Sidewalk Labs is offering to pump more than $1.3 billion into Toronto’s eastern waterfront but wants a development foothold in the Port Lands and a say in the fate of a swath of land far bigger than the original 12-acre “Quayside” site.

The Google sister company’s long-awaited “master innovation and development plan” for the high-tech test district it hopes to build was released Monday to a mix of cautious praise, skepticism and alarm.

The proposal assumes — for the first time publicly — that Sidewalk Labs will also buy, develop and sell part of Villiers Island, a waterfront community to be created as part of $1.25-billion in government-funded flood protection.

Sidewalk Labs wants the rest of Villiers Island, Polson Quay and land on the east side of the Don River to be included in an “Innovative Development and Economic Acceleration (IDEA) District” where its urban innovation projects could be tested on land to be developed by others.

“We believe it’s necessary to expand (our) approach to a second piece of the project known as Villiers West where the learning, innovation can continue to flow,” Josh Sirefman, Sidewalk’s development head, told reporters. If governments consent, the other land could be used to “foster innovation” with Sidewalk involvement guided by public leadership, he said.

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The plan, which Sidewalk vows will be an “economic windfall” for the city and beyond, was quickly branded overreach by Councillor Paula Fletcher. Her ward includes the Port Lands, most of which is owned by the city and Waterfront Toronto, the tri-governmental agency that 20 months ago chose Sidewalk Labs as its preferred partner on Quayside.

“It’s a huge surprise to learn they’re contracted for 12 acres” but have added on far more, said Fletcher (Ward 14 Toronto-Danforth) in an interview after release of the eagerly-awaited plan.

“They’ve come here and pretended we’re little rubes and we don’t know what we’re doing and we don’t have a plan,” for Villiers Island, she said, including a new river and “precinct plan” for the 80 acres including roads, sewage lines and other infrastructure for a planned mixed-use community.

Waterfront Toronto, which would have to approve any final agreement, along with the Toronto, Ontario and federal governments, quickly expressed strong concerns.

In a statement Waterfront Toronto board chair Steve Diamond called the IDEA district proposal “premature” and said his agency told Sidewalk Labs that success must be seen at Quayside, a patch of former industrial land at Queens Quay and Parliament St., before talk of the Port Lands.

“Even then, we would only move forward with the full collaboration and support of the City of Toronto, and then, particularly where it pertains to city-owned lands,” Diamond wrote.

He also balked at Sidewalk Labs’ proposal that it be the lead developer of Quayside. “This is not contemplated,” in the agreement Waterfront Toronto and Sidewalk Labs signed to work together toward a final agreement, he wrote.

Sidewalk Labs officials told reporters that in developing their business model they decided that Quayside isn’t big enough to pilot urban innovations including tall-timber buildings and sensor-driven transportation controls.

The Canadian headquarters of Google’s parent company Alphabet would build its headquarters on west Villiers Island and spur development around it as an anchor tenant, according to the plan which positions Quayside as “the start and foundation” of Sidewalk plans for the area.

The payoff for Toronto, if it signs a final agreement, the company says, is big investment from Sidewalk Labs and its partners that could kick-start other tech industry investment.

The company and partners would pay $900 million to support “a $3.9 billion project across Quayside and Villiers West”; an up-to $80 million investment in a “tall timber factory” plus other funding to kick-start innovative manufacturing; and “up to $400 million in optional financing from Sidewalk Labs” to accelerate infrastructure to support the new live-work-play communities.

Gone from the master plan is any mention of Sidewalk Labs getting a cut of future taxes and developer fees, revenue sources discussed in an internal presentation that was published by the Star in February. In its place, Sidewalk Labs proposes “performance payments” that would kick in after Quayside and Villiers West are built and certain benchmarks are met in the areas of “job creation, sustainability, mobility, affordability, and urban innovation.”

“The proposed financial structure is designed to align the interests of Waterfront Toronto, Sidewalk Labs, and the public (and) to compensate Sidewalk Labs for serving as a catalyst for a new approach to urban development,” states the master plan.

In response to public feedback, Sidewalk Labs limited its ability to profit from many aspects of the project, including “forgoing revenue streams not as directly tied to the public interest,” such as commodification of data, and seeking tax breaks. The company estimates it will make early investments of more than $100 million, plus “the provision of advisory services and certain technology products entirely at cost.”

“This investment has no direct method of return,” the plan states. “Rather, this type of investment is part of why Sidewalk Labs is seeking future performance payments.”

The second half of the model Sidewalk Labs proposes to align public and private interest involves profit-sharing. In the same way that Sidewalk Labs would receive extra payments if Toronto’s social, economic and environmental goals are realized, the city would profit if Sidewalk Labs develops products that prove to be successful elsewhere.

The company proposes sharing with the public 10 per cent of profits for a decade from products developed in Toronto. The payment would not apply to products that Sidewalk Labs would have developed “in the normal course” and only to those “that arise because of the conditions created by Sidewalk Labs’ public partners.”

The 10 years would begin “with the sale of the solution to a second customer after its initial deployment (i.e. when the product has been effectively commercialized).”

“Sidewalk Labs was unable to find any precedent for this kind of profit-sharing arrangement with government,” states the master plan. “It would represent an innovative approach to the public and private sectors partnering not only to create technology, but to jointly reap the proceeds from success.”

Terms of the proposal

Sidewalk Labs’ master plan lays out what it hopes to do and hopes to get out the agreement with Waterfront Toronto to develop Quayside. Here is a look at some of the give and take, which while specific in terms of what Sidewalk is offering on a grand scale if allowed to expand its ideas to most of the eastern waterfront, is less specific in terms of the funds and legislative changes it hopes to receive in return.

Some potential benefits from the Sidewalk project:

$900 million invested by Sidewalk in development of Quayside and Villiers West.

$2.8 billion in additional annual tax revenues based on expanded development of eastern waterfront compared to projected build-out without Sidewalk.

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$9 billion increase in Canadian gross domestic product (GDP).

27,000 additional permanent jobs.

$1.7 billion increase in development charges.

$1.5 billion in revenue from sale of public land.

40 per cent of all housing units offered at below-market rates.

$80 million invested in a mass timber factory.

$20 million for graduate research and innovation startups.

Sidewalk technologies including traffic control and other measures like heated bike lanes installed in district with 10 per cent revenues from commercial sale of that technology returned if technology would not otherwise have been developed.

$400 million in optional financing for a waterfront LRT and other municipal infrastructure like sewers and parks which would be reimbursed by the city at a low interest rate.

30 per cent more square feet of development built 10 years faster than what is currently imagined in city frameworks for the area.

New Google Canada headquarters built on Villiers Island.

Some government responsibilities:

Create a new district upfront encompassing most of the high-valued Port Lands for future development to allow Sidewalk to expand its vision.

Allow Sidewalk to purchase both Quayside and Villiers West from Waterfront Toronto (Villiers West is currently under city ownership) at a price that “fairly accounts for the heightened public policy outcomes required such as levels of sustainability and affordability unprecedented in any commercial development.”

Repay Sidewalk for $400 million in optional financing.

Fund a $1.2-billion waterfront LRT.

Give Sidewalk “performance” pay for achieving certain growth or other targets to be negotiated on closing the deal.

Establish a “public administrator” to oversee the IDEA district and project.

Reimburse Sidewalk for its “advisory and implementation services” on the project.

Make provincial regulatory reforms to allow the construction of tall-timber buildings, dynamic curbs that adjust depending on demand from cars/pedestrians, new energy rate structures and more.

Allow for additional zoning and other land use approvals to proceed with the development through the already established, provincially-legislated planning processes.

— Jennifer Pagliaro

With files from Marco Chown Oved

David Rider is the Star's City Hall bureau chief and a reporter covering Toronto politics. Follow him on Twitter: @dmrider

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