Railway’s rapid decline ends in filing for bankruptcy

Conrad Boyce, Local Journalism Initiative Reporter

In just over a month, the York-Durham Heritage Railway (YDHR) has taken its staff, volunteers, employees, fans, foes, township council and staff, and countless others, on what is likely the most interesting ride of its 30+-year-long existence. The “ride” began as a pledge to make right on issues and problems that the township had discovered, as close to the end of 2023 as possible. The last stop on the ride? Bankruptcy.

Only a few years ago, YDHR was a small volunteer-driven organization, taking families on trips through the countryside all the way to Stouffville (hence the “York” in the name). The trips got shorter, the crowds got bigger, the events got more extreme (like the “Dinosaur” experience last fall), and the volunteers found themselves working alongside more and more paid staff. The payroll expanded, the board of directors had fewer and fewer members from the local community.

The railway’s landlord, the Township of Uxbridge, became increasingly frustrated with building code and safety violations. Finally, late last year, the Township said it would not renew YDHR’s lease on the train station unless it came into full compliance with numerous conditions, including the removal of four dilapidated passenger cars from the rail yard. It was this announcement that ignited a convoluted chain of events.

The YDHR’s board of directors, under chair Michael Jacula, went on to release three announcements on its Facebook page, none of which were in the form of news releases, and none of which were officially sent to the Township.

The first, posted Dec. 21, said the YDHR no longer felt welcome in Uxbridge, and “with a heavy heart,” was taking its trains and moving its operations somewhere else. It didn’t say where, although then CEO John Perks told the Cosmos they would be in a position to announce by late January where their new home would be. In response, the Township gave the railway until Jan. 31 to cease operations in the rail yard, and until April 30 to remove all its assets, including its rolling stock.

Less than three weeks later, on Jan. 9, after a wave of local reaction online urging the YDHR to reconsider its departure, the railway issued a second announcement. There were three significant highlights:

- The YDHR board confessed that its “current business model has not been successful.”

- Accordingly, the YDHR had agreed to part ways with its senior staff (whether they resigned or were laid off was unclear), and would be returning to their volunteer-based roots.

- The YDHR had a plan to reduce its considerable debt load over the following 24 months.

The statement gave no details of the plan, nor the size of the debt.

Although the Jan. 9 announcement didn’t specifically mention the abandonment of YDHR’s plan to move, board chair Jacula told the Cosmos the railway loved Uxbridge, and would work hard to meet whatever conditions the Township set for the renewal of the railway’s lease. In response, Township CAO Kristi Honey said that although the municipality had received many expressions of interest in the rail properties (the Township owns the station, but leases the tracks and yard from the province through Metrolinx), including from other short-line rail operators, they were prepared to consider YDHR’s proposal alongside any others.

Less than two weeks later, on Jan. 21, YDHR released its third Facebook announcement, declaring it had filed for bankruptcy.

“The YDHR is sad to announce it is ceasing operations immediately and has filed for insolvency protection after almost 30 years of providing train experiences for our guests.

We will miss seeing everyone coming on board for a train ride.

We encourage you to visit and support our friends at other heritage railways in southern Ontario such as the Waterloo Central Railway, Port Stanley Terminal Rail, South Simcoe Railway, Railway Museum of Eastern Ontario, Muskoka Heritage Place, and the Elgin County Railway Museum. In Quebec, visit Canada's national railway museum, Exporail. All equipment, parts, and inventory will be available for purchase in the near future through our trustee, Riley Farber of Toronto.”

No part of the announcement explains the railway’s seemingly abrupt turnaround. The Cosmos did reach out to Jacula to try and obtain an explanation, but had not heard back from him by press time Tuesday night.

The Cosmos has obtained a copy of the Notice of Bankruptcy from trustee B. Riley Farber of Toronto, dated Jan. 19, which invites creditors to attend a ZOOM conference on Friday, Feb. 9, at 11:00 a.m. This conference will affirm the company as trustee, and discuss how the bankruptcy will proceed. Creditors must lodge a Proof of Claim in order to participate in the meeting, the form for which is available on the trustee’s website.

The notice states that YDHR filed for bankruptcy on Jan.18, with the guidance of Riley Farber. It contains a brief statement of liabilities, totaling more than $2.071 million, and assets, valued at about $860,000. It has a list of 52 “unsecured” creditors, those without any kind of lien on the railway’s assets, as well as three “secured” creditors (the Canada Revenue Agency and two railway-linked companies in Colorado) that will receive priority in any kind of payment plan. Neither list includes the many temporary contractors who worked on the railway’s recent holiday trains.

A representative of Riley Farber told the Cosmos that any corporate bankruptcy, including for a registered charity like the YDHR, follows the same procedure. The corporation must work with a licensed insolvency trustee (LIT) to prepare a detailed application to the Office of the Superintendent of Bankruptcy (OSB), a federal government agency. The application has a lot of financial detail. Would work on that application (filed Jan.18) have begun before Jan. 9, when YDHR said it had a 24-month plan for resolving its debt? The trustee wouldn’t tell the Cosmos, but he did say that question could be legitimately asked at the creditors’ ZOOM conference.

Township CAO Honey said, “It’s unfortunate to see a long-standing organization like YDHR close its doors. With the announcement of its insolvency, we will work with the trustee through our lawyers to ensure Permission to Enter for the removal of assets. We have not established a timeline, nor met with the trustee on this new development and their associated timelines.”

One local lawyer says it is possible for a corporation to declare bankruptcy in order to relieve itself of the mountain of debt, take a breather, and start afresh. The railway’s Jan. 21, announcement says it is ceasing operations, not necessarily dissolving the organization.