Special Report

Breaking down the deal between Sidewalk Labs and Waterfront Toronto

The Quayside neighbourhood on Toronto’s eastern waterfront. DroneBoy for Sidewalk Labs
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On Thursday morning, Waterfront Toronto’s board voted unanimously to have Sidewalk Labs continue planning the development of its first smart city on a 12-acre plot of land on Toronto’s eastern lakeshore. The chair of Waterfront’s board, Stephen Diamond, said the Google sister company had agreed to make “significant changes” to the Master Innovation and Development Plan (MIDP) it released in June. 

“I think it was hard for [Sidewalk] to move,” Diamond said in a press conference following the board vote, “but I think they recognized that they had to move if they wanted to pursue a project.”

The concessions Sidewalk made are sweeping. The Logic breaks down what changed as a result of the negotiations, and the deal’s winners and losers.

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Talking Point

Sidewalk Labs has agreed to scale back its development plans for the eastern waterfront to align with Waterfront Toronto’s recommendations. The Google sister company has agreed to develop just 12 acres, down from its proposed 190 acres, and to let a government body, rather than an independent “urban data trust,” determine the management of data collected from the neighbourhood. Sidewalk will also allow Canadian entrepreneurs, governments and organizations freely use its global patents, not just ones registered in Canada.

Land

“This is strictly the Quayside project. Period. End of story.” – Stephen Diamond, Waterfront Toronto board chair

Sidewalk Labs proposed the development of 190 acres of land it called the IDEA District, which included the 12-acre Quayside area Waterfront had originally sought to develop, as well as Villiers Island and part of Toronto’s Port Lands. The company would lead the development of 16 per cent of that area—Quayside and Villiers West—and, along with Waterfront Toronto, open the remaining land up to other developers. 

In a June open letter in response to the MIDP, Diamond called the concept of the IDEA District “premature” and said Waterfront Toronto would first want to see the company’s concept realized within Quayside before deciding whether to work with it on other areas. “Even then, we would only move forward with the full collaboration and support of the City of Toronto, particularly where it pertains to City-owned lands,” he wrote.

In Thursday’s announcement, Waterfront Toronto confirmed that Sidewalk Labs has agreed to limit its involvement from the proposed 190 acres to the original 12, and has dropped the concept of the IDEA District. “If [Sidewalk is] successful with the initial stage and they want to proceed, further development will be subject to a public procurement process,” said Diamond. 

Sidewalk Labs said in its MIDP the price for the Quayside land should reflect the fact that Waterfront Toronto will receive value from the project by fulfilling its policy objectives, in addition to direct payments. As part of the negotiations, the Quayside land was appraised and valued at $590 million. If a deal ultimately goes through, the property will be re-appraised at the time of the transaction.

Sidewalk envisioned being the primary developer of both Quayside and Villiers West. On Thursday, Waterfront Toronto said that wouldn’t be the case. Rather, the parties have agreed that Waterfront Toronto will lead a “competitive procurement process” and that Sidewalk Labs would partner with one or more real estate developers for the Quayside project. 

Winner: Toronto developers. They’ll now have the chance to partner with Sidewalk on the Quayside development and could stake a claim in the remaining 178 acres Sidewalk was denied.

Data

“By abandoning the data trust, it puts the responsibility where it ought to be: on government.” – Joe Cressy, Toronto city councillor and Waterfront Toronto board member

Sidewalk proposed an independent Urban Data Trust to oversee how data is collected in the smart city, as well as who could access it and for what purpose. The proposal broadly classified certain types of information from public and some private spaces as “urban data,” which could be collected without the explicit consent of those who would be generating it. Sidewalk also proposed that “properly de-identified and non-personal urban data” be available by default for anyone to use. 

In his response letter to the MIDP, Diamond requested more information on the company’s plan for collecting and managing data to determine whether it complied with the law and with Waterfront’s own digital governance principles. 

The data trust and the concept of “urban data” have been scrapped. Sidewalk has instead agreed to have a government body manage any data collected in the Quayside neighbourhood, and how it is used. And there’s a possibility no data will be collected, Diamond said Thursday. “If there’s anything they do want to collect, they’ll have to put in a rationale that says, ‘Here’s what we want to do, here’s why we want to do it,’ and we’ll have to go through a public process before it’s allowed to be done.”

The new agreement still lacks detail on what data governance will look like. Waterfront is now waiting for Sidewalk to provide a “Digital Innovation Appendix,” which will “reframe the digital elements of their proposal since there were so many changes to this particular piece,” said Kristina Verner, vice-president of innovation, sustainability and prosperity at Waterfront Toronto, who noted that data ownership models will be decided in the next phase of the partnership. 

Ann Cavoukian, former privacy adviser to Sidewalk Labs who resigned in November 2018 over concerns surrounding the company’s digital governance plans, said she was “delighted” the Urban Data Trust will be scrapped. 

Cavoukian, who now advises Waterfront Toronto, said the agency has indicated to her that they are committed to the privacy principles for which she has long advocated. “Principles for strong privacy protections will be in place at all times,” said Cavoukian.

“They’ve outlined that they want privacy by design to be embedded into all the initiatives, that they want de-identification of data at source.” Data will only be collected from people who give explicit consent, said Cavoukian, with full clarity on how their data could be used.

Loser: Alphabet. Data ownership has been central to the Google parent company’s bottom line. With the Urban Data Trust now scrapped, Sidewalk Labs has made a significant concession on the role of data collection in the Quayside development. The issue is now firmly in the hands of Waterfront Toronto and government.

Transit

“Waterfront Toronto has always supported and advocated for waterfront transit and will continue to do so.” – Diamond

Sidewalk pushed for government to build a 6.5-kilometre light rail transit line (LRT) along the eastern waterfront, and that infrastructure for a future LRT route be extended to the area north of the Keating Channel, including Villiers Island, which Sidewalk had hoped to develop eventually. It would have cost an estimated $1.2 billion, which Sidewalk said it would help finance. 

Thursday’s agreement includes no guarantee of an LRT. “Sidewalk Labs has acknowledged that Waterfront Toronto does not have jurisdiction over approval of capital funding for public transit,” said Diamond.

Loser: Dan Doctoroff. The Sidewalk CEO has publicly said transit would be a make-or-break factor for the project.

Regulation

“It was almost as if there was going to be a new provincial legislative requirement to manage these lands.” Diamond

The MIDP included a pitch for five new regulatory bodies separate from Waterfront Toronto to oversee elements of the IDEA District including transit, housing and data. The company also proposed a public administrator—be it Waterfront Toronto or a different entity—have broad authority over how public money is spent on the waterfront development and help the project access exemptions to current zoning and planning rules where needed. “Waterfront Toronto staff, my board and myself had very serious concerns about having a public administrator to manage these lands,” Diamond said Thursday. Sidewalk has agreed to abandon the idea, leaving Waterfront Toronto to oversee the development. 

Winner: Waterfront Toronto. The agency will maintain its authority over Quayside.

Technology

“They have to understand that the public is concerned with respect to some digital innovation, and they will have to be subject to those concerns if they want to come forward and work in this city.” – Diamond

Sidewalk initially proposed offering Canadian innovators clearance to use and build on any of its technology patented in Canada “without fear of litigation or other assertion of patent infringement.” That has since been expanded to include free use of Sidewalk’s global patents.  

The company had also initially proposed that 10 per cent of profits generated from technologies developed for the IDEA District would be shared with the public sector over a 10-year period. The new agreement gives Waterfront Toronto a to-be-determined portion of all patent revenues, rather than profits.  

Winner: Canadian entrepreneurs. They now have greater assurance that they’ll have the opportunity not only to contribute, but to build on the potential success of new technology  implemented in Quayside.

Here’s how the major players reacted to the deal.

“We are encouraged by today’s decision by the Waterfront Toronto board and are pleased to have reached alignment on critical issues with Waterfront Toronto. After two years in Toronto and engaging and planning with over 21,000 Toronto residents, we are looking forward to the next round of public consultations, entering the evaluation process, and continuing to develop a plan to build the most innovative neighbourhood in the world.” – Dan Doctoroff, CEO of Sidewalk Labs 

“Sidewalk Lab’s MIDP was nothing short of governance by gaslighting, treating citizens as unsophisticated rubes. Responsible tech-driven communities should only be built between citizens and their democratically accountable representatives. With Steve Diamond’s leadership, Toronto can now carve a path to build such a community, free from Sidewalk’s bullying and obfuscation.” – Jim Balsillie, former co-CEO of Research in Motion (now BlackBerry) and Sidewalk Labs critic

“By abandoning the data trust, it puts the responsibility where it ought to be: on government…. Toronto should design a model to ensure that we have the most private smart city in the world—that’s what we’re working towards.” – Joe Cressy, Toronto city councillor and Waterfront Toronto board member

“By focusing the Master Innovation Development Plan on the 12-acre Quayside parcel, ensuring that the land was valued at a fair market price and that the privacy of data collected on the site is protected, the right balance has been struck between protecting the interests of the people of Ontario and encouraging investment, innovation and economic development.” – Ontario Premier Doug Ford

“We have some significant questions still on making sure how and what kind of transit is going to be delivered to this site, because it’s not just the site that needs transit…. If there is a need to model-in transit support, you’ve got an open mind, open ears and an open heart up in Ottawa.”  – Adam Vaughan, Toronto Liberal MP 

“It’s encouraging to see this has been reined in, and we hope this is the first step in a two-step process of getting rid of Google and Sidewalk Labs altogether.” – Thorben Wieditz of #BlockSidewalk

“The Board of Trade still believes we need data governance regulations that enable innovation while garnering public confidence in urban tech projects like the Quayside project, this list of negotiated changes is a balanced resolution of the major issues between Waterfront Toronto and Sidewalk Labs. The parties have struck a balance between the public interest and an important private opportunity to invest, innovate and create Toronto jobs.” – Janet De Silva, CEO of Toronto Region Board of Trade

“We spent two years to come back to where we started. We’re still talking about data collection, and we still don’t have any clarity on what that’s going to look like—what kinds of data are going to be collected, who’s going to be collecting it and how they’re going to use it. It’s wonderful that some of our concerns seem to have reverberated. But the result really is that we have just managed to claw it back from 190 acres to the original 12-acre project that we were concerned about in the first place, so it’s a pretty hollow victory.” – Brenda McPhail, director of the Privacy, Technology and Surveillance Project, at the Canadian Civil Liberties Association

What comes next

The next major deadline for the project is March 31, 2020, by which point the partnership will end if Waterfront Toronto and Sidewalk Labs can’t agree on a development plan.

In the meantime, they’ll work together to create a new development plan for Toronto’s Quayside. It will draw some ideas from Sidewalk’s initial proposal, but incorporate the new principles agreed upon this week.

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“You could call it a revised MIDP, but that’s a language that was coined by Sidewalk Labs, and we don’t want to have a submission, frankly, in their hands and under their control that would come back to us,” said Diamond. 

According to the current agreement, if the final plan for Quayside is approved, the parties will have until Dec. 31, 2020 to develop and approve implementation agreements. 

“We don’t know for sure if a project is going to take place,” Diamond said. “And [Sidewalk has] also made it abundantly clear that they need to make sure that the economics of the project work for them, as well. They will also be reviewing the material as we move forward to the March deadline.”