Union Station tenants owe city $10 million
Report finds Toronto has not collected operation costs from tenants for 4 years
The city has failed to collect almost $10 million it’s owed by commercial tenants at Union Station and has not exercised basic oversight of some leases at the rail hub for years, according to an auditor general’s report.
The report, which will be debated by the city’s audit committee June 27, determined that “lease administration functions” at Union “have not been performed for the past number of years and immediate action is needed” to rectify the problem.
Among auditor general Beverly Romeo-Beehler’s findings were that the city’s real-estate division has not properly billed the station’s major tenants for operating costs for at least four years, could not demonstrate that it had collected what was owed from retailers who have since vacated the station, and does not have up-to-date measurements of the commercial space or even a complete list of leases at Union.
Councillor Stephen Holyday, who sits on the committee, said that city real-estate staff need to explain what went wrong.
“I am concerned,” he said. “I’m going to give the management a chance to explain it to us, and I really want to feel confident that this will stop . . . It is a lot of money, and it does speak to the public’s trust in our government.”
The city is the primary owner of Union Station, which is in the eighth year of an $800-million renovation.
In 2009, the city entered into an agreement with a private company, Osmington Inc., to administer leases for 33,000 square feet of retail space at Union between 2010 and 2015 and to administer commercial leases in the revitalized station.
In the past five years, Union has generated $59.4 million in leasing revenue, while over the same period, the city has incurred operating costs of $62.4 million.
The operating costs include expenditures on security, utilities, maintenance, cleaning and waste removal. The city also pays for common facilities such as washrooms and the station’s loading dock.
Under the terms of the leases, commercial tenants are supposed to pay in advance for rent and estimated operating costs.
However, at the end of each year, the city is contractually obligated to provide tenants with a notice of the actual operating costs.
If the amount is more than originally estimated, tenants must pay an additional amount under an agreement known as an “annual settlement.”
The audit discovered that “the city did not perform annual settlements with each of its occupants as contrac- tually required.”
City staff could not show that they reached annual settlements with all of Union’s former retail tenants between 2010 and 2015 and couldn’t say whether the tenants owed any money, the report said.
The real-estate division also had not reached a settlement with Via Rail, one of the station’s anchor tenants, in the last five years. The most recent settlement with another anchor tenant, Metrolinx, the provincial transit agency, was in 2013.
The report estimated the amount of uncollected payments could total $9.4 million. The auditor general found that by failing to collect the money on time, the city has missed out on about $740,000 in interest it would have accrued. It had also lost an opportunity to take in up to $122,000 a year by failing to exercise the right to charge Osmington for office rent.