Building Investment, Finance and Audit Committee (BIFAC) Meeting - April 20, 2017

Public Agenda

Item 1 Chair’s Remarks

Action: Information

Pre-read: Verbal Report (5 minutes)

Presenter: Chair

Item 2 Consent Agenda

Approval of Public Meeting Agenda    

Action: Approval

Pre-read: Agenda

Presenter: Chair

Chair’s Poll re: Conflict of Interest

Action: Declaration

Pre-read: Agenda and Conflict of Interest Policy

Presenter: Chair

Confirmation of the Public Meeting Minutes of March 13, 2017

Action: Approval

Pre-read: Minutes

Presenter: Chair

Business Arising from the Public Meeting Minutes and Action Items Update

Action: Information

Pre-read: Action Item List

Presenter: Chair

Item 3 Ten-Year Capital Financing Plan Update 

Action: Information

Pre-read: BIFAC:2017-20 (15 minutes)  

Presenter: President and Chief Executive Officer (Interim)

Item 4 Q1 2017 – Internal Audit Work Plan Update

Action: Information

Pre-read: BIFAC:C2017-18 (10 minutes)

Presenter: Chief Internal Auditor

TERMINATION

Minutes

The Building Investment, Finance and Audit Committee (“BIFAC” or “Committee”) of Toronto Community Housing Corporation (“TCHC”) held a confidential meeting on April 20, 2017 in the Main Floor Conference Room, 931 Yonge Street, Toronto, and by teleconference, commencing at 8:08 a.m.

BIFAC Directors Present:

Colin Lynch, Chair

Vincent Gasparro

Kevin Marshman (via teleconference)

BIFAC Directors Absent:

Councillor Ana Bailão

Nick Macrae

Amanda Coombs (on leave of absence)

Ex-Officio Director Present:

Norman (Bud) Purves (left at 10:34 a.m.)

TCHC Directors Also Present:

Robert Carlo (arrived at 10:01 a.m.)

Councillor Michael Ford (arrived at 9:50 a.m.)

Linda Jackson (arrived at 10:05 a.m.)

Catherine Wilkinson (arrived at 9:55 a.m.)

Regrets:

Councillor Ana Bailão, Vice Chair

Also Present:

Leslie Gash, Acting Vice President, Development

Rose-Ann Lee, Acting Chief Financial Officer and Treasurer 

Ted Millward, Legal Counsel,Corporate 

Sheila Penny, Vice President, Facilities Management

Greg Spearn, Interim President and Chief Executive Officer/ Chief Development Officer

Cynthia Summers, Commissioner of Housing Equity

Michael Vear, Chief Internal Auditor

PricewaterhouseCoopers Staff Present:

Michael Hawtin, Partner, Assurance

A quorum being present, the Chair called the meeting to order and Ms. Sonia Fung served as recording secretary.

Item 1 - Chief Internal Auditor 2017 Performance Measurements (In-Camera Discussion), BIFAC:C2017-29

Staff, with the exception of the Chief Internal Auditor, were asked to leave so the Committee could discuss the in-camera item: Chief Internal Auditor 2017 Performance Measurements.

Item 2 - Chair's Remarks

The Chair of BIFAC did not have any remarks, however Mr. Vincent Gasparro, Chair of Regent Park Energy Inc. (RPEI) Board of Directors, took this time to provide an update on RPEI.

Mr. Gasparro noted that the RPEI Board of Directors will meet on May 3, 2017. Mr. Gasparro advised TCHC has engaged with KPMG to conduct a market sounding for the sale of the asset and he indicated the response has been positive. Mr. Gasparro noted that by the end of May 2017 a Request for Proposals will be issued for those interested in acquiring the asset in some way. 

Item 3 - Agenda

The Committee reviewed the Agenda.

The Committee agreed to modify the agenda to lead with Item 4A. Following Item 4A, the Committee agreed to consider the remaining items in their original order.

Motion Carried 

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Marshman and carried, the BIFAC approved the agenda with the above noted modification to the agenda order.

Item 3B - Declaration of Conflict of Interest

The Chair requested members of BIFAC to indicate any agenda item in which they had a conflict of interest, together with the nature of the conflict. None was declared.

Item 3C - Confirmation of the March 1, March 13 and March 21, 2017 Confidential Minutes

It was identified that Mr. Gasparro was not reflected as being in attendance for the March 13th and March 21st confidential meetings, when he was in attendance for those meetings. Management noted this and the minutes will be amended to reflect Mr. Gasparro’s attendance. 

Motion carried 

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Marshman and carried, the BIFAC approved the minutes subject to the March 13th and 21st minutes being amended to reflect Mr. Gasparro as being present for those meetings.

Item 3D - Report on Business Arising from Confidential Meeting Minutes and Action Item List

Motion Carried 

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Marshman and carried, the BIFAC received Item 3D for information.

Item 3E - Don Summerville Status on Development Report - Remediation Update, BIFAC:C2017-17

Leslie Gash, Vice President, Development (Acting), presented the above-captioned report (BIFAC:C2017-17).

The Committee requested the previous sale price of the property from the previous RFP and Management’s estimate on what the current sale price is likely to be through the new RFP. Management noted that the previous sale price of the asset was $9 million and that all current bids to acquire the asset are over $9 million.

Motion Carried

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Purves and carried, the BIFAC received the report for information.

Item 4A - 2016 Financial Statements & PWC Year End Report, BIFAC:C2017-21

Michael Hawtin, Partner, Assurance , PricewaterhouseCoopers (“PwC”), presented the above-captioned report (BIFAC:C2017-21).

The BIFAC, Management and PwC discussed the report and the following points emerged:

• TCHC’s deficiencies in handling of HST calculations for HST by billing HST-exempt vendors incorrectly. TCHC is to review its list of all HST -exempt vendors to ensure the correct treatment of HST. PwC noted that this deficiency, and the other internal control deficiencies identified, are not significant internal control deficiencies. 
• PwC’s calculation of $1.5 million in overcharges to tenants, which is a figure extrapolated from their sample resulting in, on average, an overcharge of $50 per tenant. The maximum overcharge in their sample being approximately $50. 
• The Committee then conducted an in camera discussion with PwC without staff present.

Item 4B - Annual Information Return, BIFAC:C:2017-26

Rose-Ann Lee, Chief Financial Officer and Treasurer (Acting), presented the above-captioned report (BIFAC:C2017-26)

Motion Carried 

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Purves and carried, the BIFAC received the report for information.

Item 4C - 2017 CMHC Mortgage Flexibility Refinancing Program, BIFAC:C2017-19

Rose-Ann Lee, Chief Financial Officer and Treasurer (Acting) presented the above-captioned report (BIFAC:C2017-19).

The BIFAC and Management discussed the report and the following points emerged:

• TCHC is attempting to take full advantage of this program thanks to CMHC pre-emptively indicating which properties are eligible for the refinancing program and assigning a prime to work with TCHC on its applications.
• Management noted TCHC can gain almost up to $39 million in new money for a 30 year term on properties already selected for the program. At a later date, Management will provide an update on the anticipated amount of money to be received for new properties participating in the program.

Motion Carried 

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Purves and carried, the BIFAC approved the following recommendations in this report and resolved that the report be forward to the Board of Directors for approval:

1. A transaction totaling a maximum of $64.8 Million with Infrastructure Ontario (IO) in connection with the prepayment of 22 mortgages with CMHC, substantially upon the terms in Attachment  1 ( the “Term Sheet”).  Of the $64.8 Million, approximately $26.0 Million will be used to prepay mortgage principal balance and the remaining amount of approximately $38.8 Million will be allocated to a Capital Expenditure Reserve Fund towards capital repairs and maintenance work for the specific properties as well as all other properties in the TCHC portfolio.
2. Authorization for the President and Chief Executive Officer (Interim) and, or, the Chief Financial Officer and Treasurer (Interim) of TCHC to take necessary actions, including substituting of properties secured by IO, negotiating and executing such documents as may be necessary, to give effect to the above recommendation.

Item 5A - Contractor Award: Elevator Maintenance for Groups 1, 2 and 5 (RFQ 17075), BIFAC:C2017-23

Sheila Penny, Vice President, Facilities Management, presented the above-captioned report (BIFAC:C2017-23).

The Committee enquired how TCHC selects which elevators to modernize. Management noted that elevators with the highest volume of service calls are selected for modernization.

Motion Carried 

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Marshman and carried, the BIFAC approved the following recommendations in this report:

a) approve the award of the work to Selco Elevators Ltd. for $6,805,585.80 (exclusive of taxes) for elevator maintenance and parts replacement for a term of 7 years commencing on June 1, 2017 based on the outcome of Request for Quotations (RFQ) 17075 as follows:

• $6,167,485.80 for elevator maintenance contracts as follows:
  • $2,092,750.80 for Group 1 (consisting of 70 elevators, 36 buildings);
  • $2,054,508.12 for Group 2 (consisting of 69 elevators, 34 buildings);
  • $2,020,226.88 for Group 5 (consisting of 67 elevators, 39 buildings);
• up to $638,100.00 ($212,700.00 for each group) for replacement of parts on an as-needed basis;

b) forward the recommendation to the Board of Directors to award the work in line with financial spending authorities; and

c) authorize the appropriate staff to take the necessary actions to give effect to the above recommendations

Item 5 B - Contractor Award: Elevator Maintenance for Groups 3 and 4 (RFQ 17075), BIFAC:C2017-24

Sheila Penny, Vice President, Facilities Management, presented the above-captioned report (BIFAC:C2017-24).

Motion Carried

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Marshman and carried, the BIFAC approved the following recommendations in this report:received the report for information

a) approve the award of the work to Thyssen Krupp Elevator Ltd. for $4,994,900.00 (exclusive of taxes) for elevator maintenance and parts replacement for a term of 7 years commencing on June 1, 2017 based on the outcome of Request for Quotations (RFQ) 17075 as follows:

• $4,334,400.00 for elevator maintenance contracts as follows:
  • $2,142,000.00 for Group 3 (consisting of 75 elevators, 34 buildings)
  • $2,192,400.00 for Group 4 (consisting of 75 elevators, 38 buildings);
• up to $660,500.00 ($330,250.00 for each group) for replacement of parts on an as-needed basis;

b) forward the recommendation to the Board of Directors to award the work in line with financial spending authorities; and

c) authorize the appropriate staff to take the necessary actions to give effect to the above recommendations.

Item 5C - Contractor Award: Elevator Modernization and Maintenance at 13 Locations (RFQ 17074), BIFAC:C2017-25

Sheila Penny, Vice President, Facilities Management, presented the above-captioned report (BIFAC:C2017-25).

Motion Carried

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Marshman and carried, the BIFAC approved the following recommendations in this report:

a) approve the award of the work to Selco Elevators Ltd. totaling $5,765,478.68 (exclusive of taxes) for elevator modernization and maintenance for 27 elevators (13 buildings) based on the outcome of Request for Quotations (RFQ) 17074 as follows and as further detailed in Table 1 of this report:

• $3,659,915.00 for elevator modernization services with purchase orders to be issued as follows:
  • $1,994,386.50 for 2017;
  • $1,665,528.50 for 2018, subject to confirmation of funding in 2018;
• $806,863.68 for elevator maintenance services for a term of 7-years (84 months) commencing on June 1, 2017;    
• up to $1,298,700.00 for replacement of parts on an as-needed basis;

b) forward the recommendation to the Board of Directors to award the work in line with financial spending authorities; and

c) authorize the appropriate staff to take the necessary actions to give effect to the above recommendations.

Item 5D - Contractor Award: Bulk General Repairs (Repairs, Retrofit and Renovation) (RFVQ 17017), BIFAC:C2017-28

Sheila Penny, Vice President, Facilities Management, presented the above-captioned report (BIFAC:C2017-28).

Motion Carried

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Purves and carried, the BIFAC approved the following recommendations in this report:

a) approve the award of the work to the pre-qualified roster based on the established unit prices under RFVQ 17017 with funding under the State of Good Repair: In Your Unit Program for up to $25M for a term of five years (three years with the possibility of two 1-year extensions at TCHC management’s discretion and based on contractor performance) as follows:

• $5M for 2017, as included in the 2017 approved Capital Plan;
• up to $5M annually for 2018-2021, subject to funding in annual Capital Plans;

b) forward the recommendation to the Board of Directors to award the work in line with financial spending authorities; and

c) authorize the appropriate staff to take the necessary actions to give effect to the above recommendations.

Item 5E - Contractor Award: Swimming Pool Life Guards and Chemical Supply (RFQ 17038), BIFAC:C2017-27

Angela Cooke, Vice President, Resident and Community Services, presented the above-captioned report (BIFAC:C2017-27).

Motion Carried

ON MOTION DULY MADE by Mr. Gasparro, seconded by Mr. Purves and carried, the BIFAC approved the following recommendations in this report:

a) approve the award of the work to PPL Commercial Aquatic Fitness and Spa Group for a maximum amount of $2,558,919.90 (exclusive of taxes) ($511,783.98 annually) for swimming pool life guards and chemical supply based on the outcome of Request for Proposals (RFP) 17038 for a term of three years commencing on May 1, 2017 with the possibility of two 1-year extensions at TCHC management’s discretion as follows:

• $466,671.68 annually for life guard services;
• up to $10,112.30 annually for overtime costs;
• up to $35,000.00 annually for chemical costs;

b) authorize the appropriate staff to take the necessary actions to give effect to the above recommendation.

Item 6 - Consolidated Financial Report on Development Projects as of December 31, 2016, BIFAC:C2017-22

Leslie Gash, Vice President, Development (Acting), presented the above-captioned report (BIFAC:C2017-22).

Management noted that the City of Toronto’s Auditor General will be reviewing TCHC’s development program in September. The Committee noted this.

Motion Carried

ON MOTION DULY MADE by Mr. Marshman, seconded by Mr. Gasparro and carried, the BIFAC received the report for information.

Item 7 - Strategic Planning Discussion — Operating Sustainability

The Chair of the BIFAC lead the discussion.

The Committee and Management discussed numerous many strategies to improve operating sustainability. The following categories were among the major points discussed of the discussion.

Increasing Revenue – CMHC Zoned Pricing

• Implementing CMHC zoned based rents instead of the City wide rents now in use. It was noted that Toronto City Council must consent to this change if TCHC were to implement this strategy. Management circulated a chart with CMHC zone based rents. 

Increasing Revenue – Modifying RGI/Market Mix

• Modifying the RGI mix to include more Market rent units in TCHC’s portfolio.  Obtaining consent to transfer some of TCHC’s subsidies to other providers thereby freeing up units to be rented at market, was discussed.

Increasing Revenue – Alternative Investments

• Monetizing rooftops by renting the space to private entities, and using rooftops for solar power generation projects.

Increasing Revenue – Heritage Houses

• The Committee and Management discussed TCHC’s portfolio of stand-alone houses and, more specifically, heritage houses. It was noted that the sale of heritage houses and partnering with other organizations to run and manage these assets was a topic that was already being addressed by the City through Tenants First.

Reduce Costs – Expanding Pilot Projects

• The Committee discussed TCHC’s diesel generator pilot project with Magnolia, and requested if Management could investigate other similar projects for diesel generators that are in immediate need of replacement.

Reduce Costs – “Suite Metering”

• The Committee requested Management provide additional information on the suite metering of utilities as a way to further manage utility costs. Management noted they can come back to the Committee at a later date with information on suite metering. 

Action Items

Provide the Committee with additional information on:

• Further options to monetize building rooftops.
• Implementing CMHC zone based rent, including a hybrid approach between the current city-wide rent and CMHC zone based rents.  
• Suite metering of utilities in TCHC’s buildings.
• Potential pilot projects to replace the diesel generators that are in need of immediate replacement, including a list of properties that have diesel generators and the age of the generators. 

Mr. Purves left at 10:34

Other Business - Vacancies - Discussion

The Chair of the BIFAC lead the discussion. 

Mr. Leah advised that he is putting together an updated presentation that summarizes the points from the working session held by the RSC and BIFAC chairs that will be provided to the Board at the next meeting. Mr. Leah also advised that the response to the Mayor on the vacancy issue is to be submitted April 28th. 

The Committee enquired about reports in the press of 1000 TCHC units being boarded up. Management noted the statement reported was misconstrued, and clarified that the number was a predictive maximum estimate for the potential at the end of the year given the present situation. 

Regarding the closure of the Firgrove Units, Management noted that the City determined after TCHC’s approval that the decision to close the units must also go to Toronto City Council. It was noted that the City as the Service Manager has to approve the plan to relocate tenants.

Management noted they have identified sufficient units to relocate the 108 affected Firgrove families, and clarified that it was not the case that 1000 units were being held for this purpose.

Other Business - Arrears - Discussion

The Chair of the BIFAC led the discussion.

The Committee, Management and the Commissioner of Housing Equity discussed numerous strategies to improve the rate of arrears. It was noted that the situation with arrears needs to be improved but it is within control parameters.  It was further stated that ameliorating the arrears situation is constrained by certain realities, including pressures to minimize evictions. 

The Committee noted that continued efforts to minimize arrears are required, including continued work with OCHE.  Management was asked to continue to work on existing initiatives and encouraged to further consider creative measures to address the constraints on minimizing arrears. 

The following were among the major points of the discussion.

Repayment Plans

• Management noted that 85% of tenants in arrears are in a “managed” state meaning that they are either in repayment plans, L1 Applications have been files, or the case is managed at a legal stage. Management noted that tenants in repayment plans are expected to pay their entire balance in full.

OCHE

• The Commissioner spoke to arrears and noted part of OCHE’s strategy is to become more creative in ensuring tenants are paying arrears, for example, by engaging external individuals (family, friends) to help pay the tenant’s’ arrears.
• The Commissioner noted their office uses eviction as a last resort - out of the 383 files directed to OCHE only 17 have been recommended for eviction. The Commissioner noted this is due to tenants wanting to pay their arrears but having barriers, such as mental health issues.
• The Vice President, Asset Management, noted it is difficult for their team to send arrears to OCHE due to the high number of late payments across the portfolio– on average there are 22,000 late payments by the first of the month (this figure drops to 12,000 by day 6). In addition to this, tenant service coordinators (TSC) must manually verify 2,500 tenant repayment plans for compliance.

TERMINATION OF CONFIDENTIAL MEETING

The BIFAC resolved to terminate the confidential meeting at 11:30 a.m.