 billion worth of unfunded needs, including the SOGR backlog, $360.5 million to achieve targeted greenhouse gas (GHG) emissions reduction and $65.3 million for waterproofing and preservation of the iconic Nathan Phillips Square.
For 2024, Mayor Olivia Chow’s proposed budget earmarks a net operating budget of $121.5 million for corporate real estate management (CREM) and nearly $258 million in capital spending. That applies across 474 buildings collectively encompassing 12.5 million square feet of space in civic offices, community/recreation facilities, fire/police/paramedic stations, works depots and notable public venues like City Hall, Old City Hall, St. Lawrence Market and Union Station.
Inflationary impact on salaries, benefits, utilities and service contracts underpins much of the contemplated $14 million, or 12.8 per cent, year-over-year increase to the operating budget. Other new costs arise from extra security for city parks, new staffing and operating costs related to the pending opening of the St. Lawrence Market north facility and new safety and security measures at Union Station. Two energy managers are among 35 new staff positions, which otherwise are related to security, safety and the St. Lawrence Market expansion.
Leasing revenue stagnates, but operational savings expected from space rationalization
Leasing revenue is projected to fall by roughly 20 per cent, from about $60 million last year to slightly less than $48 million in 2023. That’s largely attributed to the Ontario courts’ move from rented space in Old City Hall to the new purpose-built Toronto courthouse and to a diminished payout from the revenue-sharing agreement with the Toronto Parking Authority due to lower office occupancy. It’s anticipated rental space coming available in the St. Lawrence Market expansion and at Union Station will push earnings back up above $50 million for 2025, but City administrators nevertheless caution there will be “stagnant revenues” from leasing in the next few years.
“CREM is working with CreateTO and other City divisions on planning investments and improvements to Old City Hall and are exploring future uses and other leasing opportunities,” the budget document states. “CREM continues to build out its property management functions and will focus on keeping leases up-to-date and at market rates to ensure the City receives optimal value from its lease portfolio.”
Sustained operational savings are forecast to come with the rollout of a space rationalization strategy that will consolidate municipal staff in 15 locations, empty out 34 leased and eight City-owned sites and trim 1 million square feet from the corporate office footprint. Thus far, 19 leases have been terminated, returning 176,000 square feet of office space with a resulting $6.9 million in annual savings.
Ultimately, the plan targets $30.5 million in annual operating savings and $450 million in “unlocked” land value in the eight municipal properties, which is to be used for affordable housing, community and environmental purposes. It’s also expected to help ease the SOGR burden, both through the reduction of real estate inventory and the improvements slated for five designated core buildings.
Chronic underfunding underpins growing backlog of deferred maintenance
City administrators calculate more than $1 billion of SOGR investment is now required, representing 17.2 per cent of asset value in a portfolio with an estimated replacement value of $6.3 billion. Accompanying analysis links the growing backlog to chronic underfunding — annual budgeting for asset maintenance at about 1 per cent of portfolio value falls short of the recognized industry standard of 2 to 4 per cent — and recent diversion of funds to meet other City operating budget imperatives.
At the current rate of funding, the backlog is projected to balloon to $1.47 billion or 23.4 per cent of total asset value by 2033. A new citywide asset management program is identified as a “priority action” to be funded with $17.6 million over five years ($3.25 million per year from 2024 to 2028).
“This includes strategic approaches to addressing the growing backlog, as well as identifying and implementing appropriate tools, processes and practices across City programs. This, in conjunction with the appropriate preventative maintenance programs, will reduce the overall cost of ownership of assets, improve performance and reduce failure, downtime and major maintenance investments,” the budget document states.
The $1.45-billion, 10-year capital plan is divided into three broad categories: aging infrastructure/SOGR; service improvement, enhancement and growth; and health and safety and other legislated requirements. A wide gamut of targeted investments include: improvements to comply with the Access for Ontarians with Disabilities Act; the new Etobicoke Civic Centre; building automation systems; energy conservation and demand management; and upgrades to fire and life safety, mechanical and electrical and elevator systems.
The budget document notes that many of the latter group of projects should deliver energy savings and operational efficiencies that will have a flow-through impact on operating costs. “Savings generated can be used to offset expected utility price increases and to invest back in City facilities to meet the TransformTO GHG reduction targets,” it states.
The City has lowered annual GHG emissions from its corporate portfolio by more than 20,000 tonnes over the last 15 years ago, but must cut nearly 80,000 additional tonnes per year just to meet its interim 2030 target of a 60 per cent reduction from 2008 levels. Thus far, strategists do not have the commitment they seek for $48 million to fund retrofits at “five key civic facilities” or the larger sum of $312 million for future fuel-switching projects that would mostly occur between 2027 and 2033.
“Incremental capital investment is required to implement this plan to drive reductions in GHG emissions, supporting the City’s net zero targets. If incremental funding is not secured, meeting the City’s long-term targets will be in jeopardy,” the budget document states.
