October 15, 2014 3:33 pm
Updated: October 15, 2014 3:34 pm

Liberal government changed loan rules so MaRS could qualify for $224M

Ontario Premier Kathleen Wynne (left) speaks and Minister of Training, Colleges and Universities Brad Duguid listens after meeting with education representatives at Queen's Park in Toronto Thursday, March 27, 2014.

THE CANADIAN PRESS/Frank Gunn
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TORONTO – Ontario’s Liberal government changed infrastructure loan criteria so a research real estate project could qualify for a loan – which it ultimately received to the tune of $224 million and has not been able to repay, a legislative committee heard Wednesday.

Opposition parties have been pressing Infrastructure Minister Brad Duguid for more details on the loan as well as $65 million the government paid to buy out an American real estate company involved in the MaRS project.

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The loan to build a second tower came from an Infrastructure Ontario program previously only available to municipalities, but Duguid said that in 2010, the regulations were changed.

“The government made decisions to ensure that Phase 2 did not collapse and part of that was making a decision as to whether we should ensure that MaRS was eligible for that infrastructure program,” Duguid said after the committee hearing.

“MaRS’ situation did, though, necessitate a regulation that would have allowed MaRS to qualify for the program – didn’t give them the outright loan – allowed them to be eligible.”

MaRS and the developer have been unable to repay the loan and the province is now paying interest of up to $7.1 million a year on it until an agreement on the future of the new tower is finalized.

The opposition parties have asked to see documentation, such as a business case, supporting why the loan was made, and are accusing the government of stonewalling.

Duguid said if that kind of paperwork exists he will try to release it, but not if it contains commercially sensitive information.

New Democrat Percy Hatfield said the Liberal government boasts about openness and transparency, but when the committee and the media ask for information that should be open and transparent it’s not there.

“They say it will all come out in the wash at the end of the day,” Hatfield said after the committee. “We’re saying, but you haven’t been upfront with the taxpayers on how you’ve gone about this, what input (was there) into that decision making, why it was done and where are we going from here? They want to keep it all private and they don’t want to release any information.”

Progressive Conservative Ted Arnott said there are many unanswered questions surrounding MaRS and accused Duguid of being evasive.

“It’s going to come out eventually,” Arnott said. “He’d be better to come clean.”

An expert panel is looking at MaRS and will recommend whether or not the government should fill up part of the nearly empty office tower with civil servants instead of the medical researchers for which it was designed.

Duguid said a judgment about whether the loan was a wise decision “will take some time to roll out.” The situation in which the government made the loan was unique, said Duguid, who added that the amount is “fully recoverable.” Duguid defended a provision in the original loan agreement that the government would make payments if MaRS couldn’t. The loan wouldn’t have happened otherwise, he said.

“At that point Phase 2 was rotting in the ground, frankly, and without making a decision to move forward with Phase 2 it would have been a failed project,” Duguid said at committee.

“As it is now, it was a challenged project that we’ve been able to save, if you want to call it that, with that loan, and now I think we ought to be judged by the results. And the results are not in yet…Ultimately the results will come out in the years ahead as we see how many additional jobs are created, and how many billions of dollars are attracted into the Ontario economy and the life sciences cluster here and how our life sciences cluster grows.”

Construction of MaRS Phase 2 was halted in 2008, when the recession hit, and resumed in 2011, but the building has had trouble attracting tenants since being completed, in part because U.S.-based Alexandria Real Estate was demanding rents the government considered too high for the marketplace.

Gordon Nixon, the chairman of MaRS’ board of directors and the president and CEO of RBC, said the board views MaRS as a “remarkable success.”

“In terms of what MaRS has done – ignoring Phase 2 – there’s a really, I think for the province, an incredibly good news story out there with huge economic value,” he said in an interview.

Nixon wouldn’t comment on the original loan, or whether MaRS itself could provide the documentation the opposition parties seek.

“I think the information that has been available and will be available once this process is complete will certainly satisfy those questions and those issues,” he said.

© 2014 The Canadian Press

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