Liveblogging Sidewalk Labs’ Master Innovation and Development Plan, Entry 40: The MIDP Volume 3, Partnership Overview: Chapter 2: Innovation and Funding Partnership Proposal, Role 1: Development of Real Estate and Advanced Systems

It’s another long one. Sorry about that. Also, I thought this was regionals.

Previous Master Innovation and Development Plan liveblog entries and relevant documents available here

The previous chapter dealt with the proposed role of the public administrator (WMOMNBWT) in governing the proposed “IDEA District.” Now, Sidewalk Labs tells us how they would be involved:

This chapter provides an in-depth review of the four proposed roles that Sidewalk Labs would play as Innovation and Funding Partner. (p. 48)

These roles are:

  • Role 1: Development of real estate and advanced systems.
  • Role 2: Innovation planning, design, and implementation.
  • Role 3: Technology deployment.
  • Role 4: Optional infrastructure financing. (p. 49)

Introduction (pp. 84-85)

Role 1: Development of Real Estate and Advanced Systems (pp. 86-113)

Real estate: It would be the lead developer of Quayside and Villiers West.

Advanced systems in Quayside and Villiers West:  These are: “advanced power grid, thermal grid, waste management system, stormwater management system, freight management system, dynamic streets, district parking management system, digital communications network, and mobility subscription package.” (p. 84)

This role would involve identifying or partnering with “experience third-party operators wherever possible,” (a public-private-private partnership, if you wil) (p. 84)

Details of its build program, building design, housing, employment, social infrastructure, and public realm plans are found on pages 89-91. Most, if not all, of the details in this section have been covered elsewhere in this report (some of them, many times).

One theme that Sidewalk Labs seems to be developing here is the extent to which they are foregoing the easy money or are spending more than one would usually on a project like this:

Critically, as part of an overall transaction involving Villiers West, Sidewalk Labs is incur- ring higher-than-market real estate costs at Quayside, to prove the model — and to enable third-party developers to employ these same sustainable construction methods and innovative building systems on a cost-effective basis. (p. 87)

Proposing a development with lower density and forgoing a request for greater density reduce the financial upside of the project. (p. 89)

To realize the innovation agenda and desired outcomes, Sidewalk Labs would need to invest disproportionately in the development and implementation of these [advanced] systems. (p. 94)

One of the benefits of reading a very, very repetitive (very repetitive) report front-to-back is that we already know that these asides are laying the ground for an ask of a reduced price for Villiers West.

The Quayside Plan (pp. 88-97)

Quayside would serve as “proof of concept” for its plans:

As the lead vertical developer, Sidewalk Labs would enter into an agreement with Waterfront Toronto to plan, design, deliver, and operate a mixed-use, mixed-income development on the consolidated properties that together constitute Quayside. (p. 88)

The mechanics of the plan

“Waterfront Toronto:

  • “would sell its Quayside land holdings to Sidewalk Labs.”
  • “or the public administrator, would assist Sidewalk Labs in pursuing the necessary approvals, financial contributions, or other actions from the city or other orders of governments”
  • “would monitor the performance of Sidewalk Labs; and”
  • “would fulfill the various governance roles incumbent upon it as the public administrator of the IDEA District.”

They’ll need to change several laws before moving forward (p. 95) (covered in pages 230-231, at the very end of the report. Cliffhanger!)

As is common with real estate development projects, particularly for large-scale projects such as the one proposed, Sidewalk Labs would require a number of regulatory and planning permissions to proceed and implement the proposed innovations. (p. 95)

Question for municipal and building experts: How common are the types of changes Sidewalk Labs is asking for?

This might just be business as usual. This page, however, does not give me confidence that this is the case. Remember the list that I mentioned a blog post or two ago regarding the bylaw and other legal changes that would be needed to allow Sidewalk Labs to do its thing? I thought that was exhaustive, and yet we seem to be getting a few more examples of rules that need to be changed, some of which seem pretty important:

Permission to apply certain innovative building techniques, including a flexible interior wall system that speeds up construction times and allows spaces to adapt quickly to a variety of uses. (p. 95)

As someone who has been known to enter buildings from time to time, I would like to know why these  “innovative building techniques” are not currently legally available to Sidewalk Labs? Are flexible interior walls workable?

Public-private-private partnerships

In addition to potential real estate development partners, Sidewalk Labs anticipates entering into partnerships to facilitate the detailed design, construction, and management of specific elements of the Quayside plan. (p. 94)

I thought this was regionals, or When will we see the final Quayside plan?

“If we win regionals, then it’s straight on to sectionals. And then a week later is semis, then semi-regionals, then regional semis, then national lower-zone semis!” – Mr. Rad, Community

Wasn’t the Master Innovation and Development Plan supposed to be a detailed development plan? What are we even doing here?

Upon approval of the MIDP, Sidewalk Labs would prepare a detailed development plan, an infrastructure and transportation master plan, and a site remediation plan for Quayside, all subject to approval by Waterfront Toronto as spelled out in the Implementation Agreements. (p. 95)

This is getting ridiculous. If Sidewalk Labs, after 18 months and several delays, hasn’t been able to put together an actual detailed plan for the 12 acres it was asked to develop, then Waterfront Toronto should can the whole process and call it a day.

Of course, once the current provisional MIDP is approved, the public loses all of its leverage. We’ll be stuck with Google and a largely unaccountable Waterfront Toronto (or “public administrator”) and whatever changes they want to make to this MIDP, which at the end of the day is more a sales brochure than an actual planning document.

Sidewalk Labs and Waterfront Toronto’s continued insistence that we’re debating an actual plan insults our intelligence. [Note: I wrote this before Waterfront Toronto and Sidewalk Labs announced that their relationship would end if Sidewalk Labs did not address several key issues. In other words, if Sidewalk Labs comes up with an alternate proposal, we have to go through all of this nonsense again. So to repeat, in bold:

If Sidewalk Labs, after 18 months and several delays, hasn’t been able to put together an actual detailed plan for the 12 acres it was asked to develop, then Waterfront Toronto should can the whole process and call it a day.]

The timeline: Good luck with that

For a company that just admitted one paragraph ago that they haven’t finalized their plans for Quayside, plans that would require regulatory changes from governments that follow their own schedules, this timeline is almost charmingly naïve and optimistic:

Sidewalk Labs estimates that construction on a portion of Quayside could commence as early as 2021 and that the entirety of Quayside could be completed by the end of 2026.

A detailed timeline is available on page 97. Note the mid-2020 date for the first of the deliverables. [Note: This was also written before Sidewalk Labs and Waterfront Toronto extended their agreement by six months, effectively throwing off these timelines. The MIDP’s timelines remain unrealistic.]

Economics (p. 96)

And here’s the ask that they were building up toward. Sidewalk Labs offers to “bear the cost of the research and development embedded in the Quayside development program,” which we are informed involves a “higher-than-market costs of the innovation agenda at Quayside.” (p. 96)

Here we go:

In transacting for the Quayside properties, Sidewalk Labs would propose to pay Waterfront Toronto a price that places the cost and risk of the innovation agenda on Sidewalk Labs, while recognizing that Waterfront Toronto would receive some of the value for its land in a direct payment and some by achieving the policy objectives it laid out in the Quayside RFP and prior precinct planning. (p. 96)

It’s a bit odd that Waterfront Toronto seems to be presenting the IDEA District and all its innovation costs as if this is a one-off project. The reason Sidewalk Labs is even in Toronto is because it wants to develop technologies, services and expertise that it can sell to other cities. Toronto is doing Sidewalk Labs a favour, not the other way around. No Toronto, no revenue stream. After all, if you can’t play ball with affable Canadians, how are you going to do elsewhere in the world?

For all Sidewalk Labs’ previous talk of Google’s deep pockets, these don’t seem to be in much evidence in this part of the report. The risk that Sidewalk Labs is taking here will, if it pays off, be spread out over many other city projects.

And anyway, functioning markets determine the most efficient use of resources. If something has “higher-than-market costs” that simply means that there are more efficient ways to spend those resources. If Sidewalk Labs can’t make the numbers work as a for-profit company without asking for a handout, that’s the market’s way of saying that there are better uses of your resources.

Thing is, this doesn’t hold for Sidewalk Labs because Sidewalk Labs isn’t responding to the market; it’s trying to invent the market – that is, a market for smart-city services.

And if you’re a city that wants to do something that doesn’t yield a profit, we already have a solution: fund it out of taxes and get government to do it. There’s a reason so much infrastructure is funded by governments: it’s because building it benefits everyone, and it can be cheaper to build things in the long run if you don’t need to seek a profit, as Sidewalk Labs does.

Long story short, this is a deal that Waterfront Toronto doesn’t have to take. If you’re going to do this plan (and I don’t think they should), charge them full price for the land or send them packing. There is no shortage of companies (many of them Canadian) with smart-city development ideas. Sidewalk Labs needs Toronto more than Toronto needs Sidewalk Labs.

Villiers West urban innovation campus (pp. 98-107)

Proposed home of Google and the Google-linked Urban Innovation Institute.

How it would happen

Upon completion of the Don River Naturalization work, the government would need to combine the parcels proposed for the new campus with parcels owned by the City of Toronto and Ports Toronto. To enable the creation of these new economic development assets and realize the catalytic potential of Villiers West sooner, Sidewalk Labs proposes to execute a land transaction to vertically develop the area, with development partners. (p. 98)

Google campus or go home

Without the addition of the urban innovation campus on Villiers Island, establishing the IDEA District as a vibrant centre of commerce is unlikely. (p. 98)

The land would include Google’s Canada Branch HQ, the Urban Innovation Institute  “and a network of mixed-use surrounding spaces.” (p. 100)

Urban Innovation Institute

The Institute is envisioned as an independent, non-profit organization located within the innovation campus. Sidewalk Labs envisions that local academic institutions would collaborate in the design and implementation of the Urban Innovation Institute, which would serve as a centre for applied research, policy development, and skills training. (p. 101)

With Google at its core, it would shape Canadian technological development according to Google’s needs. (see: technology is not neutral)

Question: Who is going to maintain the Urban Innovation Institute’s funding once its seed capital runs out?

Google Village

These parts about housing and social infrastructure around Google’s campus makes it seem like Sidewalk Labs is proposing the construction of a self-contained Google Village. (p. 102) Complete with LRT! (p. 103)

Maybe Sidewalk Labs is running the Google version of Amazon’s HQ2 contest?

The pitch for including Villiers West in the proposal when it wasn’t part of the RFP

Sidewalk Labs finds a 2006 MOU:

Although Villiers West was not specifically identified in the RFP, the city’s 2006 MOU with Waterfront Toronto contemplates circumstances such as this one where an important economic development opportunity arises outside of the context of a traditional request for proposal.  In such circumstances, including where a business seeks to move to or establish operations in Toronto, the MOU provides that “flexibility is required.” This reasonably applies to the proposed transaction, which would deliver a major economic development project, bringing a new Google Canadian headquarters and a new applied research institution to Toronto.

Nice to see this new piece of information buried 141 pages from the end of the report. It’s a nice try, but it still doesn’t change the fact that Villiers West and the IDEA District weren’t what was asked for in the RFP and that these additions have happened at the last second. That said, there’s no reason why Sidewalk Labs, or Google proper, couldn’t submit a separate Google Headquarters proposal.

Sidewalk Labs roles in Villiers West

Pretty much the same as Quayside, although as with Quayside, they haven’t ironed out the details:

Upon approval of the MIDP and the relevant Implementation Agreements, Sidewalk Labs would lead a collaborative planning process with Waterfront Toronto, the City of Toronto, Google, and other stakeholders to further advance the creation of a detailed development plan for the campus. This would include further development of the build program, site planning, and design requirements.

Sidewalk Labs would also solicit institutions interested in co-locating with the Urban Innovation Institute and other tenants. Sidewalk Labs is committed to engaging local development partners in the project and, working with Waterfront Toronto, would solicit appropriate partners. Waterfront Toronto would collaborate with Sidewalk Labs in completing the development plan so that it can serve as the basis for approvals and advance the achievement of the IDEA District goals. Waterfront Toronto would also work with the City of Toronto and, if appropriate, Ports Toronto to facilitate the land assemblage (combination of parcels) and to determine the optimal transactional construct. (p. 105)

 Next stop: Regionals!

Timeline (p. 105)

Applications begin in 2022; approvals: 2024; occupancy: 2027. [Note: these likely would have to be backed up, in light of Sidewalk Labs and Waterfront Toronto’s new understanding.]

Economics (p. 106)

Discount, please. Actual details TBD:

Land purchase price, along with the evolution of the proposed program, will be negotiated with Waterfront Toronto and its government stakeholders. Sidewalk Labs is committed to fairly compensating Waterfront Toronto and / or the City of Toronto for Villiers West for the acquisition of the land, regardless of the form of the transaction, while reflecting the value Sidewalk Labs will create as an eco- nomic development catalyst.

The proposed transaction would be governed by detailed Implementation Agreements to be developed once the MIDP has been approved. The details of the transaction — including the form of the transaction (such as land-lease versus sale, profit-sharing, joint-venture, or otherwise) and the value of the land — would be incorporated in an Implementation Agreement. (p 106)

Advanced systems (pp. 108-113)

Sidewalk Labs proposes to serve as lead developer of a range of advanced systems for Quayside and Villiers West. (p. 108)

Sidewalk Labs

would play a hands-on role in the early stages of their development and operation. It would prepare designs, identify or partner with operators, and refine and stabilize the operations to achieve efficiency and deliver the promised performance outcomes. (p. 108)

Objectives (pp. 108-109)

Implementation (pp. 112-113)

Pursuant to the [Implementation Agreements that would follow the acceptance of the MIDP], Sidewalk Labs would design, con- struct, procure, and stabilize the operations of the advanced systems. The Implementation Agreements would incorporate various terms and conditions, including specific performance requirements, user-rate constraints, and a requirement of adequate security.

The use of “pursuant” indicates that this is the serious part of the document.

With the exception of the digital communications network (which would be implemented directly by Waterfront Toronto’s broadband internet partner with Sidewalk Labs’ technical advisory support), Sidewalk Labs would be responsible for the following implementation framework for all of the advanced systems, including (emphasis added):

  • Preparing preliminary designs supple- mental to the ITMP to be used as bridging documents in the form of plans and specifications issued during the procurement of operators for certain systems

  • Managing the procurement process and selecting operators based on their merits, including qualifications, rate structure, strength of financing, and cost

  • Providing design and construction oversight

  • Working with operators to ensure the systems meet the IDEA District objectives

  • Working alongside the public administrator to ensure that operators maintain an acceptable level of performance

Procurement: Sidewalk Labs would be responsible for procurement decisions, and would have a great deal of leeway in this important area, including the ability to award contracts to itself:

The Implementation Agreements would provide Sidewalk Labs with the flexibility to procure operators that, in its judgment, offer the best solution for Quayside and Villiers West. While relying heavily on joint development agreements with third-party operators, Sidewalk Labs would retain the ability to develop solutions internally, participate in operations, and iterate and adjust those operations. (p. 112)

Question: How to prevent Sidewalk Labs from using its judgment to favour either itself or its fellow Google companies? This language would not constrain it much in this area.

The principles that Sidewalk Labs proposes do little to assuage these concerns:

  • Sidewalk Labs would seek external partners where available to diversify risk and incorporate expertise from others into the project.
  • Second, Sidewalk Labs would limit its provision of products and services to situations when its involvement is needed to achieve the necessary outcomes of each system. This means it would not participate in operations where an existing provider is willing and able to deliver the operational approach and performance outcomes and to do so cost effectively.
  • Third, in its role as Innovation Partner, Sidewalk Labs would transfer knowledge to the public administrator to enable it to take over the advanced systems development role after Quayside and Villiers West. (pp. 112-113)

The problem with these reassurances is that at the end of the day, it would be Sidewalk Labs making the call as to whether it should or shouldn’t act as the sole source contractor. This is a bad governance practice, to say the least.

Sidewalk Labs commits to providing an advanced system or a component it, when “the solution calls for significant iteration or ongoing management after the initial installation.”  (I’m not sure how many foundational systems don’t require ongoing management.)

or when

the approach represents a techno- logical solution that has no suitable alternative available in the market based on the method- ology established for classifying purposeful solutions (see Page 123 for more details). (p. 113)

I have a feeling “purposeful solutions” will require some investigation.

If Sidewalk Labs decides it must use a product or service “in which it holds a financial interest,” it must notify the relevant administrator, but it’s still the one that makes the call (p. 113). In such a case, it “may be compen-sated through operating revenue in place of, or in addition to, advanced system development fees, subject to the terms of a master service agreement” (p. 113)

Advanced systems beyond Quayside and Villiers West

If everything works out, the public administrator (WMOMNBWT) would become the lead developer and Sidewalk Labs would support it: “in procuring operators and partners; working with the operators to integrate the systems in the IDEA District to achieve the envisioned technologically enabled outcomes; and working alongside the public administrator to ensure the operators achieve and maintain acceptable performance levels.” (p. 113)

The public administrator (WMOMNBWT) would be responsible for procurement here (assisted by Sidewalk Labs with the preparation of procurement documents, and on refining standards and guidelines), although given the need for interoperability and the fact that Sidewalk Labs would have already set the foundations in place, this power would likely be much less consequential than the procurement power for Quayside and Villiers West.

This has been a lot to read. Thanks for sticking it out.

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