'Slush fund' or 'standard practice'? Developer fund debate gets heated

Ottawa city councillors have changed the terms of a $300,000 "voluntary contribution" to fund traffic calming and affordable housing after some questioned if the developer felt pressured to offer it — an insinuation Capital Coun. Shawn Menard deemed "egregious."

Katasa Group agreed to provide the funding following what Menard called "goodwill" negotiations.

The Gatineau-based developer has several projects on the go, including a recently approved 22-storey tower at Bronson and Carling avenues.

City staff wrote in a report on the project that Katasa Group responded to community concerns by reducing the building's height and adding setbacks and retail space.

"This project was unique, complicated and is not a run-of-the-mill development," Michael Polowin, a lawyer for Katasa Group, wrote in a letter to Mayor Mark Sutcliffe on Tuesday.

It said the voluntary contribution reflects the support given by the city on a difficult development, but noted that it "should not be seen [as] a universal agreement by Katasa to provide similar project donations in the future."

Many councillors supported the plan, noting similar past agreements. Others disparaged it as a potential conflict or simply a "bag of money" being thrown on the table.

Accusations without evidence

From whispers to hand-waving, the debate appeared to ruffle feathers around the council table.

The tension peaked when Orléans East-Cumberland Coun. Matt Luloff called the donation a "slush fund" and suggested that Menard had somehow goaded the developer into agreeing to it.

"I have it on good authority that this developer felt pressured by this councillor to make this contribution and understood that it was simply the way that we do things in Ottawa," Luloff said.

Orléans East-Cumberland Coun. Matt Luloff shows Orléans West-Innes Coun. Laura Dudas something on his phone during Wednesday's meeting. (Jean Delisle/CBC)

Moments later, Menard broke in to demand the comments be withdrawn.

"The councillor insinuated something that would amount to something like extortion or bribery," he said. "Feel free to provide evidence of that, councillor, but don't say those things unless you have some evidence to back it up."

Luloff refused to take back his words, instead challenging Menard to present his email exchanges with the developer.

In a post-council interview, Menard told reporters he was "really disappointed" in the comments, which he said were "unbecoming of a city councillor."

Luloff declined a request from CBC to discuss his accusation outside of council chambers.

He later sent a statement saying that "what happens at the council table stays there for me. When the meeting is over, I move on."

Luloff has been nominated to represent the federal Conservatives in the next election.

New policy will guide councillors

Councillors jumped to defend Menard's integrity, even as some argued there was a perception of conflict that should have been avoided.

Many pointed to previous memorandums of understanding with developers, including one in relation to a Heron Gate development that displaced low-income tenants.

"I do not understand why we're kicking up a fuss about this development right now," said fellow downtown Coun. Ariel Troster.

"Was the previous council simply not paying attention? This was standard practice."

Somerset Coun. Ariel Troster and Kitchisippi Coun. Jeff Leiper both supported the voluntary contribution agreement, saying these kinds of donations help urban residents with the effects of development. (Jean Delisle/CBC)

After initial debate on this issue was deferred last November, the integrity commissioner weighed in. She stopped short of making an official finding, calling the question a policy matter.

Policy has been at the crux of this debate, or rather the lack thereof.

A motion by councillors Marty Carr and Catherine Kitts to direct staff to consult with the development community and create a policy framework was carried without dissent.

Councillors want guidance on when and how to enter into negotiations, including a toolkit.

"In the absence of a policy, it can lead to false impressions and it can lead to people casting aspersions on an agreement," Mayor Sutcliffe told CBC.

Agreement not yet signed

Earlier Wednesday, Jason Burggraaf with the Greater Ottawa Home Builders' Association sent a letter to council members saying "the Association is deeply troubled by the potential precedent this may establish."

It sparked concerns among councillors that developers will see the potential for donations as a reason not to build here.

City planning lawyer Tim Marc said the agreement doesn't set a precedent since it is entirely voluntary.

Many still worried, though, that Katasa believed the donation could lead to more requests, saying that would not be "appropriate as a matter of course."

Concerned councillors voted to support an amendment from Coun. Cathy Curry as a sort of compromise.

Katasa Group, which has offices in Gatineau, Que., offered to pay $300,000 toward traffic calming and affordable housing in Capital ward. (Yasmine Mehdi/Radio-Canada)

Instead of the money being earmarked for residents who live near the new development, it would be available for staff to spend on projects city-wide.

Now it's up to Katasa to decide whether to accept the new terms.

That has Menard concerned.

"If you're that developer and you've negotiated to say that it's going to that ward … you've got to think that they might reconsider," he told reporters. "I hope they don't."

CBC could not reach Katasa Group for comment on this story.