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The Urbancorp complex on Lisgar Street in Toronto.Chris Young/The Globe and Mail

About 200 people turned out Thursday night at a raucous public meeting in Parkdale, many demanding to know why the City of Toronto abruptly withdrew from a four-year-old contract to allow the Toronto Media Arts Cluster (TMAC), a west-end arts consortium, to operate a nearly completed $9-million cultural space on West Queen West.

TMAC, which is composed of four membership-based arts groups, has been working for several years on designs for the 36,000-square-foot facility, built with development levies paid by Urbancorp. It is to include a cinema and collaborative arts spaces, but became the target of a lawsuit last month. TMAC sued the city and the developer, claiming the municipality allowed the 2011 agreement to lapse even though it was prepared to close the deal and formally take over the facility in May.

The group has asked for damages and an injunction preventing the transfer of the facility to another party. The allegations haven't been proven in court.

Citing the provisions of a Section 37 agreement with Urbancorp, city planning officials told the crowd they called the meeting to initiate a formal request-for-proposals (RFP) process to find an operator for the facility, but refused to discuss the impact of the legal action on that process.

"We are not here to talk about why TMAC didn't close on the space," said Lynda Macdonald, a senior planning official.

But numerous audience members questioned why the city has begun looking for another operator before the lawsuit with TMAC is resolved. "It seems to me there's a question of good faith on the part of the city," said Ian Murray, one participant. "Is this meeting in order?"

Others asked planning officials to explain why the city appears to have backed out of the deal with TMAC. Staff declined to elaborate, but e-mails obtained by The Globe and Mail indicate that senior city managers were questioning TMAC's governance structure in private meetings as far back as March. During the meeting, city officials said TMAC chose to not to close the deal.

"TMAC designed this space, all with unanimous approval [from council]," Henry Faber, a non-profit games developer who chairs the TMAC board, said in a statement to the crowd. "We deserve that space. It will be our space."

In an interview following the meeting, Ms. Macdonald said the city doesn't have a timeline for the RFP process, and speculated that it might take until next year to select a winning proponent to assume management of the hub. She also noted that prospective bidders will be informed that the city is facing a lawsuit. "We would advise anyone interested in the space that there's a parallel legal process."

Less clear is what happens if the city ends up selecting an operator other than TMAC but TMAC ends up winning its lawsuit. "That dynamic is something that has to be worked out," said Mike Williams, the city's senior economic development official, who described that scenario as "awkward" but "hypothetical."

"We have many, many permutations."

While Toronto's statement of defence in the TMAC lawsuit must be filed before Monday, Mr. Williams couldn't say whether the city solicitor has weighed in on the advisability of launching a procurement process with an unresolved legal action playing out.

Also during Thursday's meeting, Steven Wood, a representative of Active 18, a West Queen West arts committee that has been pushing for local arts spaces for a decade, said the group wants to see TMAC and the city work out their differences. "The heart of the matter is that the city and TMAC get together and talk about what stands between them and a settlement."

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