Promises Made, Promises Broken: An Investigation into the City’s Below-Market Rent Program

The Issue

The City has a Below-Market Rent (BMR) policy that allows some non-profit community groups providing key services to Toronto residents to lease City space in a way that is cost-neutral to the City. In return, these community agencies provide important programs to Toronto residents at a lower cost than the City could provide.

In February 2012, six non-profit agencies leasing space in the same City building (the Complainants) complained to the Ombudsman. They said that the City was raising their rent by 550%, and that despite repeated requests, the City had failed to provide an adequate explanation for the increase.

Our Investigation

We reviewed documents, including governing policy and procedures, and conducted several interviews, including with the Complainants, City staff, and Councillors.

The investigation considered the following issues:

• How the City arrived at the estimated operating costs for affected tenants
• Whether adequate notice was given for the increase in operating costs
• Whether the City provided sufficient information to the Complainants
• Whether there was an unreasonable delay in providing the requested information

What We Found

The investigation found that:

• Real Estate and Facilities staff communicated extremely poorly with tenants and other City staff.
• Real Estate changed the rate that was to be applied four separate times, failed to provide the promised data justifying the increases and did not apply policies consistently.
• There was a failure to meet basic standards of service. SDFA was the exception, and their staff tried to facilitate communication throughout.
• The City never issued written notices to the Complainants about any pending increases in rent. The changes were mentioned only orally in meetings, at which City staff kept no records. Staff would promise to follow up with further information, but rarely, if ever, met those commitments. 
• There were chronic delays within Real Estate and Facilities. Promised deadlines to provide information to the Complainants were missed by many months, and sometimes, years. 

Our Recommendations

We made 22 recommendations including that:

• The City work with the Complainants to draft a list of all outstanding promises, and that the commitments on this list be fulfilled by May 31, 2013.
• An information package be given to all BMR tenants, setting out what they can expect each year, including a breakdown of operating costs and related information, and how rent will be increased if full operating costs are not being recovered.
• The City establish a requirement for written notice regarding changes to rental rates, including a requirement for a minimum notice period.
• City divisions involved in this matter retain minutes of business meetings as appropriate and that a record-keeping process be established for their retention.
• The City refund the non-profit organization for all monies improperly charged in respect of property taxes and apologize to them for the error.
• The City provide the above organization with a written apology from the Chief Corporate Officer for the original error and the delay in fixing the problem.
• The City Manager provide a written apology to the Complainants for the manner in which they were treated by City officials.
• Real Estate review the staff report submitted to Government Management Committee in October 2011 and amend any errors or omissions required in a letter to the Complainants.