When a profit-seeking company, a municipality and a small community arts group sign a deal--is the weakest party doomed? Section 37s in Toronto are meant for community groups to benefit from developers' unsurprising lust for density, but it only works if the City does its job to ensure a benefit actually takes hold. In June 2015, Toronto saw community arts group TMAC sue the City of Toronto and developer Urbancorp in a Section 37 Culture deal gone terribly wrong--revealing publicly the behind-the-scenes strife of making these deals work. As a past consultant for 2 of the 3 parties, I offer some hope that some bad moves of humans are gladly, highly reversible. Despite likely miscalculating the appetite for humour surrounding this (too soon?), I hope to have included constructive perspective on how this deal and all like it, can be salvaged, with the civic goodwill of all parties involved. Section 37 deals do play an important part in securing cultural spaces for our densifying city, which would otherwise be unliveable and unprofitable, for everyone. If damaged relations between the groups are left unattended to, it could be curtains for these types of deals, which are already plagued with inconsistencies and complaints.

1. 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 PRE SE NTATION

2. *Unfortunately any anxiety relief
alluded to here will 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 still can)!
DISCLAIMER

3. So, please proceed with humour
and an open mind.
Or, don’t.
(What can I really do?)

4. 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):

5. 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. )

6. 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.

7. SO, IF I’ M NOT MISTAK EN, T MAC
CONTE NDS THAT INSTE AD OF THIS
RE L AT ION SHIP W IT H T HE CIT Y:
“Historically, Alice, this is how you navigate the rabbit hole
of dealing with profit-seeking developers .”

8. IT WAS MORE LIKE:
“WTF!”

9. AND NOW TMAC’S LIKE:
“You was my brother Charlie, you coulda
looked out for me a little bit.”

10. 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]

11. #drama

12. 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.

13. “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?

14. BEFORE WE UNPACK THAT
QUESTION
FIRST, THINGS FIRST

15. 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 it
 But, 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.

16. 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.

17. 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.

18. 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.

19. 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

20. The point is, TMAC and the
City have shared a lot of the
same thinking and goals
(and probably still do).

21. So, how did things go so
terribly wrong?

22. THE ROOT OF THE
PROBLEM MIGHT BE THAT
TWO NON-PROFITS
GOT IN A DEAL WITH
A PROFIT-MAXIMIZING
COMPANY
( i. e. all Section 37s and other d eals in
Tor onto, like 3Ps, which have be e n known to
e nd up se mi -d isastrously )

23. 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)

24. So, obviously, a private developer
would need to be held accountable in
any give-and-take deal with non-profits
(especially stewards of public
money!)—or else, the developer would
leverage its g reater resources and
know-how to maximize its profit,
necessarily at the expense of the non -
profits.
That is their M.O., after all—
we all know it!

25.  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, HE RE ARE SOME
*D IFFICULT IE S OF HOL D IN G A
DEVELOPER TO ACCOUNT

26. *However, it should be noted that all
these “difficulties” arose due to loose
contract wording drawn up by lawyers,
or to bad decisions made by humans —
They are NOT
the Laws of the Universe.
These things are highly changeable to,
literally, anything else that may make
more sense!
And some things can be fixed in
retrospect by those who value
preser ving cultural benefits and civic
g oodwill.

27. AND WHAT IF
EVERYONE JUST DID
WHAT WAS IN THEIR
POWER TO DO?

28. THE CITY

29. THE CITY HAS THE ROLE
OF A FACILITATOR
 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 (!)

30.  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
T HE CIT Y SHOUL D G UID E N ON -PROFITS
THROUGH COMPLEX DEALS
!

31. CITY COUNCIL L ORS SHOUL D POOL
THE IR COL L E CTIVE INTE L L IGENCE
 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?

32. THE CITY SHOUL D CL ARIFY 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.)

33. THE DEVELOPER

34. D E VE L OPE RS 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.

35. DE VE L OPE RS CAN BE
CIVIC -MINDE D
(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?)

36. THE COMMUNITY
GROUP

37. COMMUNITY ARTS GROUPS SHOUL D
WORK WITHIN THEIR LIMITS
 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

38. COMMUNITY GROUPS, BY NOW, SHOUL D
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

39. Back to the question:
Is a Section 37 deal,
with two non-profits
(one of whom is small)
and a profit-maximization
company, necessarily
a recipe for disaster?

40. 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 T A N T A L L I A N C E W I L L R E M A I N DA M A G E D.

41. FIN