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The Ontario government plans to fire the three provincially appointed directors on the board of Waterfront Toronto over frustrations about its governance, including the handling of its proposed smart-city development with Google affiliate Sidewalk Labs.

The firings would mark the first significant public government intervention in a widely criticized partnership with Sidewalk Labs, a subsidiary of Google parent Alphabet Inc. Waterfront Toronto is a development agency representing all three levels of government, each of whom can appoint four board members at a time.

The board members to be fired are chair Helen Burstyn, veteran investment executive Michael Nobrega – who is Waterfront Toronto’s acting chief executive, and University of Toronto president Meric Gertler. They were notified shortly after 9 p.m. Thursday, said a source close to the Ontario cabinet who was briefed on the plan, but was not authorized to speak on the record. Ms. Burstyn said Thursday night that she had received a call from Infrastructure Minister Monte McNaughton that the provincial appointments would be revoked. On Friday, Minister McNaughton confirmed The Globe and Mail’s report in a statement to media, noting that new board members would be appointed “in the time ahead.”

Waterfront Toronto said Friday morning that Mr. Nobrega would maintain his acting CEO role until a permanent chief was found.

All of the affected board members were appointed by the previous Ontario Liberal government. The subsequent openings will give the governing Progressive Conservatives a chance to shape their role in the agency.

The first-of-its-kind project, called Quayside, has been challenged by Canadian technology leaders, including Jim Balsillie, over how it would address issues that would come with building a neighbourhood with digital technology at its core, such as data ownership, privacy and innovation opportunities. This week, the province’s Auditor-General shared those criticisms and also said that some bidders, including Sidewalk Labs, may have had an unfair advantage in winning the project, that some timelines were rushed, and that the project required more government oversight.

The source said removing the provincially appointed directors was a first step in addressing what the Ford administration saw as governance problems with the project, particularly after reviewing the Auditor-General’s report on Waterfront Toronto. The province plans to add four new members to the board, to be named later. (While the board usually has four provincial appointees, one member, Julie Di Lorenzo, resigned in the summer out of frustration with the Sidewalk Labs smart-city partnership.)

The source cited as factors several of Auditor-General Bonnie Lysyk’s criticisms of Waterfront Toronto, including cost overruns on earlier projects; the lack of provincial oversight on the Quayside project; and timelines that appeared rushed. This includes the three-day timeline the board was given to review the initial agreement before its signing.

The source added that cabinet would use its authority to remove the appointees.

On Wednesday, Mr. McNaughton, who handles the file for the province, had promised to take “decisive action” on the project after receiving the Auditor-General’s report.

In a phone interview late Thursday, Ms. Burstyn said she had found the Auditor-General’s report was “quite reasonable,” and that being let go by the province was “certainly one option I was anticipating” as she saw people in other provincial positions removed by the Ford government. She said she was thankful for the chance to develop and open more of the waterfront for the public, and wished her colleagues well. “I’ve been fortunate to sit on the board of many organizations, and I want to be clear that the staff and board members of Waterfront Toronto are second to none.”

In a statement Friday, Waterfront Toronto said it accepted the province’s decision and thanked the departing board members. “Their years of service towards the people of Toronto and the revitalization of the City’s waterfront have been invaluable to our organization’s vision,” wrote spokesperson Andrew Tumilty in an e-mail.

Sidewalk Labs initially declined to comment, but later provided a statement that echoed their initial response to the auditor-general report, outlining their public-consultation efforts. “We received the Auditor General’s report and are committed to working with all three levels of government to be responsive to any issues of concern,” wrote spokesperson Keerthana Rang.

The decision to fire the board members comes at the end of a turbulent week for Ontario Premier Doug Ford. He has faced criticism for the appointment of a family friend as the Ontario Provincial Police Commissioner – which he has said he had nothing to do with – while Hydro One Ltd.’s $4.4-billion acquisition of Avista Corp. was blocked by Washington State regulators, who cited potential political interference from Ontario as their reasoning.

Ms. Burstyn’s and Mr. Gertler’s three-year board terms are set to expire next year, while Mr. Nobrega was appointed in April this year. He took over as acting CEO after his predecessor, William Fleissig, resigned in July. The source said the province would not interfere in Mr. Nobrega’s acting CEO role.

Mr. Nobrega took on the acting CEO role at a high-stakes time in the middle of planning the Quayside project; at a board meeting Thursday morning, Ms. Burstyn and other directors at several points took moments to thank him for the additional work he has taken on.

The city and province each have the ability to appoint one elected official to the board, although the province has never selected a sitting politician. The government source said it was unclear whether the PCs would include a politician in their new appointees.

The Quayside project is contingent on a board vote over a not-yet-completed “master innovation and development plan” late next year. If it passes, many parts of it will need approvals from all three levels of government.

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