City's rail-deck park dream depends on securing air rights

Mayor’s proposal hinges on negotiations with rail companies, but Vancouver has important fight in court.

TheStar.com
Aug. 15, 2016
By Jennifer Pagliaro

With Toronto’s still-booming real estate market challenging developers to find new space to build, the next battle may not for the last plot of available land — but for the air above it.

That new reality is the underlying concern in a pending negotiation between the city and two national rail companies for covetable space over the rail corridor that cuts through the heart of the downtown core.

Mayor John Tory stood on one of those rare, still-to-be-developed patches of dirt in front of the rail corridor earlier this month to announce a much-needed proposal to build more parkland in the parks-deficient core — a “bold” proposal to create 21 acres on a deck over the active rail corridor on par with that of the signature Millennium Park in Chicago.

While the park was a chance for Tory to put his name to a progressive, city-building idea, moving ahead with it now is also a calculated move by the city to protect the corridor already being eyed by developers as unused space to build upon.

Now the city must convince the rail companies — CN Rail and Toronto Terminals Railway (TTR) — to sell their “air rights” to that space over the corridor. First, in a bid to declare the land for public use, the city will look to rezone the space to prevent any successful pitches from developers to build towers.

There’s little precedent for the purchase of air rights over the corridor in Toronto.

A project underway just east of Union St. to build two office towers on Bay St. includes a one-acre elevated park spanning the buildings over the corridor. A numbered company, linked through public corporate documents to developer Ivanhoe Cambridge, purchased air rights from CN and TTR in 2013 for $8.7 million, according to land registry records. (A spokesperson for Ivanhoe confirmed the sale but refused to discuss negotiations of the private deal.)

The CityPlace pedestrian “Bridge of Light,” a much-debated and stalled project that opened in 2012, in the end required the city to pay $500,000 to CN for air rights after the need to clear signal sightlines for passing trains pushed the height of the bridge into their air space.

This February, the city came to an agreement with CN for the $191,500 purchase of air rights that would allow the construction of a new pedestrian and cycle bridge to Fort York.

It’s unclear what the air rights over 21 acres to build the rail deck park will cost. The city has also not yet determined what it will cost to build the park, or how to pay for it; staff is set to provide a preliminary report in the fall.

Negotiations for the related air rights, which need to first be approved by council to proceed, will, like the city-negotiated bridge projects, be subject to more public scrutiny than the Ivanhoe deal. Some say that leaves the city at a disadvantage.

Gabriel Eidelman, a University of Toronto assistant professor at the School of Public Policy and Governance said it’s a “risky strategy . . . to lay your cards out on the table.”

“When you are essentially saying we want this because it is part of signature political promise . . . you put yourself at a disadvantage in any type of negotiation,” he said.

But the city may have an ace yet to be played, reminiscent of a successful bid by the City of Vancouver to protect rail lands there.

By rezoning the land as open space, the rail companies would no longer be able to sell off pieces of the air rights to developers, preventing any buildings over the corridor. And by limiting what can be developed over the corridor to parkland, the value of those air rights is likely to decrease.

In Vancouver, the city faced a similar dilemma when Canadian Pacific Railway (CPR) began to consider selling off pieces of the defunct Arbutus Corridor to developers, once use of the rails was discontinued in 1999.

The city had long envisioned the 42-acre corridor, surrounded by development, as a future light-rail transit corridor or a greenway. In 2000, the city designated the corridor as a public thoroughfare and planned to develop it as a greenway.

That move was challenged by CPR all the way to the Supreme Court of Canada, which backed the city 2006 saying the city had the power to dictate how lands are used within its borders without having to compensate CPR.

During lengthy negotiations to purchase the land, CPR first put the value at $400 million. The city pushed back and the price was dropped by CPR to $100 million. The city put forward $20 million as its best offer, according to local media reports, with the parties eventually settling on a $55-million sale this March.

“It was the railway’s hope that they could get the highest and best use . . . out of the land,” said Vancouver Mayor Gregor Robertson’s former chief-of-staff Mike Magee, now a special adviser. “Despite the wishful thinking of the railways, where they’d like to do what they want with their land, the city has the control over what can be built on that land.”

He said Toronto would be smart to protect the space above the downtown rail corridor in a similar way.

“It’s a long-term play and it’s complicated,” he said. “I think it’s a big city-building opportunity for Toronto if they can pull it off.”

The actual sale of air rights is a standard transaction to most in the land game.

Municipal lawyer John Mascarin, who practices land use and planning law, said “when you own the land you own essentially everything beneath it and everything up to the sky.” Those rights can be stratified, he explained, to allow for sale of air rights — but what fair market value is for those rights in Toronto, especially over the corridor, is not common knowledge.

“You haven’t seen the sort of air-rights wars you haven’t seen in other places and you haven’t seen those astronomical figures that have been bandied around in some jurisdictions,” Mascarin said.

Jeffrey Lem, director of titles for the province — just think of him as the records keeper of who owns all of the land in Ontario — explains that land rights can look “like a wedding cake,” tiered and varying in size depending on how high, or low, you go.

“We in the land game don’t actually call them air rights,” he said. “We call them a chunk of real estate. It happens to be air today, tomorrow it’s a park.”

He agreed the conversation over air right sales has yet to really take off in Toronto.

“You’re already beginning to see a lot of stratification just simply with the development of more condos,” he said, referring to when the lower podium is owned by retailers and the above tower by condo developers.

“It’s going to be a wave of the future.”

The city’s chief planner Jennifer Keesmaat has said the rail-deck park could be a “landmark destination” for the whole city.

The first step is the move to designate the lands as open space, what requires council’s approval to amend the city’s official plan. It also requires a public consultation, which staff will be asking council to initiate this fall.

“That official plan amendment is a really important legacy part of this overall project,” Keesmaat told the Star at the park announcement earlier this month.

A spokesperson for Toronto’s planning division said the rail corridor is currently zoned to permit transportation and related uses, a “significantly restricted” land use which also currently does not allow for a park to be built overhead.

A negotiation on air rights is likely to come after rezoning is approved. Keesmaat, Tory and local Councillor Joe Cressy have all stressed that early discussion with the rail companies have been “positive.”

“Protecting the rail corridor as parkland is an essential first step. If we don’t, political changes or funding constraints could conceivably pave the way to development,” Cressy stated. “There are many out there who would love to build more condo towers alongside new park space over the corridor. If we are going to seize this once in a lifetime opportunity, protecting the rail corridor as parkland is crucial.”