TABLE OF CONTENTS

REPORTS OF THE STANDING COMMITTEES

AND OTHER COMMITTEES

As Considered by

The Council of the City of Toronto

on October 1 and 2, 1998

CORPORATE SERVICES COMMITTEE

REPORT No. 12

1Disposition of Computers and Related Equipment

2219 Dufferin Street, Sale of Surplus City-Owned Property - (Ward 20 - Trinity-Niagara)

City of Toronto

REPORT No. 12

OF THE CORPORATE SERVICES COMMITTEE

(from its meeting on July 20, 1998,

submitted by Councillor Dick O'Brien, Chair)

As Considered by

The Council of the City of Toronto

on October 1 and 2, 1998

1

Disposition of Computers and Related Equipment

(City Council on October 1 and 2, 1998, amended this Clause to provide that the Toronto District School Board, the Toronto District Catholic School Board, the French-Language Public School Board No. 58, and the French-Language Catholic District School Board No. 64, be given the first opportunity to purchase surplus computer equipment, after which said equipment shall be offered to individual staff members.)

(City Council on July 29, 30and 31, 1998, deferred consideration of this Clause, together with the following motion, to the next regular meeting of Council to be held on October1,1998:

Moved by Councillor Jakobek:

"That the foregoing Clause be amended to provide that the Toronto District and Toronto Catholic School Boards be given the first opportunity to purchase surplus computer equipment, after which said equipment be offered to individual staff members.")

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(Clause No. 10 of Report No. 11 of The Corporate Services Committee)

The Corporate Services Committee recommends the adoption of the following joint report (June26, 1998) from the Commissioner of Corporate Services and the Chief Financial Officer and Treasurer, subject to amending the Recommendation embodied therein to read as follows:

"It is recommended that the Commissioner of Corporate Services post for a period of two months, any surplus computer equipment in order to allow individual staff members to purchase same if they so choose; after which the surplus computer equipment be provided equally to the Toronto District and Toronto Catholic School Boards; and remaining equipment not wanted by the School Boards, be sold by public auction or public sales.":

Purpose:

To dispose of surplus computers and related equipment no longer required for municipal use.

Funding Sources, Financial Implications and Impact Statement:

Surplus computer equipment is currently disposed of by Purchasing and Materials Management Division through public auctions or calling for competitive bids. The auctions are held twice a year (May and October) and are conducted by a licensed auctioneer contracted by Purchasing and Materials Management Division. Purchasing and Materials Management Division also processes sales quotations for the sale of computer equipment which cannot be held for the auction. Proceeds are forwarded to the contributing City department. Departments are responsible for any and all costs associated with the transportation of computer equipment to the auction site. The auctioneer guarantees the sale, therefore, no unsold computer equipment is returned to the City.

Recommendations:

It is recommended that surplus computer equipment be provided equally to the Toronto District and Toronto Catholic School Boards. Remaining equipment not wanted by the School Boards will be sold by public auction or public sales.

Council Reference/Background/History:

The Corporate Services Committee on May 25, 1998, had before it a communication (April 21, 1998) from the City Clerk, advising that City Council on April 16, 1998, referred the following motion to The Corporate Services Committee:

Moved by:Councillor Disero

Seconded by:Councillor Jakobek

"WHEREAS the City of Toronto often sells older computer equipment at auction; and

WHEREAS the City of Toronto receives minimal funds for these computers at auction; and

WHEREAS one of the target groups of Toronto City Council is youth and youth training; and

WHEREAS Toronto School Boards are constantly being cut back financially; and

WHEREAS knowledge of the computer and technology industries is becoming more and more important in youth training;

NOW THEREFORE BE IT RESOLVED THAT Toronto City Council offer any computer or computer equipment no longer required for municipal services/use to the Toronto District School Board and/or the Toronto Catholic School Board for their use."

The Corporate Services Committee referred the aforementioned communication to the Commissioner of Corporate Services for report thereon to the meeting of the Corporate Services Committee scheduled to be held on June 29, 1998; and requested that such report include comments on what the practical use of these computers are if they are not year 2000 compliant.

As a result of the ongoing replacement of old computers with newer technology, the current inventory of surplus computers well exceeds 200 units. This number will continue to increase, as the new City is expected to replace 5000 computers over the next few years.

On several occasions, surplus items have been donated by the City. In 1994, City donated surplus items to Peru which did not include computers. In 1997, the Government of Grenada paid $2,880.00 for 250 surplus computers and related equipment. Also, in 1997, the Technology Learning Centre (TLC) was given, in donation, an amount equal to the equipment sold to the Government of Grenada. All donations were approved by the former City of Toronto Council. The former City of Toronto distributed over 38 computers throughout Metro daycare centres.

Frequently, both Information and Technology Division and Purchasing and Materials Management Division receive requests for donations of computer equipment and have advised the enquirer that all surplus items are disposed of through auctions or public sales and that they are welcome to purchase through those means. These enquiries have been from non-profit organizations who wish to ensure that this computer equipment is used for training or used by community associations.

There have also been requests from City staff to purchase these surplus items for home use. The computers, which are being rendered surplus, are old computers with 286 and 386 processors which are incapable of running current software applications and are questionable for any use other than teaching the basic keyboard/mouse skills. Additionally, all surplus computers are purged of all application software, thereby requiring the recipient to purchase appropriate software.

Although the hardware manufacturers of the surplus computers may deem the hardware Year 2000 (Y2K) compliant, the operating software and the embedded hardware operating systems are not compliant. By January 1, 2000, these computers cannot be guaranteed to be functional for any purpose.

Comments and/or Discussion and/or Justification:

Purchasing and Materials Management Division surveyed Canadian government municipalities and agencies and concluded that with the exception of the City of Calgary, none has a donation policy. The City of Calgary's Director of Purchasing can approve any donation under $100.00 in value. The Board of Commissioners must approve any donation exceeding $100.00. The majority of the former municipalities which form the new City, send their surplus computer equipment to the auction. A very small amount has been sold to charities or to employees. Due to the low value (approximately $1.00 to $40.00) of this equipment, an administrative fee would be charged to the employee. If the City was to start donating used computers and equipment, it would have to follow the procedures outlined in the proposed Municipal Grants Policy. Consideration would have to be given as to how recipients are screened as to their suitability. Additional staffing resources would be required to implement this activity.

Conclusions:

Without a method of prioritizing, the distribution of surplus equipment to non-profit organizations, it is recommended that the City provide equal access of surplus computer equipment to the Toronto District and Toronto Catholic school boards. Remaining equipment will be sold by public auction or public sales. This does not preclude the City from re-deploying computers from one location to another including agencies, boards, commissions and community centres on a first come first serve basis.

Contact Name:

Jim AndrewLou Pagano

Executive DirectorDirector

Information and Technology DivisionPurchasing and Materials Management

392-84212-7311

2

219 Dufferin Street, Sale of Surplus City-Owned

Property - (Ward 20 - Trinity-Niagara)

(City Council on October 1 and 2, 1998, amended this Clause by:

(1)striking out the recommendation of the Corporate Services Committee and inserting in lieu thereof the following:

"It is recommended that:

(i)the purchaser, 1245686 Ontario Inc., be required to complete the transaction within 30 days, based upon a purchase price of $2,460,000.00, along with the original conditions in the Agreement of Purchase and Sale; and

(ii)should the purchaser not agree to complete this transaction in accordance with the foregoing recommendation, the Commissioner of Corporate Services be instructed to remarket the property on the basis that the City is only prepared to consider clean, unconditional cash offers which would not provide a purchaser with an opportunity to conduct an environmental inspection and a purchaser must complete the transaction expeditiously and accept the property on a totally 'as is' basis."; and

(2)adding thereto the following:

"It is further recommended that the Chief Financial Officer and Treasurer and the Commissioner of Corporate Services be requested to report back to the meeting of the Corporate Services Committee scheduled to be held on November9, 1998, on all approved property sales, including the status of those sales and the disposition/commitment of funds, and a policy on how to harmonize the use of these funds.")

(City Council on July 29, 30and 31, 1998:

(i)amended this Clause to provide that:

(1)the purchaser, 1245686 Ontario Inc., be required to complete the transaction based upon a purchase price of $2,460,000.00 and that all the other provisions set out in the report dated July 14, 1998, from the Commissioner of Corporate Services continue to apply; and the Commissioner of Corporate Services be instructed to complete the transaction on the foregoing basis; and

(2)should the purchaser not agree to complete this transaction in accordance with the foregoing recommendation, that the Commissioner of Corporate Services be instructed to re-market the property on the basis that the City is only prepared to consider clean, unconditional, cash offers which would not provide a purchaser with an opportunity to conduct an environmental inspection and a purchaser must complete the transaction expeditiously and accept the property on a totally "as is" basis; and

(ii)subsequently re-opened the Clause and deferred consideration to its next regular meeting to be held on October 1, 1998.)

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(Clause No. 45 of Report No. 11 of The Corporate Services Committee)

The Corporate Services Committee recommends the adoption of the following report (July14, 1998) from the Commissioner of Corporate Services:

Purpose:

The purpose of this report is to secure City Council's approval to complete the sale of 219Dufferin Street to Core Construction Corporation by:

(a)informing City Council of the status of this real estate transaction;

(b)addressing the mercury and mercury vapour found in the building and the resulting impact on the proposed selling price for 219 Dufferin Street; and

(c)requesting City Council's approval to amend the sale transaction to reduce the sale price for 219 Dufferin Street from $2,460,000.00 to $2,100,000.00, to require the purchaser to create a trust fund to ensure the building is remediated and extend the closing date to August 27, 1998.

Financial Implications:

The completion of this sale will provide revenue of $2,100,000.00, less the real estate commission in the amount of $89,880.00 inclusive of G.S.T.

Recommendations:

It is recommended that City Council:

(1)approve an amendment to the Agreement of Purchase and Sale between the City of Toronto and Core Construction Corporation (Purchaser) and 1245686 Ontario Inc. (Assignee) for the sale of 219 Dufferin Street to incorporate the terms and conditions as set out in the body of this report;

(2)authorize the City Solicitor to complete this transaction as revised, including the preparation of the required documentation in a form satisfactory to him;

(3)request the City Solicitor to report to the Corporate Services Committee, in Camera, on what legal rights the City of Toronto has, if any, to recover the amount of the reduction in the sale price from Canadian General Electric Corporation; and

(4)authorize the appropriate City officials to take the necessary action to give effect to the foregoing.

Background:

Property Description:

219 Dufferin Street, a large industrial property, located a short distance south of King Street West at the southeast corner of Liberty Street and Dufferin Street, contains a site area of approximately 2.44 acres. This property has a frontage on the east side of Dufferin Street of 355 feet, a flankage on the south side of Liberty Street of 300 feet and secondary access from Mowat Avenue.

The property is improved with three primary connected buildings containing an approximate building area of 179,150 square feet. In addition, there are several auxiliary buildings.

The lands are zoned IC D3 N1.5.

Site History:

Canadian General Electric Corporation ("CGE") operated a manufacturing plant at this location from the turn of the century to approximately 1983, at which time it ceased operations at this location. I have been verbally advised that prior to CGE selling the property in December, 1985, CGE undertook a remediation plan for the buildings. The former City of Toronto acquired 219 Dufferin Street under the provisions of the Tax Sales Act in July 1996. As no interest was shown in the retention of this property for municipal purposes, City Council, in February 1997 declared by by-law the property surplus to the City's requirements and authorized its disposal through a public offering. Several major real estate brokers having expertise in the sale of large industrial properties were approached by the City to submit a proposal to market 219 Dufferin Street. CB Commercial Real Estate Group Canada was subsequently retained for this purpose.

Resulting from this public offering, fifteen Offers to Purchase and one Expression of Interest were received. The highest offer was rejected due to unacceptable conditions. The second highest offer from Core Construction Corporation was recommended to City Council for acceptance.

City Council approved the sale of 219 Dufferin Street to Core Construction Corporation at a sale price of $2,460,000.00, including a deposit of $246,000.00, subject to a due diligence period.

By an Assignment of Agreement of Purchase and Sale dated December 16, 1997, Core Construction has assigned its interest to 1245686 Ontario Inc. It has jointly and severally covenanted with 1245686 Ontario Inc. to perform all of the Purchaser's obligations.

Environmental Issues:

During the due diligence period, Core Constructionretained the services of environmental consultants and advised the City of various environmental concerns including stored PCBs and chemicals, asbestos wrapped heating pipes and boilers, an underground storage tank in the courtyard, mercury contaminated soil and the possible presence of mercury or mercury vapour in certain areas of the buildings. After some discussion, Core Construction advised they were prepared to accept title subject to all other environmental conditions except the presence of mercury in the building. It is noted that all other offers received for this property, except for the lowest offer in the amount of $900,000.00, included a due diligence clause which afforded the prospective purchasers with the same opportunity as Core Construction to investigate the environmental integrity of the property. The indication of mercury presence in the building was discussed with staff of Public Health. Resulting from this, staff of Facilities and Real Estate met representatives of CGE to discuss the buildings and its previous manufacturing uses. Staff were advised that CGE had undertaken a remediation of the said buildings. As mercury can affect human health, an environmental consultant, Agra Earth and Environmental, was retained by the City to undertake an environmental study of the buildings. The consultant confirmed to the City the presence of mercury vapour in various areas of the buildings and identified the mercury levels in each of these areas.

This information was provided to Core Construction Corporation, who requested their environmental consultant, Conor Pacific Environmental Technologies, to review the material and submit a remediation plan. Conor Pacific has submitted a remediation plan to the purchaser, including a cost to remediate at $479,000.00. This cost has been confirmed by Agra, the City's consultant.

Comments:

Core Construction Corporation indicated that it would still like to complete the transaction but has requested that the sale price be reduced to take into consideration the unforeseen building mercury remediation costs. Negotiations were conducted in consultation with Agra and staff of Public Health and the Legal Services Division. Mr. Abe Gitalis, President, Core Construction Corporation, in a letter dated July 2, 1998 advised that he is agreeable to amend the Agreement of Purchase and Sale as follows:

(1)The Purchase Price to be reduced from $2,460,000.00 to $2,100,000.00;

(2)As a guarantee that mercury remediation in the buildings will be completed by the Purchaser, on the closing of the sale, the Purchaser will deposit an additional $500,000.00 in an interest bearing trust account, to be released to the Purchaser in stages on account of mercury remediation work as such work is being carried out. Advances from the $500,000.00 trust account will be paid from time to time in proportion to the area then remediated (to a level not exceeding one microgram per cubic metre in air as determined by the appropriate NIOSH method or equivalent) calculated in relation to the total area requiring mercury remediation, as identified in the report of Agra Earth and Environmental dated January 8, 1998 and, will be backed by "progress certificates" issued by the Purchaser's environmental consultants. Existing tenanted space will be given first priority.

In the event that the mercury remediation work is not completed by December 1, 2000, at the City's option, the balance held in the trust account plus accrued interest less holdbacks pursuant to the Construction Lien Act, shall be payable to the City of Toronto.

Upon the issuing of a "Certificate of Substantial Completion" by the Purchaser's environmental consultants, the balance of the funds held in trust account together with accrued interest shall be paid to the Purchaser.

(3)Article 6.6 and Schedule "B" contained in the Offer to Purchase for the property specifying that the Purchaser "shall indemnify and save harmless the Vendor from and against any and all claims, damages, liability, orders and expenses arising out of or related to Environmental Matters" shall not apply to mercury contamination in the buildings, except for the requirement to remediate the property as set out herein and future standards developed or put in place by any future legislation.

(4)Closing will be set for August 27, 1998.

(5)1245686 Ontario Inc. will not exercise its rights under Paragraph 6.1(f) of the Agreement of Purchase and Sale with respect to environmental matters pending receipt of confirmation on or before August 5, 1998 that City Council has accepted the terms of this letter. Upon receipt of such confirmation 1245686 Ontario Inc. will automatically have waived its rights under Paragraph 6.1(f) of the Agreement of Purchase and Sale.

(6)There is to be an amendment to the Agreement of Purchase and Sale and the following paragraph is to be included:

The City of Toronto and 1245686 Ontario Inc. will enter into an agreement to reflect the terms of this letter and the terms are to be agreed upon before Corporate Services Committee meets on this matter on July 20, 1998.

The Medical Officer of Health has reviewed this matter and is satisfied that the holdback of the $500,000.00 trust fund provides sufficient safeguards to ensure the mercury contamination in the buildings would be adequately addressed and that the proposal is acceptable.

The resolution of this matter on the foregoing basis is considered fair and reasonable and will permit the City to finalize this transaction.

If City Council approves a reduction of the sale price it may be appropriate for the City Solicitor to report to the Corporate Services Committee, in Camera on what legal rights the City of Toronto has, if any, to recover the amount of reduction in the sale price from Canadian General Electric Corporation.

Conclusion:

The request from the Purchaser for a reduction of the sale price from $2,460,000.00 to $2,100,000.00 together with the other amendments set out above is considered to be reasonable. In addition, the establishment of a $500,000.00 trust fund would ensure the remediation of mercury within the buildings is completed in a timely manner.

Contact Name:

Ron Banfield, 392-1859, Fax 392-1880, rbanfiel@city.toronto.on.ca.

(A copy of the map attached to the foregoing report was forwarded to all Members of Council with the July 20, 1998, agenda of the Corporate Services Committee, and a copy thereof is also on file in the office of the City Clerk.)

(City Council on July 29, 30 and 31, 1998, had before it, during consideration of the foregoing Clause, a communication (July28, 1998) from Ms. C. Moynihan, Artistic Producer, and Mr.G.Harley, President, Board of Directors, Equity Showcase Theatre, submitting comments with respect to the purchase price of the building located at 219 Dufferin Street, as well as the possible presence of mercury contamination in such building.)

(City Council on October 1 and 2, 1998, had before it, during consideration of the foregoing Clause, a Confidential report (undated) from the City Solicitor respecting the sale of surplus City-owned property at 219 Dufferin Street, such report to remain confidential in accordance with the provisions of the Municipal Act.)

Respectfully submitted,

DICK O'BRIEN,

Chair

Toronto, July 20, 1998

(Report No. 12 of The Corporate Services Committee, including additions thereto, was adopted, as amended, by City Council on October 1 and 2, 1998.)