The City of Vancouver and Canadian Pacific Railway (CP) continue to battle over the future of the Arbutus Corridor. Last year CP announced it would resume rail operations and began to bulldoze sheds and clear community gardens along the tracks, prompting the city to seek a court injunction in October. The lawsuit is still active but an injunction was not given – the city is now calling on an independent tribunal to force CP to sell the corridor at net salvage value (the after-tax value at the end of its usable life), claiming it breached the Canadian Transportation Act when it discontinued the railway.
Two experts from UBC’s Sauder School of Business discuss the issue from transportation and real estate perspectives. Professor Robin Lindsey is the CN Chair in Transportation and International Logistics, and Associate Professor Thomas Davidoff is part of Sauder’s Strategy and Business Economics Division.
Would CP ever want to resume passenger or freight service on the corridor?
Lindsey: This is highly doubtful. The corridor does not reach downtown, and it would not connect well with existing bus routes. CP lost its last commercial customer in 2001 when the Molson Brewery on Burrard Street switched to truck delivery. Due to rezoning from industrial to residential use, new industrial customers are unlikely to materialize in the future. Instead, CP has announced vague plans to use the corridor for employee training, welding track and storing rail cars.
Are CP’s plans for the corridor credible and in the public interest?
Lindsey: No. The rail infrastructure is badly deteriorated and would be costly to restore to operating standards. Welding track is environmentally unfriendly and unsuitable near residential areas. Due to steep grades and frequent crossings, employee training and rail car storage would be costly and dangerous. Moving rail cars would also obstruct vehicular traffic and block routes used by emergency vehicles.
Is CP’s position that the corridor is worth $400 million in real estate development valid?
Davidoff: I do not believe this valuation is out of bounds, but I also believe a lower number would be fair. The courts have limited guidance as to how to value the land underlying the tracks. Should it be valued as land that is only allowed to be used to carry freight, which has almost no value, or instead as land that can be optimally developed? The city has the ability to convert the land to the latter, but also has some power to regulate such that the former is more appropriate.
What would be the best outcome for the corridor?
Davidoff: Some mix of parks and urban use are surely the “right” outcome for Vancouver as a whole. Immediate neighbours might suffer if there are noisy urban uses where there used to be tracks.
Did CP breach the Canadian Transportation Act when it discontinued service?
Lindsey: In my opinion, it looks like they did. Under Section 143 of the CTA, a railway that wants to discontinue service on a line must advertise it for sale. Under Section 145 of the CTA, if a sale is not completed within the allotted time the railway must offer to sell the line to a government or urban transit authority. The city argues that CP failed to comply with Section 145 of the CTA, and should therefore sell the corridor at its net salvage value as of 2004 when an offer to governments should have been made, and also subject to the usage restrictions in the city’s official development plan. Determining the appropriate net salvage value could be very difficult. Relations between the city and CP, which have been troubled for many years, are unlikely to improve in the near future.