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Toronto mayor John Tory is photographed on Villiers St. in the port lands area of Toronto, on Jan 30 2015. Tory sees vast potential for the industrial area on Toronto's waterfront. Bringing the Don River back to it's natural course is one step to connecting this area to the city core on the other side of the Gardiner Expressway. (Fred Lum/The Globe and Mail)

Fred Lum/The Globe and Mail

Ontario is proposing to sign a memorandum of understanding with the federal government and the City of Toronto for a final study of how much it would cost to protect the Don River Port Lands from flooding and open them to major development.

Previous estimates have pegged the cost at nearly $1-billion, but Ontario is proposing one further review before the three levels of government decide whether to foot the bill.

In a letter to federal Finance Minister Joe Oliver and Toronto Mayor John Tory, provincial Infrastructure Minister Brad Duguid wrote that he is "encouraged by your continued interest in this project" and outlines a proposed agreement.

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The letter, which was obtained by The Globe and Mail, calls for a third-party review of the business case for the project and an analysis of the current estimated cost. The goal would be to prevent floods and also create a "community plan" for redevelopment of the land.

The Ontario Liberals and federal Conservatives are often at odds, but Mr. Duguid said in an interview it appears an agreement is possible on this file.

"I think the project's in a good place with regard to the politics around it," he said, adding Ontario could move faster if Ottawa is willing. "The key for us now is to get the due diligence done, the full analysis done as to what the real costs are going to be here."

The project is extremely important to the Toronto mayor, who was on Parliament Hill this week for two days of meetings with dozens of federal politicians, including senior cabinet ministers and opposition leaders and Toronto-area MPs.

Mr. Tory's proposed $8-billion SmartTrack transit system includes a stop in the area at the former Unilever site just north of the Port Lands.

The massive, 364-hectare stretch of former industrial land on Toronto's eastern waterfront has for years been under redevelopment efforts by the city and Waterfront Toronto, an organization created by the three levels of government to improve the city's waterfront.

Ontario argues that federal funding for the project should be in addition to promised infrastructure funding through the Building Canada Fund. The province suggests Ottawa's contribution should come from federal climate-change funds.

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Mr. Oliver responded with a statement Wednesday that acknowledged "productive conversations" have taken place regarding new proposals for Toronto's waterfront, including flood mitigation.

"We are considering them carefully, however, no decisions have been made," he said. Mr. Oliver is working on a 2015 federal budget that will be delivered no sooner than April.

In an interview with The Globe Wednesday, Mr. Tory said he is receiving positive signals from Ottawa that it is prepared to support a Toronto Port Lands Flood Protection Project.

"I think it's being received very positively on all quarters and yes we did discuss it," he said. "It will free up land for development that will produce massive numbers of jobs … It also will provide flood protection so that the federal government won't have to write a huge cheque some day down the road when there's one of these freak storms as they've had to do elsewhere in the country."

The goal of the mayor's trip was to put the city's funding requests on the radar for both the upcoming federal budget and the 2015 federal election campaign. Mr. Tory rejected criticism from councillor and former mayor Rob Ford that the trip was a waste of time and money.

"I'm promoting Toronto's case for support for public transportation and I think the vast majority of citizens of Toronto would say that's exactly what I should be doing," he said.

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Many of the MPs who met with Mr. Tory posted pictures of the meetings on their Twitter accounts, suggesting both opposition and government MPs see political merit in appearing to work well with the new mayor.

The federal Conservatives, Liberals and NDP all have urban and suburban MPs from the Greater Toronto Area. Because of redistribution, the region will have 11 new ridings and many boundaries have been redrawn, meaning close races in the region could have a significant outcome on the federal campaign over all.

Matthew Kellway, the NDP MP for Beaches-East York, said Ottawa needs to be supportive of the city's transit and infrastructure needs, including the Port Lands project.

"It's a great opportunity for the city for economic development," he said, noting that he and other NDP MPs from Toronto have written to Mr. Oliver asking him to support the project.

Trinity-Spadina Liberal MP Adam Vaughan, a former city councillor, said he's concerned Ottawa is eager to make a Port Lands announcement but won't ensure funding for the broader infrastructure needs of the GTA.

"The impulse to support this program from Joe Oliver is right," he said, "but if he does it the wrong way, it could destabalize infrastructure growth in the region."

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With a report from Ann Hui in Toronto

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