CN Rail deal reached

A deal has been reached with CN Rail.

The City of Kelowna made the announcement Monday morning on behalf of the Inter-jurisdictional Acquisition team, that a signed and negotiated sales and purchase agreement with CN has been completed for the discontinued rail line between Kelowna and Mile 88 in Coldstream.

“CN’s discontinuance of the rail line was an economic loss for our communities but it also put local communities between Kelowna and Vernon in a position to protect the rail corridor as a sustainable multi-modal transportation link that will enhance the social, environmental and economic health of the region for generations to come,” says Mayor Walter Gray, on his last official day in office.

The negotiated cost to secure the corridor is a combination of $22M in monetary consideration and land donation, for which the City of Kelowna will issue a charitable donation receipt.

Local governments have also said they respect and support the Okanagan Indian Band in its claim of reversionary rights on the land that falls within IR No. 7, and as such, those parcels have been excluded from the pending agreement.

Through the sales agreement, local municipalities will now have a 120-day due diligence period to lift conditions, which includes financing. This agreement supersedes the previous application for non-binding Net Salvage Value determination, so the CTA process no longer applies.

“This is a once-in-a-lifetime opportunity to preserve a continuous, regionally significant corridor with the potential to provide long-term public benefits for our residents,” says Doug Gilchrist, Divisional Director Community Planning & Real Estate for the City of Kelowna on behalf of the regional partners.

“We are ecstatic to have reached a negotiated agreement with CN that both parties consider fair.”

Local governments are making every effort to minimize the current tax impact in the interest of securing a land asset that would be valued for generations.

The specific land parcels fall within the jurisdictions of Kelowna, Lake Country and the Regional District of the North Okanagan, so funding options such as partnerships, grants, municipal reserves or borrowing will be finalized by those jurisdictions during the due diligence period.

Under the Canadian Transportation Agency discontinuance process, a single entity must put forward an interest in acquisition of the corridor, therefore the transfer process is to have the City of Kelowna be the sole purchaser with subsequent purchase and sale agreements to other jurisdictions. While a number of ownership models were explored, the preferred model is for each municipality to own the land that falls within its own boundaries.

The agreement stipulates that CN will attempt to remove the rail infrastructure from the corridor for salvage by the end of 2015. Once the discontinuance process has concluded, and assuming public ownership is achieved, local governments will establish construction and operation agreements to determine future costs and other considerations as part of protecting the rail corridor for future generations.

The municipalities of Kelowna, Lake Country, Coldstream and Vernon, as well as the regional districts of Central Okanagan and North Okanagan, have jointly identified the value the rail line could have as a continuous multi-modal transportation corridor connecting all the communities.

Quick Facts:

• The corridor is approximately 47.5 kms long extending from Kelowna’s north end to Mile 88 in Coldstream.
• The municipalities of Kelowna, Lake Country, Coldstream and Vernon, as well as the regional districts of Central Okanagan and North Okanagan, representing more than 212,000 residents are collaborating for the mutual benefit of the valley’s residents.
• The CN Rail line was constructed in 1925 to bring the produce and lumber of the Okanagan Valley to markets across the country.
• Challenged with high costs and low revenues, Kelowna Pacific Railway (who operated the line in recent years) entered receivership and ceased rail service in July 2013.

In a statement Monday morning, CN Rail says:

"CN is pleased at the successful outcome of these multi-stakeholder negotiations, which preserves this transportation corridor for use by local communities.

The settlement, reached through the federally-regulated Canadian Transportation Act (CTA) discontinuance process, is based on a mutually-agreed balance between the value of the asset and the needs of affected communities.

The agreement is the final step in settling the affairs of the former Kelowna Pacific Railway, which ceased operations in July, 2013. CN took over the former shortline at that time, and invested close to $20 million to revitalize rail freight service  between Kamloops and Kelowna. This accounted for 80 per cent of rail traffic on the line. It was not economically feasible to preserve rail service on this final 47.5 km of track, but this agreement preserves the corridor for use by the communities as they see fit."