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A courtyard, part of a proposed redevelopment of Toronto's downtown waterfront is seen in an undated artist rendering provided by Alphabet Inc's Sidewalk Labs unit, Feb. 15, 2019.Supplied/Reuters

A senior Ontario government source says Premier Doug Ford would never approve a proposal from Google-affiliate Sidewalk Labs that would see the company given a share of the increased property-tax revenues that result from new development across Toronto’s entire eastern waterfront.

The proposal, which was first revealed by The Toronto Star, was then released on Friday by Sidewalk Labs. The company has been in talks with Waterfront Toronto over a plan to build a high-tech “smart city” on a plot of lakefront land for more than a year.

New York-based Sidewalk Labs says it could help finance Toronto’s proposed waterfront light-rail line and other infrastructure – such as utilities and parks – needed to develop a wider area of the city’s Port Lands.

But in return, the firm wants a share of the higher property taxes generated by the development in the area that follows, as well as the fees developers pay to the city, known as development charges, and even profits from land sales to other developers.

A provincial government source, who was granted anonymity because he was not authorized to speak publicly on the matter, told The Globe and Mail that Mr. Ford would never agree to hand over tax revenue to a large multinational corporation this way. The source also said the tax-sharing proposal was news to senior officials at Queen’s Park.

Waterfront Toronto – a development agency controlled by all three levels of government – chose Sidewalk Labs, a subsidiary of Google-parent Alphabet Inc., as its “innovation and funding partner” for a 12-acre parcel of lakefront land, known as Quayside, in October, 2017.

Talks on a master plan have dragged on for the controversial project, which is expected to include state-of-the-art sensors to track traffic and pedestrians, among other innovations. The bid process was criticized by the province’s auditor-general. And critics have raised concerns about privacy and the use of the data the company would collect – as well as the extent of Sidewalk’s ambitious designs over the rest of the city’s 300-hectare undeveloped eastern waterfront.

Sidewalk has held several town hall-style public consultations about its ideas for self-driving cars, affordable housing and other innovations. But until now, it never outlined its business model, or suggested it would want a share of property taxes.

Micah Lasher, Sidewalk Labs’s head of policy and communications, said the proposals – outlined in a leaked slide deck that was presented to Sidewalk’s parent company – were still at the preliminary stage. He said they hadn’t been made public before this week as they were still under discussion at the company.

He would not say how much of the cost of the $1-billion Waterfront East LRT the company would pick up. Any such arrangements would have to be worked out in further discussions with governments and Sidewalk’s parent company, he said.

Asked what he made of word the Premier was unlikely to approve any tax-sharing deal, he said Sidewalk still needed to do a lot of work before finishing its final offer.

“We believe that when we put forward that proposal, that it will be something that people are excited about,” Mr. Lasher said. "And we certainly welcome a robust public discussion then and every day between now and then about how we can make a great project.”

Sidewalk Toronto’s latest plans also call for 2,500 units of housing, with 40 per cent of it classified as “below market” or affordable, and for the establishment of a “tall-timber factory” somewhere in Ontario to supply wood for use in its innovative plans to use timber for tall buildings.

Ann-Clara Vaillancourt, a spokeswoman for federal Infrastructure Minister François-Philippe Champagne, appeared to pour cold water on Sidewalk’s plans for the entire eastern waterfront: “The scope of the Quayside redevelopment remains confined to a portion of the Port Lands and does not exempt Sidewalk Labs from any of the normal planning or regulatory processes at any of the three orders of government.”

Lee Greenberg, a spokesman for Ontario Infrastructure Minister Monte McNaughton, said Queen’s Park would continue to work with Toronto and Ottawa on the project. He said Ontario expects Sidewalk to come up with a final plan that is in line with Waterfront Toronto’s original vision and that “respects the private data of our citizens and their taxpayer dollars.”

Don Peat, a spokesman for Mayor John Tory, said the mayor was not aware of the financing plan until it was revealed on Thursday. In an e-mailed statement, the mayor said the final proposal, which has yet to be submitted, will be subject to public consultations and approvals by the board of Waterfront Toronto and city council. But he did not offer an opinion on the tax-sharing plan.

But city Councillor Joe Cressy, who is Mr. Tory’s designate on Waterfront Toronto’s board, said he had “serious questions” about the proposals, which have not been presented to Waterfront Toronto. He stressed that if the city disagrees with whatever the company finally comes up with, “we can and will say no.”

City Councillor Gord Perks, a critic of the project, warned that schemes to finance public transit with private money have so far always failed in Toronto, citing pledges from Mr. Tory and his predecessors that developers would fund various new lines: "When we think that fairies and unicorns will pay for transit, we get nothing.”

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