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Toronto's Port Lands stretches from the inner harbour to Leslie Street south of Lake Shore Blvd.Michelle Siu/The Globe and Mail

Waterfront Toronto, the agency set up by three levels of government to oversee development of the city's shoreline, will run out of cash in three years and is asking permission to take on debt to fund its future operations.

The agency, established a decade ago with $500-million from each of the federal, provincial and municipal governments, will be in a "cash shortfall position" by 2017, says a new report to be considered by Toronto's executive committee next week.

To keep going, the agency has drafted a plan for the next decade – what it calls Waterfront 2.0 – that outlines the need for another $1.65-billion in investment to continue its work. The plan asks that the three levels of government it answers to give the agency the power to finance operations with short-term debt and the ability to take out loans to finance construction.

The timing of the new report sets the stage for funding for the agency – and its continued existence – to become an issue in this year's race for mayor. City staff are proposing to report next year on options.

Waterfront Toronto's defenders point to its track record as evidence that it should continue to oversee major development projects, such as the Port Lands. Without a new funding commitment from the federal and provincial governments, the city could save money and increase accountability by doing away with an additional layer of bureaucracy.

Early in Mayor Rob Ford's administration there was a push, led by his brother, Councillor Doug Ford, to have the city take over development of the Port Lands. That effort was defeated by council after the Etobicoke councillor brought in a consultant to design a plan for the area that included a large mall and a Ferris wheel.

With its money running out – all federal money has been spent, there was $17-million left from the province at the end of last year and $170-million in city funding at the end of March – Waterfront Toronto's future is in question once again.

Next week's executive meeting will be the first with the mayor since he left two months ago to enter rehab.

"We have to have a really hard look at the future of Waterfront Toronto," said Councillor Denzil Minnan-Wong, a member of the executive. "They are not as transparent or accountable as they need to be."

Councillor Michael Thompson, chair of the city's economic development committee and an executive-committee member, said he's pleased with the progress Waterfront Toronto CEO John Campbell has made and supports allowing the body to complete its projects.

Mr. Thompson said Waterfront Toronto should be allowed to borrow against future earnings like any other business. "I think that is something we should be encouraging," he said. "We want the waterfront to be built. We want it to be done as quickly as possible. It can't be built without money."

Mr. Campbell said in the past decade Waterfront Toronto's efforts have generated $622-million in tax revenue and more than $2-billion in private-sector investment.

Under the proposed funding model, he said no level of government would be asked to guarantee loans. Additional government investments would be needed, but he could not say how much. The agency wants permission to finance operations with a $40-million line of credit.

Councillor Paula Fletcher, whose ward includes the Port Lands, warned against the city taking over the job now done by Waterfront Toronto. "I don't believe the city could do it on its own," she said. "It would become too political, too quickly."

With files from Ann Hui

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