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Letters to the EditorBerms block railbed and why isn’t a donation of the corridor possible?

Berms block railbed and why isn’t a donation of the corridor possible?

Neil Carleton 2by Neil Carleton

In the absence of hard facts about the current negotiations, there are at least some hard berms on the railbed to focus on while a discussion of certain terms, and the research of various issues, continues on the potential purchase of the Canadian Pacific rail corridor from Smiths Falls to Mattawa.

 

As far as the eye could see, the once essential rail corridor ran uninterrupted through our rural and urban neighbourhoods.  Now, where highways, concession roads, and municipal streets cross the abandoned CP railbed, obstructions are in place.
As far as the eye could see, the once essential rail corridor ran uninterrupted through our rural and urban neighbourhoods.  Now, where highways, concession roads, and municipal streets cross the abandoned CP railbed, obstructions are in place.
With rails, tie plates, spikes, and ties removed, it was easy work for a heavy machine to dig up the railbed and create obstacles to vehicular traffic.
With rails, tie plates, spikes, and ties removed, it was easy work for a heavy machine to dig up the railbed and create obstacles to vehicular traffic.
The once a continuous ribbon across the landscape, the railbed is now blocked by mounds of coarse aggregate.
The once a continuous ribbon across the landscape, the railbed is now blocked by mounds of coarse aggregate.
No Trespassing 1 November 25 2014 - Copy
No trespassing signs are prominently posted near the recently created berms.
No Trespassing 5 December 12 2014 - Copy
The season’s first covering of snow gives a new expression to familiar features.  With a change of light, colour, and texture, there’s a fresh perspective to the landscape where new interpretations are possible.  The interpretation of new perspectives is common to both artistic expression and problem solving.

Seen from an angle of corporate prosperity, and considered in the light of the company’s gifting history, the challenge of purchasing the CP railbed looks more like an opportunity for the donation of the land.  CP is enjoying economic success and has a history of giving away abandoned rail corridors.

Founded in 1881, CP became one of the largest and most powerful companies in Canada, a position it held as late as 1975 according to tables published that year in Canadian Business.  It then ranked 4th behind Ford, Imperial Oil, and General Motors.

Investors in CP have been well rewarded over the past five years.  A March 2014 analysis pointed out that the company’s shares were up more than 250% since the market’s big decline in 2008-09.  Results were particularly impressive over the past two years.

CP’s third quarter performance in 2014 was another success story, as reported by the Financial Post in October.  According to CP’s CEO, Hunter Harrison, the corporate team “delivered another quarter of impressive results.”  He expressed confidence that the company was “on track to finish the year with CP’s strongest quarter to date.”  The company had $400 million of net income in the third quarter.

At the end of Friday’s trading on the Toronto Stock Exchange (TSX), Canadian Pacific Railway Ltd closed up $2.84 or 1.41% to $204.15.   While CP shares lost 6.75% over the week, they gained 27.08% over the past year.  Also noted was that this security outperformed the S&P TSX by 22.76% during the last year.

CP’s policy of land gifts captured national attention in 1999 when the company donated 38 sections of former rail lines in six provinces for the Trans Canada Trail.  The donation in Ontario at the time was a 117.5 km / 73 mi line from Owen Sound to Orangeville.

On the British Columbia mainland, the CP donations of the Columbia and Western + Kettle Valley lines were made to the Province for a non-motorized cross-country rail trail experience.  On Vancouver Island in 2006, CP donated track to the Island Corridor Foundation, a partnership that included 14 municipalities, 5 regional districts, and 12 First Nations territories.  It was noted at the time that CP received a $243 million tax credit for the donation.

CPR Bridge With Locomotive
Canadian Pacific railway bridge over the Mississippi River at Almonte.  Photo courtesy of the Michael Dunn Digital Archive.

Research has shown that early Canadian railway companies, most notably CP, received large direct subsidies in the form of cash payments, as well as in indirect subsidies in the form of land grants, rail construction, cheap credit, monopoly privileges, cartelizing regulations, and cost reimbursement.  A study by Professor L. J. Mercer, published in 1972 by the Business History Review, found that, out of the railways investigated, CP benefited most from government aid.  Including cash subsidies and land grants, he determined that public funded support to CP amounted to 55.6% of investment in present value terms at the time of the study.

Over the period 1927-1991, according to the Fraser Institute, direct subsidy payments to the Canadian rail sector totaled almost $12 billion (1991 dollars), with $11 billion accounted for in the period 1967-1991. This didn’t include subsidy payments made under the Western Grain Transportation Act, and direct federal assistance to Canadian National.  The massive subsidies included rail passenger movement, branch lines, and eastern grain movement.  The cancellation of explicit transportation subsidies resulted from changes in federal regulations .

CPR Holiday Train - Copy
Canadian Pacific Holiday Train on its passage through Winnipeg.  Photo:  Wikimedia Commons, the free media repository

Earlier this year, Canadian Business reported that over the past decade CP paid just $138 million in cash taxes, or just 2% of its pre-tax profits. It was noted that this amount was significantly less than the low 19% paid by CN Rail, our other major railroad.

The potential purchasers of the abandoned rail line are carrying a significant debt load.  Years of provincial downloading of services and programs continue to affect municipal budgets.  Although Lanark County reduced its debt by $6.5 million in the 2014 budget, its debt repayments were still in the magnitude of $1 million up to July 31.  Renfrew County’s debt charges for 2013 were $1.1 million.  The Township of Papineau-Cameron paid $41,142 in debt charges for 2013.

The partner municipalities are currently discussing the potential purchase of about 302 km / 187.7 mi of abandoned railbed from Smiths Falls to Mattawa with a corporation that

  • was given the publicly owned land
  • received massive subsidies for years and years which were funded by the public purse;
  • has a giving history of donating abandoned rail corridors;
  • is familiar with receiving a tax credit for donated land;
  • in the past five years has seen its shares rise by more than 250%, with particularly impressive results over the past two years;
  • pays amazingly low taxes;
  • with a net profit of $400 million in the third quarter, is looking to finish the year with its strongest quarter to date.

It’s a matter of perspective looking over the top of a snow covered berm on an abandoned railbed.

 

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