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While the Inner Harbour is fully within the City of Victoria, separating the city's downtown on its east side from the Victoria West neighbourhood, the Upper Harbour serves as the boundary between the City of Victoria and the district municipality of Esquimalt.Before European development the Coast Salish Songhees people lived in settlements to the east of the harbour and the Esquimalt people lived to the west of it.The two lighthouses were the first built on Canada's west coast and still serve as active aids to navigation. Victoria was incorporated as a city on 2 August 1862.
In 1859 Captain William Irving (1816–1872) became a partner in the Victoria Steam Navigation Company that provided ferry service between New Westminster and Victoria. Later in 1882 Irving helped to form the Canadian Pacific Navigation Company (CPNC) and the Pioneer Line ceased to exist.
On Joseph Spratt and Johann Kriemler started the Albion Iron Works that would later become the Victoria Machinery Depot shipbuilding company on property adjacent to the Upper Harbour.
In 1888 the company launched their first vessel, Princess, a tugboat built for the Department of Public Works.
On 29 March 1888 the first Esquimalt and Nanaimo Railway service started over the first railway bridge to span the harbour.
The successor to that line is the Victoria – Courtenay train operated by Via Rail over the Johnson Street Bridge (which opened in January 1924).