Report: Business Board - April 26, 2023

REPORT NUMBER 272 OF THE BUSINESS  BOARD

APRIL 26, 2023

To the Governing Council,
University of Toronto.

Your Business Board reports that it held a meeting in the Council Chambers, Simcoe Hall, on Wednesday, April 26, 2023, at 5:00 p.m. with the following members:

In Attendance: Sandra Hanington (Chair), Rajiv Mathur (Vice-Chair), Scott Mabury (Vice-President, Operations, Real Estate and Partnerships), Heather Boon (Acting Vice-President, People Strategy, Equity and Culture), Trevor Rodgers (Chief Financial Officer), Glen Bandiera, Janet Cloud, Alicia Damley, Teodora Dechev, Mathangi Gopinathan, Sue Graham-Nutter, Thomas Hofmann, Paul Huyer, Sarosh Jamal, Kathryn A. Jenkins*, David Regan, Ian Taylor, Grace Westcott, Mary-Agnes Wilson*

Regrets: Olenka Baron, Annabelle Dravid, K. Sonu Gaind, Maureen Harquail, Arman Rasekh, Danielle Skipp, Lara Zink

Secretariat: Timothy Harlick, Assistant Secretary (Secretary)

Non-Voting Assessors:
David Palmer, Vice-President, Advancement, Joseph Wong, Vice-President, International, Jeff Lennon, Assistant Vice-President, Planning and Budget, Anne Macdonald, Assistant Vice-President, Spaces & Experiences, David Lehto, Chief, University Planning, Design & Construction, Susan McCahan, Vice-Provost, Academic Programs, Ron Saporta, Chief Operating Officer, Property and Sustainability, Deb Brown, Chief Administrative Officer, UTM*

In Attendance:
Gwen Burrows, Assistant Vice-President, International Engagement and Impact, Chuck O’Reilly, President and Chief Investment Officer (CIO), University of Toronto Asset Management Corporation (UTAM), Tad Brown, Counsel, Business Affairs & Advancement, Helen Bao, OREP Executive Finance Officer, Sanish Samuel, Controller and Director of Financial Services, Anthony Tia, Director of Treasury and Investment Services, Marc Couture, Director, Sustainability Operations & Services, Alex Matos, Director, Internal Audit Department, Allison Burgess, Director, Sexual & Gender Diversity Office, Russell Smith, Manager, Finance and Administration, Spaces & Experiences, Olivia Stewart, Development Finance Analyst, Richard Samuel, KPMG

*Attended Remotely
 

ITEMS 3, 5 & 8, and IN-CAMERA ITEMS 18 & 19 (a)&(b) WERE APPROVED. ALL OTHER ITEMS ARE REPORTED TO THE GOVERNING COUNCIL FOR INFORMATION.

Pursuant to section 33(i) of By-Law Number 2,
items 15 to 19 were considered in camera.

OPEN SESSION
 

1. Chair’s Remarks

   
   The Chair welcomed members and guests to the meeting of the Board.
    

2. Reports of the Administrative Assessors

   
   There were no reports from the administrative assessors.
    

3. Spaces & Experiences: Annual Report 2022-23 and Budget 2023-24 and 4 Corners Annual Report 2022-23
   
   The Chair noted that under its Terms of Reference, the Board reviewed and approved the annual budget of unincorporated business ancillaries.
   
   Professor Scott Mabury, Vice-President, Operations and Real Estate Partnerships, commented that the University Development and Campus Services had been established as a business ancillary on June 18, 2020, and was subsequently renamed Spaces & Experiences (“S&E”) in December 2022.  He added that S&E brought together St. George campus Ancillary Services and the tri-campus mandate of the University’s Real Estate department, both part of the division of Operations and Real Estate Partnerships.
   
   Ms Anne Macdonald, Assistant Vice-President, Spaces & Experiences, reported that the newly renamed portfolio refreshed its strategic plan and committed to 4 new strategic pillars. The key themes included: continued integration of roles and teams for efficiency and cohesion, building on the team’s track record as subject matter experts and creative problem solvers, doing more work to engage the communities served by the portfolio, and implementing a plan to embed Equity, Diversity and Inclusion in the all the division’s activities.
   
   Discussion
   
   In response to a member’s question regarding the Food and Beverage revenue budget being higher than the 22/23 forecast, Ms MacDonald reported that the Food and Beverage budget was the largest component of the budget and contained the following smaller budgets:

• Residential dining (student meal plans, cash revenues from non-residential customers, summer meal programs): about 47% of the total. Price increases of 5% were included in the budget for residential and retail dining. In residential dining, anticipated volume increases of about 10% were a result of streamlining meal plan options and anticipated higher occupancy rates.
• Retail (revenues from all non-residential food locations, including third party operators; vending): about 32% of the total.
• Catering and Beverage Services (includes catering delivered and served on campus, and the Chestnut conference centre revenues): about 16% of the total. All related activities were comprehensively reviewed this year, including competitive benchmarking of similar service offerings both on and adjacent to campus. As a result, prices and service fees had been adjusted.
• Campus Events: about 5% of the total. Campus Events was also reviewed this year and a cost recovery model for internal events was set to launch on May 1, 2023, after significant stakeholder consultation. The budget contained an assumption that all Campus Events costs would be fully recovered moving forward, and external event and filming revenue would now yield a surplus. Campus Events would also be responsible for the SRIC conference centre when it opens later this year; these revenues had not yet been modelled and would be added to future budgets.

• THAT the Business Board concur with the recommendation of the University Affairs Board’s approval of the S&E fees charged to students and the University community; and
  
  THAT the proposed 2023-24 operating plans and budgets for Spaces & Experiences, as summarized in the S&E annual report Appendix A, and the St. George business ancillary rates as summarized in Appendix B, be approved effective May 1, 2023.
  
  On motion duly moved, seconded and carried
   

YOUR BOARD APPROVED

THAT the Business Board concur with the recommendation of the University Affairs Board’s approval of the S&E fees charged to students and the University community; and

THAT the proposed 2023-24 operating plans and budgets for Spaces & Experiences, as summarized in the S&E annual report Appendix A, and the St. George business ancillary rates as summarized in Appendix B, be approved effective May 1, 2023.
 

4. Semi-Annual Update on Investment Performance and Responsible Investing Activities to December 31, 2022
   
   Chuck O’Reilly, President and Chief Investment Officer (CIO), University of Toronto Asset Management Corporation (UTAM) presented the UTAM Semi-Annual Update on Investment Performance and Responsible Investing Activities to December 31, 2022.
   
   Highlights of the presentation included:

• The University had established an investment target for LTCAP at an annual investment return of 4.0% plus the increase in CPI, net of fees and expenses, over ten year periods.
• For the year ending December 31, 2022, the target investment return (including CPI) net of fees and expenses was 10.5% (2021: 8.8%).
• The actual investment return for the year was -8.9% (2021: 14.9%) for LTCAP.
• The actual investment return for the Reference Portfolio was -13.0% (2021: 10.2%).
• In 2022, the actual LTCAP return was higher than the Reference Portfolio return by 4.1 percentage points (-8.9% versus -13.0%) but it was less than the target returns by 19.4 percentage points (-8.9% versus +10.5%).
  
  Mr. O’Reilly reported that over the 10-year period ending December 31, 2022, LTCAP outperformed its target return by 1.8 percentage points per annum and it outperformed the Reference Portfolio by 1.9 percentage points per annum, adding more than $523 million in additional value to the LTCAP portfolio compared to what would have otherwise been achieved under the passive investment approach of the Reference Portfolio.
  
  He further commented that UTAM had continued to advance its responsible investing activities in 2022 and had set a new carbon footprint reduction target of 50% by 2030, using 2019 as the baseline date. Similar to 2021, the 2022 carbon footprint was calculated on equity, equity-like securities (i.e., private equity and real estate via proxy) as well as corporate bonds, which together comprised approximately 70% of LTCAP’s net asset value.
  
  Mr. O’Reilly concluded his presentation noting that beginning with the 2022 Annual Report, in addition to a usual review of investment activities, governance, risk management and portfolio performance, UTAM would also include content that previously had been covered in a separate Responsible Investing Report. Combining these two reports reflected a fundamental belief that producing them separately, while having practical advantages, created an artificial distinction – and further noted that that sound investing was, by definition, responsible investing.
  
  Discussion
  
  In response a member’s question regarding evaluating returns against a reference portfolio instead of other peer institutions, Mr. O’Reilly commented that at the request of the UTAM Board, he had completed a peer group analysis over a 10-year period. The research indicated that UTAM had outperformed the median return by 20 basis points, while taking less overall risk.
   

5. Amendment to the Debt Strategy
   
   Mr. Rodgers introduced the proposed Amendment to the Debt Strategy and commented that the Debt Strategy was initially approved in June 2004 and last revised in November 2012. The Debt Strategy established a single Debt policy limit including both internal and external debt, with fungibility between them. The Debt policy limit was calculated annually using the 5% debt burden ratio (debt service cost divided by total expenditures) as a key determinant, and the viability ratio (total expendable resources divided by total debt) threshold of 0.8 was taken into consideration in setting that Debt policy limit. 
   
   Mr. Anthony Tia, Director of Treasury and Investment Services, provided a presentation. Highlights included:

• The proposed amendment was to expand the definition of debt under the debt policy to include indirect (off balance sheet) debt exposure from new joint venture partnerships, and to increase the debt burden limit to 6% using the new expanded definition of debt
• Actual debt outstanding as of April 30/22 was $889 million – with a 2.2% debt burden ratio
• The revised 6% limit remained lower than the 7% industry benchmark.
• The revised limit would be applied to both direct and indirect debt, without specific ratios for each category, thereby continuing to keep the fungibility principle from the current debt strategy.
• The viability ratio remained unchanged at 0.8 but would apply to external debt only.
• The increase of the debt burden limit of 5% to 6% would add $389M to the University’s current debt capacity from $2,096.7M to $2,485.7M, of which $31M would be allocated to existing indirect debt.
  
  Discussion
  
  In the ensuing discussion, Mr. Rodgers commented that:
• The Ministry of Colleges and Universities (“MCU”) had not yet finalized their new financial health framework including metric definitions, risk thresholds, or action plans. However, based preliminary conversations, it was expected that MCU would assign an average score across multiple metrics in each of three financial health categories — liquidity, operating income, and debt. They would determine a specific action plan for the University (no action, low action, medium action, high action) based on the average performance across categories. The University remained in the no action to low action category under the proposed policy revisions.
• There was an important distinction between the MCU definition of high debt risk – which was a 4% interest burden ratio on direct external debt only – and the proposed policy limit of 6%, which included both principal and interest on external debt, internal debt, and now indirect debt exposure.
• Under MCU’s definitions, the University’s debt ratio was 1.2% as MCU did not include internal or indirect debt exposure in its calculations.
• The policy change would increase the overall amount of debt capacity for the University.
• The CFO continued to have responsibility for reporting to the Board on the University’s debt capacity, and the Finance Division would provide the risk assessment of debt exposure in joint venture partnerships and provide an initial risk assessment at the time new capital projects are brought forward.
• Updates to those assessments would occur on at least an annual basis with a report to the Business Board in the annual debt strategy review.
  
  On motion duly moved, seconded and carried
   

YOUR BOARD APPROVED

THAT the Business Board approve the proposed revisions to the University of Toronto Debt Policy, to be effective May 1, 2023.
 

6. Annual Report, 2022: Vice-President, People Strategy, Equity and Culture
   
   Professor Heather Boon, Acting Vice-President, People Strategy, Equity & Culture, reported that the 2022 Report detailed the activities and accomplishments of the Division of People Strategy, Equity & Culture (“PSEC”) between January 1 and December 31, 2022.
   
   Highlights of the presentation included:

• Community support through various stages of restart and recovery from the COVID-19 pandemic. At each stage the University adapted, affirming the importance of in-person supports while developing new approaches and resources that met the changing circumstances. Efforts remained focused on inclusion: ensuring supports and services could be accessed by those in need.
• PSEC remained committed to developing strategies to promote well-being, safety, workplace recognition, and a sense of community.
• Tools such as Pulse Surveys and the “Speaking Out!” Employee Engagement Survey were used to gain insight and understanding of employee concerns and experiences.
• PSEC collaborated with tri-campus partners to change systems, policies, and practices that pose barriers to members of our community.
• The University launched the Institutional Equity Office and enhanced communication and support around complaints resolution for students, faculty, librarians, and staff.
• PSEC had launched an Employee Equity Dashboard and revised the Equity Survey to better capture and understand employee data.
  
  Discussion
  
  In response to a member’s question, Professor Boon commented that the University had not mandated a minimum number of days employees were required to work in-person. Divisions, Faculties, and campuses were responsible for determining where hybrid work meets their operational needs and the PSEC supported these local decisions by offering resources to support in-person work as well as tools such as Alternative Work Arrangements to support hybrid settings.
  
  Professor Boon further commented on some of the main challenges for upcoming year which included: fostering a culture of belonging across the institution; attracting, retaining, and recruiting top talent in a competitive job market following the repeal of Bill 124; and navigating the University’s transition to a post-pandemic workplace.
   

7. Annual Report: Vice-President, International
   
   Professor Joe Wong, Vice-President, International, offered a presentation which included a progress report focused on the previous year of the International Strategic Plan 2017- 2022 (TISP).
   
   Professor Wong highlighted the following key accomplishments of TISP to date:
   
   Partnership Network in Africa with MCF support

• The University had maintained a strong partnership with Mastercard Foundation since 2013 and was recently renewed with a $94.6M grant.
• Working in partnership to further identified priorities of 8 university partners in Africa, the University had built a robust network of collaborators focused on developing health capacity and economic development.
• Staff in Toronto along with 4 staff in Africa were working closely with divisions and the first year of this ten-year grant had established a strong foundation upon which to build.
  
  Engagement in Asia-Pacific
• The University’s leadership continued and expanded in existing and new markets (Vietnam, Singapore, S. Korea, Taiwan).
• Continued developing connections with alumni and potential students.
• Built new relationships with corporate partners.
• Expanded existing and developed new academic partnerships for more comprehensive & strategic engagement.
  
  Centre in India launched
• In partnership with Tata Trusts
• The intended goal would be to have a measurable and lasting impact through partnership, by generating transformative innovations and implementing specific solutions to address urban & rural, environmental, health and other challenges.
• The Centre will Catalyze mutual opportunities for students, faculty, and entrepreneurs, with support of staff in Mumbai, and provide an Indian base for public outreach, alumni and student engagement, business development, etc.
  
  Blue Door
• The Blue Door was a portal for Corporate Partners to facilitate partnership development.
• The portal would serve to assist the University in becoming a globally sought-after university partner for corporate organizations aiming to achieve impact in the world.
• International corporate-sponsored research for FY 2022 was $25.5M; with the Blue Door and collaboration across the institution, the University would continue to attract new corporate partners and look for opportunities to engage in broader opportunities.
  
  Leadership in the U7+ Alliance of World Universities
• The Alliance was committed to concrete action for global impact.
• 2023 priority areas included: peace and security, access to education, environmental sustainability.
• Engaged governments regarding the role of universities in contributing to multilateralism.
• Leadership presented Peace and Security statement to Japanese Prime Minister Kishida, host of the 2023 G7 Summit.
• The University had also convened an official side event at the 27th Conference of the Parties of the UNFCCC (COP27) on the role of universities in generating solutions for climate change.
  
  International Student Diversification
• Up from 7 citizenships in 2016 to 14 in 2022, including China (3,236 new students); with a goal to grow to 16 in 2023, 17 in 2025, and 20 in 2027.
• Fall 2022: 13 Citizenships with 40+ New International Registrants (excluding China).
• The University’s Authorized Immigration Advisors across all three campuses supported over 5,950 students through individual appointments and over 17,000 email exchanges.
• My Student Support Program, which provided mental health support 24/7, assisted 943 international students during 2020-21
• At the conclusion of the International Student Experience Fund’s final competition round, $2.6M had been committed to 29 projects. 11 projects were completed with the remainder concluding in 2023-24.
• Continued engagement with Immigration, Refugees, and Citizenships Canada (IRCC) on study permit processing times.
• International enrolments did not impact the set spaces for domestic intakes determined by the Government of Ontario.
  
  Discussion
  
  In response to a member’s question regarding diversifying international student enrollment, Professor Wong commented that the University was actively engaging in several regions around the world and provided an example that the University had opened an office in India to work with school guidance counselors across the region as there was an undersupply of educational institutions available in India to accommodate its demographics.

OPEN SESSION CONSENT AGENDA

 

On motion duly moved, seconded, and carried,
 

YOUR BOARD APPROVED

THAT the consent agenda be adopted.
 

8. Report of the Previous Meeting
   
   Report Number 270 of the Business Board, March 15, 2023, was approved.
    

9. Business Arising from the Report of the Previous Meeting
   
   There was no business arising from the Report of the previous meeting.
    

10. Project Completion Report: January 1, 2013 and December 31, 2022
    
    The Project Completion Report: January 1, 2013 and December 31, 2022 was received for information.
     

11. Status Report on Debt to March 31, 2023
    
    The Status Report on Debt to March 31, 2023, was received for information.
     

12. Health and Safety Requirements – Quarterly Report on Compliance for January 1, 2023 – March 31, 2023
    
    The Quarterly Report on Compliance for January 1, 2023 – March 31, 2023, was received for information.
     

13. Date of the Next Meeting – Tuesday, June 20, 2023
    
    The Chair advised members that the next meeting would be Wednesday, April 26, 2023 at 5:00 p.m.

CLOSING ADMINISTRATIVE MATTERS
 

14. Other Business
    
    
    There were no items of other business.
    
    THE BOARD MOVED IN CAMERA
     

15. In Camera Reports of the Administrative Assessors
    
    There were no in-camera reports from the administrative assessors.
     

16. Collective Agreements:

    1. July 1, 2021 – June 30, 2023 Collective Agreement between the University of Toronto and CUPE Local 2484
       
       The Collective Agreement between the University of Toronto and CUPE Local 2484, July 1, 2021 – June 30, 2023, was received by the Board for information.
       
        
    2. July 1, 2021 – June 30, 2023 Collective Agreement between the University of Toronto and OPSEU Local 578
       
       The Collective Agreement between the University of Toronto and OPSEU Local 578, July 1, 2021 – June 30, 2023, was received by the Board for information.
        

17. Report on Capital Projects as of March 31, 2023
    
    Professor Mabury and Mr. David Lehto, Chief, University Planning, Design & Construction, presented the Capital Projects Report for the period ending March 31, 2023 – the report included a comprehensive list of capital projects under construction and in design.
     

18. Capital Project (Level 3): Report of the Project Planning Committee for the Lash Miller Building Expansion - Execution of the Project
    
    The Board approved a motion that the recommendation of the Vice-President, Operations and Real Estate Partnerships, as outlined in the memorandum dated April 19, 2023, be approved.
     

19. Capital Project (Level 3): Project LEAP

    1. Financing Requirements
       
       The Board approved a motion that the recommendation of the Vice-President, Operations and Real Estate Partnerships, as outlined in the memorandum dated April 19, 2023, be approved.
       
        

    2. Execution of the Project
       
       The Board approved a motion that the recommendation of the Vice-President, Operations and Real Estate Partnerships, as outlined in the memorandum dated April 19, 2023, be approved.

THE BOARD RETURNED TO OPEN SESSION.

The Chair thanked members for their attendance and participation during the meeting.

The meeting adjourned at 7:33 p.m.

May 1, 2023