Special Report

Key takeaways from Sidewalk Labs’ long-awaited innovation plan

The Quayside site and Villiers Island, where Sidewalk Labs is proposing a second development not included in Waterfront Toronto's initial vision for the Toronto smart-city project.
The Quayside site and Villiers Island, where Sidewalk Labs is proposing a second development not included in Waterfront Toronto's initial vision for the Toronto smart-city project. Photo: Sidewalk Labs
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The government body that brought Sidewalk Labs into a partnership to develop a neighbourhood on Toronto’s eastern waterfront has concerns about key aspects of the company’s plan.

In an interview with The Logic, Stephen Diamond, chair of Waterfront Toronto’s board of directors, said the agency has “preliminary concerns” that it feels need to be addressed as it goes through its evaluation of Sidewalk Labs’ Master Innovation and Development Plan (MIDP).

The approximately 1,500-page proposal was released to the public Monday in four books, with a combined weight of more than eighteen pounds.

It’s a detailed proposal of what Sidewalk Labs hopes to accomplish in its development, and includes real estate, infrastructure and technological objectives. The Google-sister company is planning to spend more than $1.3 billion over two decades building a 190-acre “IDEA district” on Toronto’s waterfront. The Logic has broken down the key elements of the proposal and what they mean below.

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Goodbye Waterfront Toronto?

Sidewalk Labs suggests the creation of a new public body governing key parts of the waterfront; it would have the authority to perform infrastructure- and transportation-planning throughout the proposed area.

“The success of the public administrator, in turn, depends both on having the ability to set the innovation and development priorities for the district, alongside the three levels of government, and on having the tools to ensure that those priorities are achieved,” reads the document.

As The Logic reported last week, tensions between the two groups have been bubbling below the surface for months. Now, Sidewalk Labs is suggesting a new body to oversee a master plan for the district, and facilitate the distribution of government money.

However, the Google sister company also lays out a scenario where Waterfront Toronto could be granted additional powers, instead. Who would decide which option is pursued remains unclear.

Cutting out the municipal, provincial and federal governments

Sidewalk Labs is proposing that the agency—whether it be Waterfront Toronto or a replacement—be granted broad powers over spending public money and laying out a master plan for the development. This would allow the Google sister company to bypass large parts of the regulatory process for projects like building a light rail transit system or getting autonomous vehicles on the road. Currently, Waterfront Toronto lacks the authority to determine whether new developments can access the regulatory exemptions Sidewalk Labs is hoping it will get. The tri-governmental agency can apportion government money for things like real estate development, but not for things like transportation.

“I don’t know who the public administrator is,” said Diamond in an interview with The Logic. “It’s not within our mandate to be that; we don’t have the legislative authority. Who sits on it? How does it report to city council? How does it report to the province or other legislative [bodies]?”

This land is your land, this land is my land

Sidewalk Labs is asking for 16 per cent of land in what it’s calling the IDEA District to build out its vision on Toronto’s waterfront, which would include office spaces, stores and housing. The proposal doesn’t include dollar amounts for the Quayside and Villiers West lands, but it lays out how Sidewalk Labs will determine the amount it’ll pay. The Logic’s analysis shows that the downtown land area, which works out to just under 55 acres, has an estimated value of $500 million, based on valuation estimates obtained by The Logic last September.

It will set its Quayside land valuation based on what a developer would pay to buy property for buildings that had to meet stricter-than-usual requirements, including more rental housing, community and retail space, as well as sustainability targets. Sidewalk Labs says this is “commonly utilized for the disposition of publicly held land,” citing Waterfront Toronto’s West Don Lands—which, at sources’ lower estimates, is valued at $100 per square foot. Waterfront Toronto would provide input into the valuation process, and independent market experts would review the results.

That figure won’t take into account the reduced value of the land because of the company’s 40 per cent below-market-rate housing commitment, and its use of timber and other innovations, which Sidewalk Labs projects at $115 million. Sidewalk Labs calls this “foregone profit,” and says it’s the company’s investment in piloting its innovation agenda via the Quayside. The firm says 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.

Similarly, the company wants the Villiers West transaction to take into account “the value Sidewalk Labs will create as an economic development catalyst,” but the firm says it’s “committed to fairly compensating” the agency or the city for the land it acquires.

All told, Sidewalk Labs and its partners would make a $900-million investment in real estate and infrastructure across the Quayside and Villiers West, according to the proposal.

This is more than the 12 acres of the Quayside that were considered in play in Waterfront Toronto’s initial Request for Proposals (RFP).

Diamond said in an open letter released by the agency on Monday afternoon that Waterfront Toronto told Sidewalk Labs that the concept of the IDEA District is “premature,” saying the agency “must first see its goals and objectives achieved at Quayside before deciding whether to work together in other areas.”

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Privacy elements

Sidewalk Labs wants a data trust to be created that would oversee the collection of all data in the development. The company wants cameras and sensors to capture data on a variety of metrics including noise, temperature and traffic. Those sensors could help Sidewalk Labs, and other firms, develop new technologies and monetize existing ones. The company claims it won’t sell personal information, use it for advertising or disclose it to third parties.

How Sidewalk Labs will make money

Real estate: The company expects to receive “the traditional revenue streams associated with a real estate project,” citing rental income, the sale of units and developer fees. It also wants to be allowed to enter into presale or pre-lease agreements for the properties it develops.

Technology profit-sharing: The company is proposing 10 per cent profit-sharing of technology “first-deployed” in the IDEA District, which would go into Waterfront Toronto’s coffers (or any adjacent agency established) over a ten-year period. It’s also looking at getting performance payments from the government.

Government payouts: Sidewalk Labs wants to receive payments from Waterfront Toronto, or the administrator replacing Waterfront Toronto, to compensate the company for accelerating waterfront development. Payments would be conditional on Sidewalk Labs meeting growth and performance targets, the first of which the firm expects to hit in about 2028. The proposal does not state how much money Sidewalk Labs is seeking or what the targets it would need to hit are.

What’s the big IDEA?

Sidewalk Labs has ambitions for the entire 138.8-hectare IDEA District, which include Google’s new Canadian headquarters and an urban innovation institute.

This includes 1.5 million square feet of commercial space for an urban innovation campus. “Alphabet commits to establishing a new Canadian headquarters for Google at Villiers West. Alphabet would target 500,000 square feet to accomodate 2,500 jobs.” Alphabet is Sidewalk Labs and Google’s parent company.

The company would also commit $10 million in seed funding for an Urban Innovation Institute focused on developing urban innovations, working in partnership with local post-secondary institutions.

Much of the IDEA District is currently being developed. Seventy-eight per cent of the land is publicly owned, and Sidewalk Labs wants access to all of it. Twenty-two per cent of land is privately owned; those developers will be “permitted” to opt into the IDEA District.

Sidewalk Labs says “existing private landowners would be eligible to access proposed regulatory adjustments and reforms included in the Innovation Framework and receive other inducements.” If private landowners don’t opt in, they would be “responsible for delivering enabling infrastructure to their own sites.”

Partnerships: While Sidewalk Labs sees itself as the primary developer for the Quayside and Villiers West, it plans to recruit partners to run the neighbourhood’s smart grid, dynamic streets technology and other “advanced systems.” The company also plans to bring on a local development partner for its Quayside building projects, and could bring in “outside equity capital” to finance the work. It notes that potential partners for the Quayside could include other companies, non-profits and public-sector organizations, but does not spell out who all the partners would be, or which ones would perform which functions.

The company says $10 million would be committed to a venture fund that would invest in local startups focused on urban innovation.

And, on the intellectual-property front, it wants its patents to provide a platform for other tech companies to build on.

Boundaries of the area included as the proposed IDEA District in the Sidewalk Labs MIDP presented to Waterfront Toronto

Timber! Sidewalk Labs is looking to build 35-storey timber buildings. Initially, the firm had proposed 30-storey buildings, but it conducted new research suggesting that an additional five storeys will be possible.

Sidewalk hot spots: Sidewalk Labs is looking to partner with a telecommunications company to build a public Wi-Fi network. The firm “hopes to work with existing telecommunications companies with experience on the Toronto waterfront to build out infrastructure and conduct research and development of new technologies,” according to the report. The telecommunications company will “deliver gigabit service to every residential unit that gets built on public land, including in affordable housing.”

Responses

Toronto Mayor John Tory did not directly respond when asked if he’d consider setting up a new agency outside of Waterfront Toronto, as Sidewalk Labs suggested. “Collectively, our job as governments, along with Waterfront Toronto, is to make sure the Quayside project – and the tremendous opportunity it represents for innovation, economic development and jobs – is done in a transparent manner that’s good for Toronto, good for the province, and good for Canada,” Tory said in a statement to The Logic.

“I look forward to Waterfront Toronto consulting the public about this draft plan and thank officials at Waterfront Toronto for their ongoing work on this plan that ultimately will be subject to the approval of all parties involved.”

Laurie Scott, Ontario’s infrastructure minister who took the role in a cabinet shuffle on June 20, similarly did not address questions about whether the provincial government would be open to the creation of a new public administrator, or expanding Waterfront Toronto’s powers.

“Once the public has provided input and the evaluation process has concluded, Waterfront Toronto’s Board of Directors will decide on the future of the proposal in question,” she said, adding that she had “full confidence in the Board’s expertise and leadership.”

Federal infrastructure minister François-Philippe Champagne also did not address questions about setting up a new public administrator. “Waterfront Toronto is an arm’s length tri-government agency and we are supportive of its formal evaluation process that will assess the MIDP and whether it represents sound planning and good value for Toronto residents,” said Ann-Clara Vaillancourt, Champagne’s press secretary, in a statement. “As the MIDP is a proposal at this stage, we look forward to closely monitoring how the initiative unfolds over the course of public consultation and expert evaluation in the coming months.”

Toronto city councillor Joe Cressy, whose ward includes parts of the waterfront and who sits on the Waterfront Toronto board, praised the affordable housing and sustainability aspects of the proposal. He also flagged a “number of significant concerns, including data collection, management and privacy, project scope beyond Quayside, and requirements for future infrastructure investments.”

Councillor Paula Fletcher, whose ward includes some of the lands in Sidewalk Labs’ proposal, said that the company does not have the authority to expand the scope of the project beyond Quayside’s 12 acres. “They are simply insulting the citizens of this city,” said Fletcher. “Billions of dollars [are] at stake here and proper procurement must be followed.”

Michael Bryant, executive director and general counsel for the Canadian Civil Liberties Association (CCLA), wrote in a statement to The Logic, “Our argument before the Divisional Court is that Waterfront Toronto lacks the legal jurisdiction and the capacity to manage this monster of a deal. Too much is at stake to permit a democratic shell game that permits government leaders to attend press conferences but otherwise avoid any accountability.” The CCLA has filed a legal challenge against Waterfront Toronto seeking a “reset” to the Quayside project.

Community advocacy group #BlockSidewalk, which has similarly been seeking a reset of the project, raised concerns with the months-long delays and the expansion of the proposed development from 12 acres to almost 200 acres.

“No public administrator is needed to recognize that they are trying to scam the City of Toronto out of prime waterfront real estate. They never got contracted to do this work, so why should we even entertain this,” said #BlockSidewalk organizer Thorben Wieditz.

In an op-ed for The Globe and Mail, Richard Florida said that Sidewalk Labs’ plan gives Toronto an opportunity to be a world leader in urban tech. Florida is a professor at the University of Toronto’s School of Cities and Rotman School of Management.

Matthew Leibowitz, general partner at Plaza Ventures, said he thinks Sidewalk Labs’ plans will put Toronto on the map as a “world–class tech hub,” and that the project is one of the most important things to happen to Toronto’s tech ecosystem. Plaza Ventures is the venture capital arm of Plazacorp, which is leasing 307 Lakeshore Blvd. E. to Sidewalk Labs for its Toronto office.

Daniel Bernhard, executive director of the advocacy group Friends of Canadian Broadcasting, had a different reaction. He raised concerns about data being collected on children, and Sidewalk Labs assuming functions usually performed by government. “For Sidewalk to succeed, Google needed to find the most compliant government possible: one that would gladly surrender sovereignty to a private American corporation,” said Bernhard. “Google needed a pushover, and clearly it determined that of all governments on Earth, Canada was the biggest pushover.”

Bikes, trains and scooters, oh my!

Bike share: Sidewalk Labs plans to make bike and pedestrian paths connected to light rail and bus stops. Quayside would have 3,800 bike parking spaces, 190 bike-sharing docks and 60 electric bikes. The report says, “Cyclists would access these stations through either dedicated lanes or entire streets prioritized for bicycle travel, with ample bike parking and bike- and scooter-share access adjacent to stations.”

Public transit: The company is advocating for the creation of a 6.5-kilometre light rail transit (LRT) line that would service the eastern waterfront, as proposed in the Waterfront Transit Network Plan. Independent of that plan, Sidewalk Labs is proposing an optional addition to that infrastructure to service the area north of the Keating Channel for future development in the area, including Villiers Island. In addition to existing bus lines, Sidewalk Labs is proposing an extension of the 65 Parliament bus route, which it envisions encircling the Quayside lands. “These proposals raise important implementation concerns,” wrote Diamond in his open letter. “They are also not commitments that Waterfront Toronto can make.”

Scooter share: The development would have 190 e-scooters. Several U.S. scooter- and bike-sharing companies are currently eyeing Canadian expansions. Lime has a scooter pilot in Waterloo. Last week, Skip got 400 scooters approved for a pilot in Kelowna, B.C.; Lime, Uber and Jump have all talked to the B.C. municipality about expanding in the city. Getting scooters on the streets would require a law change in Ontario, but, as The Logic reported earlier this year, the provincial government is exploring changing those regulations.

We built this city

Real estate developments at the Quayside and Villiers West: The total cost for these developments is expected to be $3.9 billion, which the firm will pay for through “an equity commitment from Sidewalk Labs and its partners, construction loans, certain existing affordable housing programs, and the reinvestment of proceeds received as the project progresses (such as proceeds from condo sales).” New York’s Hudson Yards development—which Sidewalk Labs CEO Dan Doctoroff championed when he was deputy mayor of the city—received almost US$6 million in tax breaks and other government incentives, as reported by The New York Times in March. In April, critics questioned the amount of money used for Hudson Yards’ development that was allotted for the EB-2 visa program, by which immigrant investors put their money toward projects in areas with high unemployment in order to buy their visas at lower rates.

Building Quayside for $2 billion: In all, Sidewalk expects building the Quayside to cost about $2 billion. The firm won’t pay all that itself, but will instead ask local partners to shoulder some of the cost. That includes timber construction and “innovations like Shikkui plaster and digital electricity.” The company also flags that there will be less parking and more mixed commercial- and residential-use buildings, which it believes will result in lower rents.

The Shipping Channel: Sidewalk highlights a “future option” of developing south of the “Ship Channel,” which it claims could “become home to over 26,000 direct jobs, create $8.1 billion in annual GDP, and generate $2.5 billion in tax revenue.” The plan suggests that third parties would start developing in the area as a knock-on effect of Sidewalk building, that two bridges could be added so the LRT could connect to the area.

Economic Impact: Toronto-based real estate consultant firm urbanMetrics calculated that the construction impact of Sidewalk Labs’ plans would add $22.6 billion in GDP, generate about $8.6 billion in taxes and 174,000 jobs by 2040. All the proposed additions are premised on baseline development projections. In other words: if nothing fundamentally changes about the waterfront’s development, this is how much Sidewalk Labs’ plans would add to the area.

What’s next

Now that the proposal has been submitted to Waterfront Toronto, it kicks off an evaluation and public consultation. Waterfront Toronto said it will hold its first round of consultation four weeks after receiving the MIDP, some time in mid-July. The agency has committed to documenting and publicly releasing all the feedback it receives throughout that process.

Update: Our friends at BetaKit weighed the MIDP, and report that it is in fact 18 pounds.