TORONTO

The Ontario government quietly changed borrowing rules four years ago to restart the stalled MaRS Phase 2 project with a taxpayer-backed loan.

Regulation 46/10 was filed in February 2010 for the sole purpose of allowing the MaRS Discovery District to qualify for a $224-million Infrastructure Ontario loan, one the non-profit entity is currently unable to pay back.

Economic Development Minister Brad Duguid acknowledged Wednesday that the building did not have the 70% confirmed occupancy rate usually required to secure a commercial loan so the government stepped into the void.

“The alternative would have been to see Phase 2 collapse,” Duguid said.

Infrastructure Ontario, which usually gives out construction loans to municipalities and now to not-for-profits like universities, charged MaRS less than 3% interest.

NDP MPP Percy Hatfield quizzed Duguid about why MaRS qualified for a taxpayer-backed loan.

“The original regulation was set up to allow Infrastructure Ontario to make loans to municipalities so MaRS came along and said, ‘We have a problem',” Hatfield said. “Nobody at the time made much about it ... they were never forthcoming about it.”

In a bizarre twist, Hatfield asked Duguid in estimates committee who was the minister responsible for the regulation change, but did not get a definitive answer .

Duguid had been the Minister of Energy and Infrastructure for about a month when the regulation was introduced in 2010.

The regulation did not authorize the Infrastructure Ontario loan but did make MaRS eligible to apply, Duguid said.

Opposition MPPs have been demanding answers to the MaRS deal ever since it was revealed during the spring election campaign that the government was secretly negotiating to buy out a private sector U.S. real estate company involved in Phase 2, a commercial tower adjacent to the MaRS Discovery District at College St. and University Ave. in downtown Toronto.

The Ontario government recently announced that it has paid out $309-million-plus interest for MaRS Phase 2.

Duguid said he has been as forthcoming as possible without revealing commercially sensitive information.

“I’ll leave the witch hunt for (the media) and the opposition,” Duguid said, under pressure from reporters asking for more information on the history of the deal. “What I’m focusing on is the public interest here and that is what do we do going forward to ensure we make a responsible decision for the interests of taxpayers and a decision that continues to ensure that we’re building a strong bio-science cluster.”

Progressive Conservative MPP Ted Arnott said he was surprised to learn at committee Wednesday about the 2010 change in Infrastructure Ontario’s borrowing strategy, and believes that the Liberal government deliberately sat on the details of a MaRS bailout prior to the 2011 provincial election.

“I heard him say the media’s questions are a witch hunt and obviously that’s an inappropriate comment for a Minister of the Crown,” Arnott said.

MaRS Discovery District is a charity funded largely with government money that offers subsidized space to science start up companies hoping to turn research into economic success and jobs.

Phase 2 was built beside the original MaRS building to house commercial tenants interested in locating in a bio-science cluster.